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Think ESG Investing This Earth Day

Earth Day is Friday, April 22

Earth Day is on Friday, April 22. Celebrate Mother Earth by taking the day to get outside, enjoy nature, and consider your role in your community.

We all want to make small changes to make the world a better place, and some of these changes can take place through your investment portfolio!  Let's discuss Environmental, Social, and Governance (ESG) investing, how to get started, and the difference it can make for both your investments and the environment.


Discover ESG Investing

ESG investing is a strategy that allows investors to build a more ethical portfolio. ESG investments can be very strict in what they include, and the criteria determining this classification are directly tied to a company’s structure and performance rather than personal values.

Here are some factors to consider by each category:

Environmental

  • Carbon emissions 
  • Air and water pollution
  • Water usage
  • Fossil fuel/green energy use
  • Deforestation

Social

  • Employee diversity
  • Customer satisfaction
  • Employee protection
  • Sexual harassment and protected class policies
  • Fair labor practices
  • Human rights

Governance

  • Board member diversity
  • Lawsuits
  • Lobbying
  • Executive salaries
  • Conflicts of interest
  • Shareholder rights

Investments can have an ESG score that determines how well they adhere to the given guidelines and consider the above factors.


The Rise of ESG Investing

Not only can ESG investing be better for the environment and social justice, but it can also be great for investors. According to Forbes, ESG funds outperformed non-ESG funds based on annualized returns over the last 3-, 5-, and 10-year periods.1 ESG funds also outperformed non-ESG funds and the stock market in risk-adjusted returns.  While there is no guarantee that they will outperform moving forward, the data at least shows that ESG investment may perform on par with other investments.

It is no surprise that ESG funds have become more popular for investors of all backgrounds. According to Fast Company, investors poured about $120 billion into sustainable investments in 2021, more than double the $51 billion in ESG investments in 2020. About one-third of all assets contain sustainable investments.2

Plus, the diverse availability of different ESG investment funds may fit more directly with your values, such as investing in a company that is championing green energy initiatives or is working to become carbon neutral or even carbon negative.


How to Get Started with ESG Investing

If you’ve decided that ESG investing is aligned with your personal goals and values, it’s easy to get started.

The first method is to examine your portfolio and include ESG companies. You can find ESG investments that align with your financial goals, risk tolerance, and personal values by doing your research. You can open your own brokerage account or work with a robo-advisor platform to manage your ESG portfolio. ESG investments can include both individual stocks, mutual funds and exchange traded funds (ETFs)

Another option is to work with a financial advisor who has experience with ESG investing. Look for an advisor who believes in being a good global citizen through their business practices and the investment options they offer their clients.

From recycling and cutting out single-use plastic to cleaning up the streets, parks, and beaches by your house, there are many ways to get outside and celebrate Earth Day. ESG investing can be a lasting strategy to help you create a portfolio that reflects your values. As we grow as a global community and educate each other on ways to protect our planet, we will likely see an even more dramatic increase in ESG investing.

  1. https://www.forbes.com/sites/jacobwolinsky/2021/09/24/how-do-esg-hedge-funds-stack-up-against-their-non-esg-counterparts/
  2. https://www.fastcompany.com/90706552/esg-investing-continued-to-soar-in-2021-the-government-could-boost-it-even-more

Jeff Spitzmiller is the CEO of Ohana Wealth & Life Planning based in Cincinnati, OH.   Ohana specializes in life and financial planning along with ESG (Environmental, Social, Governance) investing principles for professionals in the healthcare and university fields.  The firm is an independent financial advisor and a fee-only fiduciary.  Jeff and the firm also enjoy volunteering and giving back to the local community.  You can reach Jeff at jeff@ohanaplanning.com.

This was prepared by Ohana Wealth & Life Planning; a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Ohana Wealth & Life Planning Form ADV Part 2A & 2B can be obtained by written request directly to: Ohana Wealth & Life Planning 212 East Third St. Ste. #100 Cincinnati, OH 45202. All opinions and estimates constitute the firm’s judgment as of the date of this report and are subject to change without notice. This is provided to investment advisory services clients of Ohana Wealth & Life Planning. It is not intended as an offer or solicitation with respect to the purchase or sale of any security. Investing may involve risk including loss of principal. Investment returns, particularly over shorter time periods are highly dependent on trends in the various investment markets. Past performance is no guarantee of future results. The information herein was obtained from various sources. Ohana Wealth & Life Planning does not guarantee the accuracy or completeness of such information provided by third parties. The information given is as of the date indicated and believed to be reliable. Ohana Wealth & Life Planning assumes no obligation to update this information, or to advise on further developments relating to it. This is for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person.  An index is a portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown.