PART TWO - A Whole Lot Modern: Three Investment Pillars to Embrace Now

The article series, A Whole Lot Modern: Three Investment Pillars to Embrace Now, began with a focus on Investments with Impact, which feature an advocacy component in support of investors’ values. One example was a mutual fund that invests in the construction of solar farms. We continue by exploring Investments with ESG (Environmental, Social, Governance) analysis as an integral feature. Generally speaking, the aim of our second pillar—Investments with ESG—is to avoid certain companies and thereby “do less harm.”

Previously, an investor interested in doing less harm was often described as a “socially responsible investor.” Such investors might delineate what they wanted their investment choices to avoid: no tobacco, no firearms, no fossil fuels and so forth. Simply stated, socially responsible investing meant a no harm portfolio of assets. Please note that choosing to do less harm with respect to investment selections occurs on a continuum. When an investor or fund manager avoids the purchase of certain companies, this does not mean that absolutely nothing harmful could be present. It typically means that “harm” is far below the average and that efforts to reduce it further are underway.

Today, major financial firms are recognizing that companies who “do less harm” are better investments for their shareholders because their results tend to be more consistent and reliable over time. This understanding has prompted certain global financial firms, such as Capital Group, to adopt ESG as central to their entire investment process. In their words, “We believe ESG is key to successful investing. So we consider environmental, social and governance issues before we invest.” This Capital Group video offers a window into the complex and robust nature of the research, monitoring and engagement required for true ESG investing.

Stay tuned for more about our three investment pillars we explore the nature of Investments with Impact and ESG in article three. We welcome your comments and would love to start a conversation about this vital investment trend! contactus@entrustfinancial.com