In the world of Sustainable and Responsible Investing or SRI, acronyms get thrown around quite a bit. When it comes to investing in companies that are addressing sustainability, the process of searching for quality companies is called ESG Screening. The ESG stands for Environmental, Social and Governance. FYI!
We often get the question, “Well, does it perform just as well as traditional investing because you are limiting your universe of stocks?” And I always indicate that past performance is not indicative of future results, BUT in our opinion if a company is treating its employees better, paying them a decent wage, and not over-compensating its CEO (Yikes! Walmart! I mean $25 million for stock performance that is lower than the S&P) then I would think that investors should ask their investment advisor who is NOT performing these ESG screens this question. “Are you taking a look at how the companies in my mutual funds/ETFs or stocks are handling sustainability?” If they draw a blank stare you may want to reconsider and walk over to the Sustainvest office.
Any one of us have seen the crowded parking lots at Whole Foods and have come to realize that shoppers (who also are investors) are interested in buying products that are better for us. The same principle applies to investing (have you seen coal and oil stocks lately?) Below is a comparison of what Sustainvest looks for in companies to invest in for clients that would fit the Consumer Staples sector clearly leaning towards excluding Walmart and including Costco (you can go ahead and look up the clear distinction in stock performance for the 1 year/5 year/10 year time horizons in your Google finance account and see for yourself).
Walmart
- Strikes at 1,000 stores in 46 states
- Average pay for full-time retail workers there will be about $13 an hour
- CEO made $25,592,900 last year
Costco
- The company pays employees a living wage of approximately $21 an hour
- 88% of its employees have company-sponsored healthcare insurance
- CEO made $5,385,480
The process of investing in more sustainable companies is really no longer about feeling good about your moral decision to invest this way. It is becoming an engrained part of investing as a whole and working with an advisor who focuses on these criteria may not only fill your morale but also your wallet.
Note: Sustainvest clients may own Costco (COST) in its portfolios.
