While increasingly more widely recognized, Environmental, Social and Governance Investing has become a hot topic on the minds of investors over the last couple of decades, even more so over the last few months. But what exactly is ESG Investing and how is it monitored?
An umbrella term, ESG Investing can be defined as investments that seek positive returns, but not at the cost of negatively impacting society, the environment or business practices. In short, ESG Investing means investing in companies that “do well by doing good.”
Formerly known as Impact Investing or Socially Responsible Investing, ESG Investing strikes a chord with many of the newer generation of investors. As younger individuals are beginning to invest, the demand for ESG Investing guidelines has also increased. But who makes the rules and what guidelines oversee and manage if a company is following ESG practices? As ESG has picked up steam over the last few years, the U.S. Securities and Exchange Commission (SEC) has had to significantly ramp up efforts to moderate and structure guidelines and reporting tools for companies that may help investors distinguish which companies are making proper ESG supportive efforts.
Some believe that the practices and guidelines governing ESG Investing is strictly a means to distinguish which companies are “good” and which ones are “bad.” This is a common misconception. ESG Investing and subsequent guidelines help investors understand a company, allow for investors to gain insight into how that company behaves and operates, and what differentiates that company from others. Understanding which ESG issues are expressly important to you, the individual investor, may help you assess a company in which you may be primed to invest.
Private Capital Group knows the importance that ESG may play in the future of investing as well as the traction it has gained over the past few years. In collaboration with our strategic partners, PCG will be implementing a new tool to help us better serve you, our clients, and your desired investment strategies. This new tool is simple to use. Answer a few questions regarding your investment credo, tell us which investing values are most important to you, and finally inform us of any concerns you may have while investing. Capturing your responses in our Values Discovery Quiz, PCG may better understand what type of investor persona best reflects your motivations for values-based investing. Following are four categories of investor types. Which one most resembles you and your investment style?
Security Seekers strive mainly to see that their investments help secure their financial future. Security Seekers do not change their investments to support causes, as they believe there are other ways of supporting the causes they hold near and dear. Moreover, Security Seekers are more concerned about attaining strong financial performance than aligning with specific issues.
Impact Seekers desire to invest their money to make measurable differences in the world. Impact Seekers focus their investments on specific matters backed by beliefs in making differences, and they crave evidence that demonstrates their investments are making an impact guided by principles they have identified.
As the name suggests, Alignment Seekers are determined to strive towards aligning their investments with the causes they support. Alignment Seekers seek to avoid investing in companies that profit from causing or inflicting harm to causes about which they care.
Expression Seekers aim for their investments to make outward statements about matters for which they are most passionate. They prefer not to invest in entire industries considered to be either unethical or contradictory with their personal beliefs. Expression Seekers believe that they possess the capacity for rewarding “good” companies by investing in them and obstruct “bad” companies by not investing in them.
Good news – there is no right or wrong value-based investor persona. As generally defined, chances are you and what drives your investment preferences, classify you as one of the listed investor types. ESG Investing may become more prevalent and gain popularity as more capabilities become available for investors to implement causes that are important to them.
We encourage you to take our soon-to-be-unveiled Values Discovery Quiz. Your beliefs and outlook matter most to us, and the more we know about your values and investment preferences, the better equipped we are to provide you with sound and substantive financial guidance. Your dedicated PCG Wealth Advisor is eager to work with you to construct a portfolio designed with you and your unique values as its directing force.
From all of us at PCG, we wish you and your loved ones a happy and healthy start to the summer. Enjoy the sunshine!