ESG (environmental, social and governance) investing, a descendant of ethical investing, isn’t just for hippies and optimists anymore…
In fact, as Chief Income Strategist Marc Lichtenfeld uncovers in this week’s episode of his YouTube series State of the Market, ESG investing has gone mainstream…
So much so that it now accounts for one-third of all managed U.S. investments.
That’s because ESG strategies aren’t just good for the environment, good for workers and good for leadership – they’re also good for business.
Just look at how funds of companies that focus on these principles stacked up against the broader S&P 500 during the coronavirus crash…
Many of them trounced the broader market, some of them even soaring close to 20% amid one of the most devastating market events in history.
The data shows that initiatives like climate-friendliness, fair treatment of workers and executive suite diversity aren’t just “nice to haves” in 2020.
Instead, experts are wary of the risks of not implementing these strategies.
As Marc explains in this week’s video, “Companies that are conscientious about the environment are less likely to have big spills or leaks, less likely to pay fines for running afoul of regulations, and more likely to have technology that saves money over the long term.”
And the benefits for investors don’t stop with the stock market…
In 2016, Barclays found that bonds of companies that prioritize ESG principles perform better.
They appreciated in price and avoided credit downgrades more often than their low-ESG counterparts.
This week, Marc reveals three companies that score highly on ESG rankings…
But you can also check your portfolio’s ESG risk for yourself.
MSCI has pioneered the ESG Ratings Corporate Search Tool that investors can use to check how the companies they invest in manage issues that are important to the world today.
For instance, I looked up popular consumer goods holding Target (NYSE: TGT).
I discovered that on a score ranging from CCC to AAA, the company has been able to improve from a score of BB to a score of A in just four years.
That places the company in the middle of its industry peers.
According to MSCI, while the company leads in areas like chemical safety and corporate behavior, it falls behind in labor management.
Consider using the tool to check the ESG ratings of your own holdings – because as this year has shown, it is more important for companies to adhere to these principles than ever.
And as always, don’t miss Marc’s groundbreaking weekly State of the Market video. This week, he’ll discuss why ESG has become popular…
How it stacks up against the broader market…
And what three companies he tracks have the best ESG scores.