Your Questions, Answered: Investing in ESG
On this week’s episode of Your Questions, Answered Andy Garrison and Brian Leitner discuss investing in alignment with your values, and answer the following question:
“Should I be investing in environmental, social and governance (ESG)?”
Do you have questions you’d like answered? Email them to QA@marinerwealthadvisors.com, and we’ll provide answers.
Brian Leitner: You have questions. We have answers back with another quick clip. Well, thanks for being here, because we have another question that someone emailed us. And the questions essentially are: Should I be investing in ESG? So, what I thought we might do is explain ESG and, some of your thoughts around socially responsible investing.
Andy Garrison: Yeah, absolutely. Absolutely happy to. This is an area that I’m passionate about because I think it provides a lot of potential for the right folks that are interested in it. ESG is kind of our industry term, if you will, to define the ‘E’ is environmental, the ‘S’ is social and the ‘G’ is governance. And what that really means are three criteria that you kind of look at different companies and different investments to evaluate them on the broad umbrella of social responsibility. And so that just means are we investing in companies that perhaps agree with our values or disagree with our values and trying to find those, whether it’s on the environmental front or how they treat employees, how they treat their communities or the governance side is really about, are they keeping their books right? Or are they being honorable? Do they have good independent board of directors and that kind of thing on there? So, the whole concept of it is just investing in alignment with your values.
Brian: It’d be investing in companies that are doing good. Or, that are doing well by doing good for others. Right?
Andy: Exactly. Exactly. Yep. Yep.
Brian: So, so how would someone get involved in that? How would, if someone was interested in that type of investment philosophy, where would they get started?
Andy: Yeah, so we’ve had a lot of new clients come in lately asking specifically for that. And the question they have is either something that’s gone on recently or something’s happened in their family, has made them think, you know, I’m starting to vote when I’m out shopping with my wallet. And there are certain companies I like to support some companies I prefer not to support. And a lot of times they look at it and say, “is this something I can be do with my investment dollars too?” And so that’s a lot of times what clients are coming to us on there. And then it’s just figuring out what are those values they hold that they want to make sure reflected in their investments? How do we do that in a prudent way that still meets their investment objectives, but also ties back into their broader financial plan as well?
Brian: So, if somebody is interested in this, how would they get started? What are the avenues to invest in ESG for example?
Andy: Yeah, great question. So, this market has really exploded in the last five or six years. So, there’s a number of different ways. It used to be purely individual stocks, which we think still might hold the best promise for some folks in some areas. But there’s also a lot of exchange traded funds and mutual funds that are out there which are basically ways to invest in a whole pool of different companies that meet certain criteria. Not quite as transparent or have as much control over as perhaps individual stocks, but they’re becoming more and more accessible in those ways.
Brian: So, more control from an individual stock or equity perspective. Then what about returns? I mean, again, things sound great. I want to invest in companies that are, that are doing good by doing well. But do I sacrifice returns by investing with ESG or socially responsible funds?
Andy: So that’s always the number two question that comes around when it comes up to the socially responsible questions, as you might imagine. And I’m a big believer that good values and good returns are not mutually exclusive. And I think we see that kind of intuitively with companies that make sense. Right? That if a company treats the world well, treats its people well, the employees are more productive, right? If you take care of your communities, you have better, broader support from customers, all those things kind of spill in. So, what we’ve seen, if you look at kind of the broad measures of socially responsible investing, kind of based on those ESG criteria, the environmental, the social and governance. And you look at it really over any timeframe, you’re not going to see a loss of value relative to the broad market as a whole. And the main reason I believe that is, beyond that good companies can do well over time is that we’re seeing kind of a shift in consumer preferences with it as well. But you’re still able to own enough companies and enough different industries to get that same exposure that a regular market investment might have too.
Brian: Okay. So, not necessarily sacrificing the returns and, you know, as a prediction, I know a lot of folks that are out there are saying that most companies that aren’t necessarily socially responsible today are certainly taking steps to sort of maybe move closer down that road as time goes on. Right?
Andy: Yeah, I think so. And I think it’s coming from two angles. I think consumers are starting to request it a little bit more and I think employees are starting to request it a little bit more. And, you know, as the environment changes or you go through kind of tough economic times perhaps, or other tough health times, you know, as we’ve seen recently that you see a lot of companies just stepping up and saying “Hey, I want to do the right thing by my employees, my customers and stakeholders.”
Brian: Listen, Andy. That’s great. Thanks for answering the question. Thanks for being here. And if anybody has any questions they would like to have answered, they can go ahead and email firstname.lastname@example.org. Thanks for watching.