ESG: Investing with your Head & Your Heart

Friday Oct 15th, 2021

In 2021, making an impact is more important than ever before. Many clients are attracted to ESG investing because they care about building a better world – not just building wealth.

Over the past several years, there has been a significant movement towards environmental, social and governance (ESG) investing both at the individual and institutional level. ESG investing is a natural fit for individuals who care deeply about certain causes and feel a calling to support the greater good. These investors want their portfolios to help build a better world.

Are you interested in learning more about ESG investments? Whatever your values, from climate change to social unrest, your financial advisor can help you choose funds based on criteria for environmental, social and governance issues that you care about.

There is no single exhaustive list of ESG issues, but let’s consider each of these categories.

  • Environmental: Environmental factors refer to how companies steward our world, and the environmental impact of the products and services they produce. Environmentally friendly companies are energy efficient and conscientious of natural resources in daily operations and practices. They may focus on limiting their carbon emissions, air or water pollution, or focus on biodiversity or waste management.
  • Social: Socially responsible companies are considerate of people and relationships. They are thoughtful and intentional in the company’s internal and external practices. Does the company have high customer satisfaction? Do they employ appropriate labor standards and treat their employees well? Do they participate in philanthropic giving to their community? And do they care about diversity, equality and inclusion practices?
  • Governance: Governance refers to the standards in place for running the company. Is there accountability, transparency and inclusiveness of a company’s C-suite and board of directors. Do they have fair and equitable selection processes for those who will lead the entity? Is the shareholders money being treated in a way to increase profits and boost the share price? Good governance has many more factors, but this aspect of evaluating a business can help you support companies who operate with integrity.

How Does ESG Investing Work?

ESG research firms produce a score for a wide range of companies, which provide a clear metric for financial advisors to compare investments on clients’ behalf. ¹ These scores follow a 100-point scale. The higher the score, the better a company is performing based on ESG criteria. ¹
At the end of 2019, one out of every three dollars under professional management in the United States—$17.1 trillion—was managed according to sustainable investing strategies, according to the US SIF Foundation’s 2020 Report on US Sustainable and Impact Investing Trends.² Year-over-year, more investors are taking an interest in ESG funds and paying attention to the purpose and popularity of this conscientious approach to investing.

Want to Learn More?

If ESG investing piques your interest, we encourage you to schedule a consultation with our team to determine if it’s the right fit for your financial goals. At Thielen & Associates Inc., we’re equipped to craft an investment portfolio that supports your personal beliefs and is mindful of ESG criteria.

Investment portfolios should always be designed with three things in mind:

  • Your long-term goals
  • Your personal risk tolerance
  • Potential tax consequences

Remember, no matter what kind of investment portfolio you have, investing is a marathon – not a sprint. It’s normal to experience fluctuations and market volatility. What’s important is staying focused on your long-term financial plan, your personal desires for building wealth and tax-smart strategies to pursue your goals for the future.

Our team at Thielen & Associates, Inc. is always here to answer your questions. Schedule a complimentary consultation through our website anytime you’d like to review your investment strategy.

Keep in mind, this blog is for informational purposes only.

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