ESG Investing 101
So you liked the podcast, now you want to know how to actually find some options for Sustainable/Social investing. Well my friends, it’s time to do your homework. Ugh. I know, but what a good use of our quarantime!
First of all, I can’t tell you which fund I think you should invest in, because I don’t know what is most important to you. I will also preface this post by saying that this social and sustainable world of investing is constantly changing and evolving. New ratings, analysis, and funds are coming out all the time, as popularity for this continues to soar. Put in some time to find an investment that matches up with your values AND your long-term goals.
Step 1: Understand your investment philosophy.
Are you investing for your long-term goal of retirement, or is this money for an upcoming down payment? Do you want to focus on well-diversified, low cost investments? (hint: most likely yes.)
Step 2: What do YOU care about?
Lower carbon emissions, equal pay, animal testing, anti-gambling? A little bit of everything? It can be helpful to frame what issues you want to focus on in your investments. Otherwise, it’s easy to get overwhelmed with options.
Step 3: Start Researching
If you’d like to dig deeper and understand more about sustainable investing, some of these resources are a good place to start :
- US SIF
- As you Sow
- Morning Star- ESG
- Morning Star-Sustainable Investing Article
- Vanguard ESG Investing
- iShares Sustainable Investing
Step 4: Don’t forget the basics. You might want to invest in a fund that only holds wind energy and solar power. BUT it might be a very concentrated fund, actively managed and expensive. (Remember the basics of low-cost, highly diversified funds)
Step 5: Talk with your Financial Mentor if you have additional questions.
Remember, ESG stands for Environmental, Social, Governance. Some mutual funds and ETF’s will use ESG in the title, but in order to really understand what they’re doing you need to dig deeper. Don’t just skim the overview of a fund, really get in there and read the prospectus. This is normally a PDF you can download to glean a lot of good information. Every mutual fund and ETF will have a prospectus. Information includes: investment strategy, who runs the fund, the fees, and major risks. Some funds will also have an additional resource called an impact report. This can be a really helpful tool to see how the manager is rating companies and evaluating the impact of the investments.
Now go out there, read some articles, download a prospectus (or 10) and make the world a better place!
Author: Lily Styrmoe
Lily Styrmoe, CFP®, CSRIC™ , is a Financial Planning Associate at TCI Wealth Advisors. Lily graduated Magna Cum Laude at Northern Arizona University and earned her Bachelor of Arts degree in Environmental Studies with a minor in Spanish.
Lily recently received her Chartered SRI Counselor™ designation as she continues to expand her passion for sustainable investing. Lily was also recently selected for the inaugural SRI Conference 30 Under 30 list. The award includes rising stars advancing sustainable, responsible and impact investing.
Before joining TCI, Lily was a backpacking guide in the Grand Canyon. She has always been committed to helping people accomplish their goals. She believes that a fear of failure should never stop someone from pursuing what is important to them.
In her free time, Lily loves to spend her time outdoors; backpacking, river rafting and rock climbing. Lily also enjoys running, biking and playing tennis. When she’s not outside, Lily loves to cook, try new recipes and host dinner parties with friends.