Individuals and large institutions alike are allocating more of their dollars to investment strategies that meet some level of environmental, social, and governance criteria. This is commonly referred to as responsible, sustainable, or green investing.
Referenced in this video:
– 2018 GLOBAL SUSTAINABLE INVESTMENT REVIEW http://www.gsi-alliance.org/wp-content/uploads/2019/03/GSIR_Review2018.3.28.pdf
– Sustainability as BlackRock’s New Standard for Investing https://www.blackrock.com/uk/individual/blackrock-client-letter
– The Contributions of Betas versus Characteristics to the ESG Premium https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3010234
– Disagreement, Tastes, and Asset Prices https://papers.ssrn.com/sol3/papers.cfm?abstract_id=502605
– A Sustainable Capital Asset Pricing Model (S-CAPM): Evidence from Green Investing and Sin Stock Exclusion https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3455090
– Sustainable Investing in Equilibrium https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3498354
– Aggregate Confusion: The Divergence of ESG Ratings https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3438533
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Lower returns in order to keep a planet hospitable to life, yeah that's important enough to invest in ESG companies. High return isn't worth diddley squat if the only habitable planet in this solar system becomes Venus-like. Duh!
This fact based, nuanced discussion of ESG investing is so much better than most of the vids I've watched on this subject. In many of those, the comments about ESG state reductively that ESG is a scam, without really getting into the nuts and bolts that support that assertion.
I've been interested in investing in ESG for years, but instead have been doing my own stock picking. And that row has been a tough one to hoe. My success has yielded me income, but it's also put me into some difficult positions. Right now, my wind and solar stocks are in the tank, and I don't know how long before they bounce back. Some may not.
I know I"m missing out on profits by not investing in an S&P 500 index fund, or other mutual funds that invest in the broader market or in sectors. But I refuse to follow the crowd based on what I know is becoming of the world relative to ecosystems and climate. I cannot and will not give in to investing with the herd, while sticking my head in the sand.
Great stuff Ben. I've read about this on a blog before watching your video, and can say that I feel I'm much more well informed now, considering the two sources. Keep up the good work!.
In other words, capitalism has no solution for a sustainable future.
It will always be more profitable to invest in exploitative practices and sustainable alternatives are always at a disadvantage.
The free market controls only one thing, the market…
So good, Ben.
If ESG tastes are high, it makes sense that ESG costs are more expensive each (and therefore potentially less profitable). Let's call this the ESG premium. They are effectively overprices, relative to that taste. However, if ESG tastes are increasing, wouldn't that also mean that the ESG premium is increasing? In other words, wouldn't it mean that those who already own ESG stocks are in a position to earn more over time, at least to that extent?
How can we solve the problem of the different ESG definitions across ESG rating agencies? Are there no standards?
CNSI
My ESG mutual fund outperformed my other mutual funds where i picked a sector
Perfect is the enemy of good.
iShares MSCI World Screened UCITS is still very diversified (tracking 1228 companies vs 1323 of the original), cheap (0.20% TER) and has the same returns (9.24% vs 9.23% YTD).