We have seen many disruptive technologies and transformative changes in society and
business over the past few decades. One change that has gained tremendous momentum
in the past few years is the widespread acceptance of socially-conscious investing. Corporate
social responsibility has come under intense scrutiny for many reasons.
The movement for responsible investing can reflect a wide variety of strategies, issues and
causes. There are many forms of this work and there are many names for it. Investing for
positive social impact, mission-based investing, sustainable investing and the growth of activist investors all reflect different aspects of the fastest growing trend on Wall Street. Recent research has shown that over 25% of all professionally managed money is managed with consideration of the intangibles of corporate social responsibility. Trusts and foundations were early adopters and a natural fit for mission-based investing, and portfolios can be designed to fit any organization or individual's mission.
To call it a niche market doesn't do it justice. It is more like an analytical overlay that has
been embraced by Wall Street analysts and is apparently on the way to universal acceptance.
The United Nations has been working on a world-wide standard of corporate behavior and there are three general criteria that have been adopted to create that standard. ESG Investing stands for grading companies on "Environmental, Social & Governance" criteria. Bloomberg,
Morningstar, and many other research firms are giving companies ESG scores. The E in
"Environmental" was initially a reference to a company's carbon footprint, but rating agencies
have developed a much more nuanced analysis of environmental stewardship now. The S in
"Social" refers primarily to a company's culture and employment policies. Studies have shown that successful corporate performance correlates with greater ethnic and gender diversity at all levels, among employees, managers and directors. The G in "Governance" refers to how companies respond to feedback from all stakeholders. Privacy issues and challenges to shareholder's voting rights have embroiled the big tech stocks in controversy recently.
Now that studies have shown that ESG investing is popular and profitable Wall Street has
taken notice. Over the past five years impact investing (in it's many forms) has gained widespread acceptance among professional investors. Individual investors have remained largely unaware of this approach to investing and it's outstanding success. There are now hundreds of different mutual funds and ETF's that consider corporate culture and ESG scores. These funds and ETF's are available to individual investors at every brokerage firm. Inquiring minds want to know more.
Jeffrey Ball, Senior Vice President, RBC Wealth Management, Red Bank, New Jersey. Jeff is a Financial Advisor and Certified Financial Planner practicing in Monmouth County for over 30 years. For more information contact Jeff at 732.576.4634 or email jeffrey.ball@rbc.com.
This article appears in the April 2019 issue of Natural Awakenings Monmouth Ocean edition. Click here to subscribe. Thank you.