SANTA FE, NM – In 2017, the Guardian reported on a study by the Climate Accountability Institute which found that 100 companies are responsible for 71% of global emissions. Not surprisingly, ExxonMobil, Shell, BP and Chevron were among the largest issuers owned by investors.
I called my IRA manager. “I want you to sell all the stakes I have in fossil fuels,” I said. “OK,” she said slowly, “we’ll sell any stocks you own, but what about funds that hold fossil fuels, some good diversified funds hold small amounts of fossil fuels and, what about funds that hold fossil fuels? are there any utility stocks that use fossil fuels? They pay very good dividends.
– I want to go out, I say. “Find me environmentally friendly funds, including bond funds. And they did.
About a year later, she said, “We refer a lot of our clients to these funds, not just because they care about the environment, but because they’ve actually done better overall.”
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Socially Responsible Investing (SRI), which simply means investing in companies that match your values and avoid those that don’t, is now very popular.
As SRI manager Hamish Chamberlayne recently said: “The big picture is that over the next decades the global economy will transform into a low carbon economy and this will be one of the most major investment events of our life.
The world economy is around $ 80 trillion. The low carbon transition will create major risks and opportunities requiring a new level of understanding from investors. You don’t want to be the loser for short-term, high-risk gain.
A starting point is ESG investing. ESG is often used interchangeably with socially responsible investing and sustainable investing. ESG takes into account environmental, social and governance factors in the investment decision-making process. In other words, ESG rated companies care about the environment, take good care of their employees, and are better managed.
Among the environmental criteria for an ESG rating are waste and pollution, resource depletion, greenhouse gas emissions, deforestation and climate change. Social criteria relate to employee relations and diversity, working conditions, service to local communities, health and safety and conflict. Governance takes into account tax strategy, executive compensation, donations and lobbying, corruption and board diversity.
My friend Jake is a financial advisor. I recently asked Jake about ESG investing. “ESG companies just tend to be better performing companies and there is pressure for companies to improve their ESG profiles,” he said. “They offer a better business model. “
It seems that more and more investors are proactive about how they want their funds to be invested. I asked Jake if it was difficult to create fully ESG portfolios.
“Things have changed a lot over the past five years,” he said. “It’s no longer difficult or time-consuming. ESG portfolios are increasingly standardized.
Interestingly, Jake told me that some fossil fuel companies have improved their ESG ratings. Some oil and gas companies strive to protect the environment, diversify into alternative fuels, are well managed, and treat their employees well.
There are no easy answers.
Recently, marketwatch.com reported that the $ 226 billion New York State Pension Fund was abandoning many of its fossil fuel stocks and selling shares of companies that contribute to global warming. .
Some green energy advocates suggest that rather than divestiture, it may be wiser to stick with companies that are switching to cleaner alternative fuels, especially utilities, and to work as shareholder advocates. Currently, 30% of greenhouse gases come from power plants.
Chris Meyer, a management manager of the Praxis fund, says the utilities industry is ripe for the transition to green energy.
ESG growth is accelerating as the world changes and most investors are no longer passive. As the millennial generation ages, invests, saves and inherits, there will be an increasing demand for funds that “do good and do good”.
You may be able to have a say in how your personal funds or IRA are invested, but what about company pension plans? Some employer plans are flexible. Check with your pension fund. The first step is to know how these funds are invested. Pension managers can be open to sustainable ESG alternatives.
And if you don’t have one, look for a financial advisor who understands your goals.
Greening your investments can be one of the most important steps you can take to secure your family’s future.
Judith Polich, a longtime New Mexico resident, is a retired lawyer with a background in environmental studies and a climate change student. She can be reached at [email protected]