Environmental, Social and Governance (ESG) Investing
Are you concerned about the environment? Is it important to treat other people fairly and equitably? Does it matter how companies are run and how executives are compensated? If you’ve read this far, you’ve probably answered ‘yes’ to one, two, or all three of these questions.
If you did answer yes, what are you doing about it? Resources at your disposal include time, money and specific discrete actions. Do you drive a car or truck? Do you drive it more than you have to? Is the mileage less than it could be? Do you vote? Do you know where the candidates stand on ESG issues? When you spend your money, are you doing business with companies that ‘do the right thing?’ How do you know?
Are you making a difference? Is the difference you make small and are you depending upon the collective action of others like yourself doing the same thing?
What about the money you invest? Most of us don’t invest in individual companies but rather invest in a diversity of companies though packaged investment vehicles like mutual funds. A fraction of these packaged investments purport to be ESG funds. Can you do E, S, and G effectively all at the same time? If you researched a political candidate before you voted did you also research what ESG means before you invested?
OK. Enough questions. One of the mutual fund firms I like to work with best does sustainable investing and social investing and oft times separately. They don’t specifically offer governance investing. I’ll tell you what means to them:
Social Investing:
“The Portfolio seeks to exclude from its investment portfolio those companies that are identified by the Portfolio’s social issue screens, as further discussed below. The Portfolio’s social issue screens are designed to identify companies that:
(1) earn at least 20% of their total annual revenue through the production and/or sale of conventional or nuclear weapons, their weapon systems, or critical components of these products, or the provision of weapon systems support and service;
(2) are engaged in business activities in or with the Republic of the Sudan that are tied to, or support, its military or government, the oil, mineral or power sectors, or that otherwise demonstrate complicity in genocide in Sudan;
(3) earn at least 15% of their total annual revenue through the production and/or sale of tobacco, alcohol, or cannabis products, or key products or raw materials necessary for their production;
(4) earn at least 20% of their total annual revenue from certain gambling activities, the production of goods used exclusively for gambling, or the provision of certain services in casinos that are fundamental to gambling operations;
(5) directly participate in abortions, or develop or manufacture abortive agents or contraceptives; (6) earn at least 15% of their total annual revenue from the rental, sale, distribution or production of pornographic materials, or the ownership or operation of adult entertainment establishments;
(7) are involved in the production or manufacture of landmines, cluster munitions, or the essential components of these products;
(8) are involved in the production or manufacture of civilian firearms;
(9) have had major recent child labor controversies in their own operations or supply chain;
(10) are involved in stem cell research;
(11) are i