How generational and societal change is influencing companies and the markets.
ESG: what does that acronym stand for? Those three letters stand for “Environmental, Social, and Governance” and signify an investment that has particular merit to investors of all ages.
A recent Morgan Stanley Bank survey found that almost 90% of millennials would prefer to have investments that suit their values. With young adults, ESG investing could become more and more of an element in investing strategies.1
You may recall how the phrase “socially responsible investing” became part of the stock market vocabulary a generation ago. Socially responsible investing (SRI) was often about not investing in certain companies – businesses whose products or services seemed distasteful to this or that investor. ESG investing focuses more on corporate behavior. Is a corporation managing natural resources sustainably? Does it treat workers well? Is its culture inclusive and diverse?
Corporate values count, perhaps now more than ever. Today, you have companies pledging to commit to environmentally sustainable practices and leadership initiatives designed to include women and members of minority groups in the C-Suite.
Some corporations now include ESG metrics in financial and annual reports. This is more than a nod to investors; it represents a trend in corporate communication and behavior. One notable ESG metric is CEO pay. Some S&P 500 firms have gotten bad publicity over the last decade for the degree of executive compensation their leaders receive, and investors are watching.
Philosophically, ESG investing asks two questions. An ESG investing proponent’s answers may differ significantly from those of an investor uncompelled by the ESG approach.
One, should social responsibility matter more than a company’s financials when you are considering an investment? Two, can positive environmental and social news about a corporation influence its stock’s value more than its earnings and guidance?
If you want to explore the world of ESG investing, consult your financial professional for the insight and information that can help you identify your choices.
Investment advisory services are offered through Trek Financial, LLC., an SEC Registered Investment Adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
1. Corporate Finance Institute, February 24, 2021
Trek FG 21-29