Answers to Your Questions about Socially Conscious Investing
Are your investments aligned to your values? Should they be? Here are some of the basics.
By: Edward Jones
What is socially conscious investing?
It's an investing approach in which ESG considerations play a role in how investments are selected for a portfolio. It's also known as sustainable investing or values-based investing.
Key sustainable investing considerations
Governance: Corruption, executive compensation, lobbying, board composition, board independence
Social: Alcohol, firearms, tobacco, diversity, labor relations, human rights, faith-based
Environment: Climate change, renewable energy, pollution, resource efficiency, water scarcity
Sustainable investing considerations can be be grouped into three main categories – Governance, Social and Environmental. Governance considerations include corruption, executive compensation, lobbying, board composition and board independence. Social considerations include alcohol, firearms, tobacco, diversity, labor relations, human rights and religious faith. Environment considerations include climate change, renewable energy, pollution, resource efficiency and water scarcity.
What types of sustainable investment options are available?
Investments that align with ESG considerations could include mutual funds, exchange-traded funds (ETFs), separately managed accounts, and individual stocks and bonds. It's important to note, many funds incorporate sustainability criteria into their investment processes, even though they're not marketed as sustainable.
Are there any downsides to ESG investing?
Some sustainable funds exclude entire industries from their portfolios to avoid investing in companies that do not align with the fund's mission. If you have strict views you want represented in your portfolio, understand that you may have to make diversification and performance trade-offs.
When considering an ESG approach to investing, the most important question to ask is: Will this strategy help me reach my goals? Working with an Edward Jones financial advisor who understands you and your goals can help you answer it.
All investments and investment strategies involve risk, and the value of your account will fluctuate. Your investment may be worth more or less than the original investment when sold.
Edward Jones - Mae Luchetti