Tuesday, November 30, 2021

Commitment to Values

Ask the CFP

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“No bird soars too high if he soars with his own wings. William Blake 

Question: Why is sustainable investing on the rise? I keep hearing about it and would appreciate more insight.  

Answer: You’re right, investing in companies that proactively focus on and manage environmental, social and governance (ESG) issues is growing in popularity. Between 2012 and 2018, investments worldwide in sustainable assets more than doubled from $13.3 Trillion to $30.7 Trillion as reported by the Global Sustainable Investment Alliance in March 2019. In the United States, $12 trillion is invested in sustainable strategies, equaling one out of every four dollars of investable assets. 


Socially responsible investments (SRI) exclude some investments for specific reasons that may cause investors to forgo some potential market opportunities available to those who do not use SRI and ESG criteria. As we move forward, it is likely that there will be more requirements to disclose adherence to ESG criteria. Here are a few of the benefits which may be attractive to some investors. 

1Risk Mitigation 

Institutional investors often stress the importance of attempting to moderate or alleviate potential environmental, social and governance (ESG) risk. We all hope to protect the downside, right? Environmental disgrace and damage, and prevalent data breaches can impact a company’s bottom line. These cautious optimists look for companies trying to get ahead of regulations for the right reasons.  


Just as self-worth is not the same as net-worth, value has several meanings. Assessing the value of a company and its growth prospects based on financial reports and the bottom line is an important metric when building a portfolio. There is another kind of value you may wish to evaluate when selecting investments. To measure this sort of value, we’ll look to companies whose practices align with their own moral compass. This method of selection traces back to when people who refused to invest in the slave trade, avoided companies who participated in those activities. This still resonates today, with mutual funds that seek to promote women in leadership or adhere to religious values, and green bond funds that finance projects related to renewable energy or river and habitat restoration.  

3Long-term Performance 

Slow and steady, like the fabled gopher tortoise, the long-term investor sees growing evidence that integrating environmental, social and governance (ESG) principles has the potential to positively impact risk-adjustedperformance. In the past few years, companies with higher ESG ratings exhibited higher average return on invested capital, compared to companies with lower ratings, according to data provider MSCI. This is in part because ESG pushes companies to look beyond the 3-to-5-year business cycle in evaluating risk. Whether you’re interested in making a positive impact or want to avoid ESG risks, the time may be right to have the discussion with your Certified Financial Planner Professional to help you customize a sustainable investing strategy that fits your financial and personal goals. Stay focused and plan accordingly.  



Sources: 2018 Global Sustainable Investment Review, US SIF, CNBC, MSCI, Global Impact Investing Network. There are additional risks associated with Sustainable/Socially Responsible Investing (SRI), including limited diversification and the potential for increased volatility. There is no guarantee that SRI strategies will produce returns similar to traditional investments. Investors should consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. The prospectus contains this and other information and should be read carefully before investing. The prospectus is available from your investment professional. Investing involves risk and you may incur a profit or loss regardless of the strategy selected. Because SRI criteria exclude certain securities/products for non-financial reasons, investors may forgo some market opportunities available to those who do not use these criteria. Investors should consult their investment professional prior to making an investment decision. 

The opinions expressed are those of the writer as of December 9, 2020, but not necessarily those of Raymond James and Associates, and subject to change at any time. All information provided herein is for informational purposes only and is not intended to be, and should not be interpreted as, an offer, solicitation, or recommendation to buy or sell or otherwise invest in any of the securities/sectors/countries that may be mentioned. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.  

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.” This article provided by Darcie Guerin, CFP®, First Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239389-1041, email darcie.guerin@raymondjames.com. Website: www.raymondjames.com/Darcie. 



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