- CRS Form
Take into consideration the current population, rate of growth, and consumer consumption of natural resources. Can we survive without natural resources? Energy, water and oxygen are three main components of survival. With increasing carbon emission and toxic waste from companies, the depletion of these materials that is quintessential to our survival is being harmed.
The redundant statements that the core social responsibility of companies is to increase profits and growth, is completely unhinged in its sense.
The question that should be asked to individuals that firmly believes in this statement goes as follow: Where would your business be located if our land becomes uninhabitable by your ideology; the way you choose to do business?
I can assure you that this question would leave them speechless. The lack of understanding the important role that our environment plays in the development of a country economically is scant.
The question then is: what can we do to carry out our moral responsibility to ensure a prosperous future not only for us but for our children, and their grandchildren?
The Answer: The ESG approach or ESG data is integrated into the investment process as a supplement to financial analysis. It becomes a factor when weighing securities for inclusion in a portfolio. Paying keen attention to issues regarding climate change, executive remuneration, and employee morale can be important as financial metrics used to determine corporate performance.
ESG investments are a fast growing segment of the financial realm. It’s an opportunity to make money and make a difference in the world you live in. Many opt out of sustainable investing because the feeling of choosing between wealth and personal value. However, they think about the way sustainable investing used to be and unfortunately the opportunity to jump on this new “wave” could be missed.
Good ESG factors have been linked to better performance. I like to think that the ESG process is a part of the fundamental analysis that many investors use worldwide. Fundamental analysis studies anything that could potentially harm a security’s value. A company that discloses executive pay, treats its’ employees well and take a social responsibility to continuously assist in environment awareness and to improve their processes to ensure a better society for everyone will and can perform well. ESG like any other non-SRI funds identifies long term opportunities strategically. Let’s look at the stats.
According to the US SIF more than $8.10 trillion dollars were classified under management as of the start of 2016. Social Responsible investing now accounts for more than 1 out of 5 dollars under professional management in the U.S, a 33% increase since 2014. As to returns for 2017, SRI funds averaged a 7.73% gain, while non SRI funds averaged a 6.64% gain (“ESG Investing (finally) gets a Little Respect”). Almost a 1.09% competitive advantage! SRI funds have been proven to outperform non-SRI funds, and as investors realize that, the rapid growth of these funds increase as the years goes by.
Engaging in the front line:
A change in corporate culture is visibly a change in how leaders lead. The engagement process of advocating and exercising shareholder rights are ways we bring change to the operation practices of businesses on multiple levels. It focuses on long term outcomes and embraces the idea of being proactive. It inculcates the roots of being an investor.
Recurrently, the financial industry is deemed as distrustful and fraudulent, to regain credence is the essential part of engagement. It essentially opens a gateway to clarity and understanding the customs of a company.
Quite often we turn a blind eye to the issues we face today. The level of damage humans create is beyond thinkable limits. We are so profound on blindness that we trained ourselves to believe that in order to make a better suited luxury life for ourselves; we must do whatever it takes to be on top. In process, economic inequality occurs; deforestation, ocean and air pollution, and major ecosystems are being destroyed because of our footprints.
In essence ESG investing is the distinction between investors who are aware of the “entire picture” and not just a mere glimpse. I strongly presuppose that these are the types of investors we need today. With major environmental changes and governance issues, if we can see beyond 6 months and the potential impact that external factors place on these companies we are better equipped to make sound decisions and advocate ways to continue to yield high returns without affecting the resources we have significantly.
The engagement process aids this change, Engagement allows an individual to not only invest in personal values but investing with a purpose. Whether it is women’s pay gap or lack of diversity on the board, we play an active role by exercising shareholders right to bring positive change to the way our companies handle controversies and their governing bodies. Active engagement allows companies to be conscious of their actions and their consequences if any. This is a very prevalent way that one individual can make a positive change in our world. Let this change begin with you.
“Fighting the Fight for Change”:
A vast number of characters have made a living out of denying climate change. These people often state “I’m not a climate scientist, but…” before launching into a series of talk points to confuse their audience. Too frequently, the discussion of climate change is instated as a hoax. Insufficient theories are provided without sufficient facts.
Taken as a whole, what scientist had predicted would result because of climate change globally is coming to light; melting of glaciers, heat waves and accelerated rise in sea level has all without a doubt increased significantly.
Climate change creates significant risks to humans and their environment. According to the EPA (U.S Environmental Protection Agency) human activity is responsible for almost all of the increase of greenhouse gases in the atmosphere. With Electricity producing 29%, Transportation 27%, industries 21%, residential and commercial 12% and agriculture 9%.
The argument that then stands to the “climate deniers” is “if we (humans) aren’t responsible for climate change, who’s to blame? Why are we experiencing spikes in temperate, why are sea levels rising, and why are natural disasters more frequent?
A stereotypical answer? Climate change is natural. While that is most assuredly true, the process and the speed as to which this is happening is moving in the wrong direction way too fast. And if nothing is done, it’ll continue to accelerate.
Extreme weather, made remarkably worse by climate change along with health impacts of burning fossil fuels has cost the U.S economy at least $240 billion a year over the past ten years according to National Geographic, excluding the hurricanes and wildfires in 2017 . “The economic losses estimated to top $300 billion” according to a new report.
We continue to deduce the idea that our world is completely fine and it will eventually adapt to our changes and the pace of growth we are at. Without considering external factors we see merely a piece of the over-all image. It’s time for a change in the way we think. We are not living in the 18th century any longer, while many believe that climate change is too expensive to warrant taking action, the damage and the cost of waiting will evidently increase to more dollars. Action needs to be taken now, if you don’t initiate change, who will?
Stop to think about the harm that we place on animals and life beyond 50-100 years. We are so fixated in our old habits and unfortunately we simply cannot continue to trot in our predecessor footsteps.
Check the background of your financial professional on FINRA's BrokerCheck.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by Advisor Launchpad to provide information on a topic that may be of interest. Advisor Launchpad is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
*Securities offered through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services offered through AJF Financial Services Inc. an SEC Registered Investment Advisor which is not affiliated with APFS.