It’s 2021. The Senate minority leader is Mitch McConnell. The Covid-19 vaccine is being distributed. Things like the “swuit” (sweat material formal wear) not only exist but trend as a socially acceptable dinner ‘fit. And, despite this past week’s little malfunction wherein Trump supporters (white supremacists) conducted an armed insurrection on the US Capitol, I dare say, things are looking up. But then again, there is a clock in Times Square now dedicated to broadcasting the time humanity has left before the effects of global warming are irreversible. 

So, grain of salt and all. 

With life being all that it is, I thought it only appropriate to introduce your existential self to something called ESG investing. Also known as sustainable, responsible, socially conscious, socially responsible, ethical, green, and any other term that feels like a little exhale to those of us concerned for our time remaining, investing. 

To invest, as I’ve rambled about before, is like voting with your money, which is to say: more effective than screaming into the void. 

What exactly is ESG?
Say it with me: E! Environmental. S! Social. G! Governance. Put it all together and what does that spell? A strong moral compass and the type of person who is appalled at “Bison Man” storming the Capitol Building.
In short, ESG criteria are a set of standards for a company’s operations that you, (the good people), will use to screen potential investments.
Environmental criteria: encompasses carbon emissions and climate change.
Social criteria: addresses labor relations, diversity and inclusion.
Governance: analyzes the internal system of practices, controls, and procedures a company adopts in order to govern itself, make effective decisions and comply with the law.
(Imagine the impossible nightmare of investing in a thing like the Weinstein company or a variant of such like the now infamously lawyer-abandoned Parler)? Investing in companies with high ESG scores will save you from this. 

Will I make less money with ESG investing?
No. In years past, critics of ESG investing argued that it required a trade-off on the investor’s part: a limited universe of eligible ESG companies means limited potential profit. However, the critics are wrong. Between the new generation of investors and the pandemic, sustainable investing is set to “surge”. Studies further suggest that companies with robust ESG practices display a lower cost of capital and volatility, as well as fewer instances of bribery, corruption and fraud. Conversely, it has been shown that companies who performed poorly on ESG had a higher cost of capital and volatility due to controversies such as spills, labor strikes, fraud, governance irregularities and all other scandalous things that happen to shitty companies. As far as I know, none of you are out here for risky business (all Tom Cruise jokes aside), and ESG companies should theoretically perform better in the long term for lack of, you guessed it: environmental, social and governance risk!

Will my investment decisions really matter?
There is historical precedent for divestment movements making a real impact. A divestment, I’m sure you’ve figured, is the opposite of an investment, thereby making a divestment movement: the removal of money from stocks, bonds or funds that are unethical or morally ambiguous.
A feel-good story: In the ’70s and ’80s, university students and faculty protested apartheid by demanding their schools stop investing their endowments in companies that had business interests in South Africa. (To no-one’s  surprise, one organizer of the South Africa divestment movement at Occidental College was a teenage Obama). The movement gained critical mass and ultimately pushed Congress to pass the Comprehensive Anti-Apartheid Act of 1986, which banned new U.S. investment in South Africa. The extent to which this pressured South Africa to start negotiations that eventually dismantled the apartheid system is unclear, but it is unanimously agreed to have played a role. (Also, of no surprise, then-President Ronald Reagan vetoed the legislation, but the strength of the anti-apartheid sentiment made Congress override him). 

A probably too long-winded example to say: your investment decisions can shape radical change, at the highest level, no matter who’s in charge. It matters. 

Where do I find them?
Luckily, being environmentally and socially conscious is trending. There are multiple outlets to find ESG scoring.
The following websites rate or rank the social responsibility of companies:

  • SustainalyticsA catch-all for ESG research and ratings. Search up any company that you’re interested in and get all the nitty gritty on the good and bad of their operation.
  • Ethisphere – An annual listing of the world’s most ethical companies.  
  • Fortune’s Change the World – Ranks companies that aim to make a profit while making a difference in the world.
  • Corporate Knights – An index of the Global 100 most sustainable corporations worldwide.
  • RobecoSAM – Dow Jones Sustainability Indices cover over 600 ESG indicators for over 4,000 global companies.

(If you know of any other superior outlet to find ESG ratings, let a girl know. I truly can’t get enough of this saving the environment being nice to people stuff). 

A revamped editor’s note: my eagerness for sustainable investing may have overshadowed a few of the cons? (Ish. This type of investing is still the new, hot thing). But, as the well to do journalist I am not…stay tuned for part 2 where I cover the less pretty monetary payoffs of going green.

Click this link, if you’re so inclined, to subscribe for your weekly finance updates! (But please do, it will help my rep)

Written By:

Madelyn Grace

Maddy has graciously allowed the Equity.Guru audience to take a look into her investor education journey - and is here to ask all your questions, with a heavy dose of millennial cynicism and good humour (swear it's not oxymoronic). With an EngLit degree from Ryerson University, and a pedigree that includes having been killed on CW series Supernatural twice, she fits right in with the rest of the Equity.Guru team, making even the most dull financial topic approachable. Talk to her about feminism, the acting world in Vancouver and all your financial woes. Don't talk to her about pineapple on pizza, NFTs, or how cheesecake is really a pie.

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