Sep 24, 2020
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How To Make Money And Make A Difference

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How can you make a difference as an investor? How can you grow your portfolio and also make a favorable impact at the world around you? These are the questions I m increasingly hearing from investors. They know they must invest for growth so they ll have a safe and comfortable retirement but they also see their investments in order to vote with their dollars

 

If two companies—or two funds—are doing well they d rather invest in the person who s more environmentally friendly or more concentrated on providing safe workplaces for its employees. They want to support companies which are trying to have a favorable impact and they also believe that these companies might be more successful over time

 

A company that makes money according to limited resources or questionable ethics may face new regulations or costly lawsuits that may really hurt its bottom line. But how can investors evaluate a company s environmental record? How can they know if a company is treating its workers fairly or if a company includes women on its board of directors? Few people have the time or the expertise to do that important research but it s what sustainable responsible impact (SRI) funds were doing for decades

 

SRI funds can help make a difference SRI funds—also called socially responsible or sustainable responsible funds—are one of the fastest growing areas of the fund industry. Assets in SRI funds increased from $641 billion in 2012 to $1. 93 trillion in 2014 consistent with the Forum for Sustainable and Responsible Investment (USSIF). And the evidence is now clear that sustainable and responsible investors don’t have to pay more to align their investments with their values or to prevent companies with poor environmental social or governance practices

 

In 2015 Deutsche Asset & Wealth Management and Hamburg University published a piece of writing titled ESG and Financial Performance: Aggregated Evidence From More Than 2 000 Empirical Studies. The team conducted a meta-analysis of more than 2 000 empirical studies because the 1970s making it the main comprehensive review of academic research in this topic

 

They discovered that the comprehensive majority of studies show positive findings between ESG and corporate financial performance (CFP). Companies with robust sustainability practices demonstrate better operational performance which ultimately translates into cash flows. Most of the reviewed studies demonstrate that prudent sustainability practices have a favorable influence on investment performance. PROMOTED Grads of Life BRANDVOICE | Paid Program
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Going All In On Young Voter Education I ve included SRI funds in my NoLoad FundX newsletter for decades and I ve also managed sustainable investing portfolios for clients for almost two decades and I ve seen firsthand how SRI funds have evolved over the years

 

NoLoad FundX NoLoad FundX has an annual average return of 14. 3%. A $25 000 investment in 1980 would have grown to $2. 8 million in Dec. 2015. Click here to determine how to put Janet Brown s strategy to work. When I first started managing sustainable investing portfolios most SRI funds were concentrated on divestment: they avoided investing in certain industries or companies like tobacco weapons or more recently fossil fuels

 

This allowed investors to sidestep industries that they discovered objectionable but it didn t help them support companies that were trying to make a favorable impact. SRI funds now have a much more comprehensive method of impact investing. They use positive screening to invest in companies with strong environmental social and corporate governance (ESG) practices and they don t necessarily divest from companies that they suspect could do better

 

Many SRI funds now invest in companies and then use their power as shareholders to actively engage with the company by filing shareholder resolutions voting proxies or meeting with company management to attempt to aid the company move forward. Working example rather than excluding all fossil fuel companies an SRI fund may invest in an oil company and then use its power as a shareholder to aid the company better address the challenges of climate change or increase its investment in renewable energy sources

 

SRI funds discuss a variety of issues What makes a sustainable company? SRI funds and SRI investors often have different answers to that query although there s a global consensus round the 17 United Nations Sustainable Development Goals including issues like clean water and sanitation treatment of major diseases and economic growth

 

Some funds and some investors discuss one particular issue but I believe investors can make the biggest impact by considering a diverse mix of SRI funds and then investing in the funds with the finest recent returns. Funds that have done well recently tend to continue to do well in the coming months or even years

 

Three recent strong performers that still invest in a sustainable way: Parnassus Endeavor (PARWX) owns a lean portfolio of about 30 large companies which are considered excellent places to work. It s currently quite concentrated on technology companies like Applied Materials and Micron Technology. Technology s done well particularly ago few months and PARWX is one of the top diversified funds over the trailing three months up 7

 

5%. For the year ending August 31 2016 PARWX is up 15. 2%. Parnassus Endeavor excludes most fossil fuel companies. Ariel Fund (ARGFX) invests in mid- and small-cap value companies that have been one of the leading areas of the market ago six months. ARGFX has done particularly well over this period of time up 17

 

4% for the six months ending August 31 2016 but it hasn t been as strong over the trailing year (8. 2%). Ariel s largest sector concentrations are in consumer and industrial stocks. The fund excludes tobacco and handguns. iShares MSCI U. S. ESG Select (KLD) is a sustainable responsible index fund. It includes about 100 large- and mid-cap U

 

S. companies that have high environmental social and governance (ESG) scores. (MSCI has been evaluating companies according to ESG criteria for almost 40 years!). The index excludes tobacco companies. KLD wasn t as strong as Parnassus or Ariel in August but it s up 16. 1% for the trailing six months and 14

 

7% for the year ending August 31 2016. Of course markets change over the years and these funds won t stay in favor indefinitely so ensure you monitor these funds regularly

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