If you’re a conscious consumer and forgo unnecessary plastic usage or excess packaging when you can, you may have mixed feelings about how your investments are contributing to a more/less sustainable planet.

ESG investing (Environment, Social, Governance) has been an option for retail investors like you and me since the 1970s.

Much of what has been a hurdle to this type of investing becoming mainstream was the nagging belief that in order to “invest with your values” you would have to give up some level of return.  Thankfully, there’s a growing body of research asserting that ESG investing does not necessarily result in lower or higher levels of returns compared to non-ESG investing.  (see attached PDFs).

Of the 4 ways you can integrate ESG criteria into your portfolio, advocacy is my favorite:

  • Exclusion (boycotting if you will)
  • Integration (using ESG data alongside financial data)
  • Advocacy (described below)
  • Impact (purchasing companies that exist to combat ESG challenges)

Advocacy investing is when shareholders use their ownership to voice concerns to company leadership.  This is possible through engagement (fancy word for communication: phone calls, emails, letters), introducing shareholder resolutions, and voting proxies in annual shareholder meetings.

Parnassus and Green Century Funds are two fund families in our portfolios that helped influence these changes recently:  

  • Verizon committed to source 50% of it’s annual electricity usage from renewable sources, this is up from it’s previous 4% goal
  • Coca-Cola agreed to decrease it’s cumulative use of virgin plastic by 3 million metric tons by 2025 (equivalent to 200,000 plastic bottles per minute)
  • After 5 years of pressure from investors and the broader community, Mondelez, the owner of snack brands including Oreo, Ritz, and Cadbury agreed to zero net waste packaging

Last year, many fund managers focused on Covid response and Equality.  Parnassus and Calvert, both represented in our impact portfolios, focused efforts on asking companies to disclose their EEO-1 data (which includes racial/ethnic and gender data by job category).  Parnassus reports that this led to agreements for Mondelez, Masco, Hologic and IDACORP to publish their data this year and Calvert had this to say about the 100 companies it made the request to:

“We had a positive initial response, with 23 companies agreeing to the request. We filed a shareholder proposal at 18 companies that did not respond or responded negatively. Dozens of other proposals were filed at other companies by other shareholders. We then contacted companies and offered to withdraw if they agreed to disclose. As of this writing, we have now withdrawn, or are likely to withdraw, 9 of our proposals.

As of January 2021, 32 companies out of the 82 have agreed to publish their reports. Of the top 100 companies, half will now be issuing a full EEO-1 report, and many of the other companies will be improving the quality of their diversity reporting. We expect that additional companies will agree to disclose later this year, after the 2020 EEO-1 filing date.”

All this to say, you don’t need to feel conflicted about your investments.  It is possible to be both a conscious consumer and conscious investor.

How aligned is your portfolio to your priorities?

Jen Sapel

Investing involves risk including loss of principal. No strategy ensures success or protects against loss. Past performance is no guarantee of future results.

Investment advice offered through WCG Wealth Advisors LLC, a Registered Investment Advisor.  Utor Wealth is a separate entity from WCG Wealth Advisors and The Wealth Consulting Group.

 ESG and financial performance aggregated evidence from more than 2000 empirical studies.pdf

 Morgan Stanley 2018 Sustainable_Reality_Analyzing_Risk_and_Returns_of_Sustainable_Funds.pdf

 Trends in ESG Investing 2021.pdf