This week I made an amazing discovery.
I’ve been interested in and following the trends of socially and environmentally responsible investing for over a decade. In that time, investment in this sector has grown exponentially (well into the trillions) and taken on various forms and descriptions. There’s ESG (Environmental Social Governance), SRI (Socially Responsible Investing), Impact Investing, Sustainable Investing and more. And those can be further broken down into specific areas of focus like renewable energy, diversity, water, etc. For the sake of this article I will use ESG.
There are several reasons people invest in ESG. Traditionally it has been a small act to punish companies that do bad things socially and environmentally, in recent years it is to help or show support for companies that do good deeds, and now it’s to make more money.
This past week I discovered that BlackRock was including an ESG fund in their regular model portfolios. A sign from the world’s top asset manager that ESG could give an investor a performance edge. Responsible investing is moving from being an altruistic sector to a necessary attribute of being in business.
I became interested in this type of investing because I love the outdoors and hate to see people I know suffer unnecessarily. I love surfing clean water and running pristine trails, breathing clear skies and look forward to my daughter having the mind blowing experience of seeing a wild elephant walk out of the African bush. I don’t like to see people I know marginalized and manipulated….it seems unfair.
It’s easy to be responsible within our microcosm. We keep our yards clean and our families safe and well. We support our friends. The further away from this we get the less likely we are willing to sacrifice our hard-earned money. Money is the ultimate truth serum. Whatever we might say, how we spend is really where our heart is. Not many people would sacrifice their comfort for the well-being of those a world away. And I recognize this about myself but do realize that to keep nature clean and vibrant around me I need to do a little more than pick up trash. To help people I know be more successful I need to do more than send a supportive text message. By expanding my impact effort outward, I believe that I improve my microcosm. 100 degree days in the arctic, (Arctic) Sahara Sandstorms in the Caribbean, plagues of locusts in north Africa, more powerful storms in the Atlantic. These are all the butterfly effect of local behavior.
Companies that are making an effort to pollute less, are wary of the natural resources they take and who make an effort to break through the cultural, social and economic barriers that get in people’s way in my mind are the once’s who will perform the best over time. We have a long way to go but the companies that have led the market for the last decade have also shown that they might also lead us to a better world.
What we need to do to take care of our family, friends and neighborhood is intersecting with what is needed to take care of the global community and preserve oceans and forests.
Milton Friedman’s idea as expressed in an influential The New York Times Magazine article in 1970 that “The social responsibility of business is to increase its profits.” is going to need to be amended to include the wisdom of Adam Smith the founder of capitalism , and Yvon Chouinard, the founder of Patagonia – “The social responsibility of business is to increase its profits, reinvest more money in its people, its community and their mission of producing better more sustainable products.”
Milton would probably say this amendment stunts the growth of investor’s profits. But the trend in performance of ESG funds says otherwise
The views in this material were those of the Advisor at the time of writing this report and may not reflect the views Wealthcare Advisory Partners LLC. These views are intended to assist clients and do not constitute investment advice. Advisory services offered through Wealthcare Advisory Partners. Wealthcare Advisory Partners LLC is a registered investment advisor with the U.S Securities and Exchange Commission.