October Meeting Recap: Sustainable Investing
written by Irene Hogstrom
Financial Advisor Mike Wapner led a discussion on how to make financial investments that align with personal, environmental and social values, examining both challenges and solutions to sustainable investing at our October meeting. Mike is active in several green initiatives within Park Ridge, including Friends of the Parks and Go Green Park Ridge and is a founding member of their Sustainability Commission.
How do I get started?
It is beneficial to get familiar with certain terms and concepts used in this type of investing and to make sure you understand how they're being used when you talk to your advisor, as many are used interchangeably or may be defined differently by one person versus another.
Common terminology includes:
Sustainable
Socially conscious
Socially Responsible Investing (SRI)
Environmentally Friendly
Green
Ethical
“ESG” which can be broken down into factors under Environmental, Social and Governance.
Important concepts to consider when investing sustainably involve priorities. Is it best to be value driven, focused on maximum financial gain and then social issues come second by examining a portfolio’s ESG factors? Or is a values driven approach better, where values come first and financial gain is second? These are personal decisions to make when consulting a financial advisor.
What are the perceived obstacles to sustainable investing?
According to studies conducted by Morgan Stanley, 88% of their clientele in North America is interested in sustainable investing. Mike addressed the group and asked that if we are interested in sustainability and other social factors, what is preventing us from making investments that align with our values? Participants listed several obstacles:
Unable to get good information about this kind of investing from advisors.
Do not know how to do sustainable investing.
Heard that there will not be as much money made on investments.
Told to focus on making money, and then provide support to causes with charitable contributions.
It’s too complicated.
It’s difficult to pick the winners.
It only has long-term benefits, so it’s not right for a large part of my investments.
Sustainable Investing options are not available where my money is, such as in 401(k) plans and 529 accounts.
What companies do I use for sustainable investing?
There are active Sustainable Fund Managers that have been using sustainable factors for decades. Their offerings include US Large and Small Cap Funds, Global Environment and Social Funds, and a Women’s Leadership Fund. The second option is to use traditional Fund Managers with ESG integrated as part of their stock selection. Traditional funds may also offer a portfolio of sustainable businesses for investment.
Additional offerings beyond stock index funds include sustainable bond funds. Funds are also available that focus on the following:
Women/Minority empowerment
Diversity
Religious values
Clean Energy
Water Technology
Real Estate
Infrastructure/Smart Grid
Farming with a focus on organic/regenerative
Learn More
If you work with an investment advisor, reach out to them to learn more about your options vis a vis your values. Other information sources include podcasts focused on sustainable/ responsible investing and business news sources like The Wall Street Journal and Bloomberg.
Take Action
Speak up to request Sustainable Investing.
Speak with your financial advisor - Establish clear goals and define what matters most to you when it comes to investing sustainably. Then, working with your advisor, develop an investment strategy.
Meet with your company benefits manager to learn whether there is a sustainable investment option in your corporate retirement plan. If not, request that an ESG fund be added
It has been around for decades and major investment companies offer sustainable portfolios. Just have to ask!
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