Ok, so you walk into your local kitchen supplies store looking to buy a new coffee maker. You see that sweet Cuisinart that uses less electricity, has more safety features and costs that same as the next. No decision here. Right? Interestingly enough, when it comes to investing, investors still worry that the sustainable fund might not perform as well. Times have changed.
Investing in your future can be complicated and overwhelming, which is why investors often rely on the expertise of an investment advisor. Often times, investors don’t put much thought into where their money is invested as long as they’re seeing a return. However, as the world becomes more conscious of how we treat our environment and record climate change floods the streets, investors have become more responsible with their investing. We see more clients looking to invest with companies they can truly get behind and support. This is why I started Sustainvest, an asset management company that only invests in socially responsible and sustainable companies looking to make a better planet.
As a sustainable investor, when helping clients set up a financial plan and a sound asset allocation specific to their needs, I am looking to exclude the companies contributing to the problems at hand. These companies are the pro fast food, alcohol, fossil fuel, military or weapons manufacturers. On the flip side we look to invest in companies that are preserving human rights and creating a better way of life for everyone. It is investing in the good of the planet, something that is good for your neighbor and will not harm others, per se. This is not a new concept at all and has been around for quite some time. However, in today’s society we see more and more investors looking for companies that are in line with their beliefs and way of life.
Invest in Companies That Do Good By the Planet
Investing in companies that are socially responsible is a win-win for everyone. You are essentially helping that company grow and they are helping your future look brighter in a couple of ways. Socially responsible investments are just like any other investment that has good and bad days on the market. So, you need to look at them as you would any other investment to ensure you pick something that is going to grow your portfolio and offer a great return on your investment.
What’s interesting is according to a 2017 Institute for Sustainable Investing survey, 75% of investors are interested in sustainable investing. I wonder what percentage of that 75 have implemented SRI in their ROTH IRA or 401k or inheritance? In a recent report put out by none other than Morgan Stanley, they analyzed 10,723 funds using Morningstar data for the years 2004-2018. What they found were 2 things:
- There is no financial tradeoff in the returns of sustainable funds and traditional funds.
- Sustainable funds may offer lower market risk. In fact, sustainable funds showed a 20% smaller downside movement than traditional funds.
Say what? Again a no brainer.
The same principles work as they would in any investing. However, we are doing a bit more research and due diligence as to what the company is about and what they stand for. We are being more responsible with your money and investing in companies that are bettering the world with their business.
The screening process to find out just how well these funds are doing is called Environment, Social and Governance (ESG) screening. Funds with that ESG overlay are doing the hard work for you as they are vetting the egregious companies out of the fund and including the ones with high scores when it comes to issues like renewable energy use, water usage, employee compensation and gender diversity at all levels. Another term being used for the practice is impact investing, though this focuses on more community level type investments. Then, there are faith-based funds, which are funds that focus around a particular religion or faith.
Investing for the Better
Better yourself, better your life,better your investments. When you become socially conscious of how you are investing your money and can get behind the companies that you have a vested interest in, you can say you’re doing your part to help make this world a better place.
If you have questions about sustainable and socially responsible investing, contact Sustainvest for your free portfolio review.
Dale Wannen, MBA
Founder Sustainvest Asset Management
707-766-9480
Sustainvest Asset Management is a fee-only registered Sonoma County investment advisory firm focused on sustainable and responsible (SRI) investing. We align our client’s investments with their goals and values through sustainable companies. Whether you are a new or seasoned investor, I offer a complimentary consultation on your investment strategy.
Clients include individuals, families, foundations and non-profits with financial planning services including investment management, 401k, 403b or IRA rollovers, trust accounts, non-profit asset management, retirement planning, fixed income investing and managing inheritances.