Environmentally Friendly Investing: Hype or Opportunity?

This Friday is Earth Day and I'm looking forward to accompanying my daughter and her 3rd grade class on a field trip to the EcoTarium in Worcester.

April 22nd is the 46th anniversary of Earth Day and over the last five decades there has been a tremendous amount of communication, awareness, community action and conservation associated with Earth Day.

New companies have been formed, many new economy jobs have been created and new approaches on everything from transportation to energy to agriculture are being researched and incorporated into consumer products. All of these trends are accelerating and impacting companies in unique ways. The speed and level of integration across companies also varies wildly.

We must also acknowledge the political undercurrents and public debate that while generally healthy, complicate the task of building investment perspectives and performing investment analysis.

So is it hype or time to act?

The concept of environmentally friendly investing has been around for a while and has recently taken on the moniker “ESG” for Environmentally Friendly, Socially Responsible and Strong Corporate Governance. As more of these environmentally friendly and socially responsible trends emerge, it makes practical sense that we monitor and measure those trends and their impact on companies. Morningstar has even recently included this information in their ETF and Mutual Fund analysis.

The good news for investors is that there is now greater transparency into the ESG activities of many companies and individuals can make their own determinations on the desirability and prudence of those actions. Furthermore there are now many investment options that allow investors to gain exposure across that entire ESG spectrum -- from very tactical exchange traded funds (ETFs) to broadly diversified mutual funds. So there are many ways to add ESG positions and exposure to your existing portfolio.

The bad news is that many of the ESG investment options have exhibited a fair amount of volatility and risk and returns over short periods have tended to underperform.

As investment professionals, we evaluate investments in this space through a mix of traditional analysis techniques, assessments of the secular trends impacting companies in this space and through the lens of our job to act “prudently” and in some cases act as a “fiduciary”. In the end, the answer for most investors is that ESG investments can be incorporated into a diversified portfolio to help individuals align their investments to their political, social and religious values and at the same time, achieve their long term investment objectives.

And beyond the traditional mutual funds and exchange traded funds, there are many complementary options such as the New Hampshire Community Loan Fund, on which you can earn competitive interest in local investments and Kiva which is a no interest option that allows you to make loans to individuals worldwide.

So bottom line, it’s complicated. I invite you to join me on Thursday April 21st at noon in Nashua (1 Tara Boulevard Suite 200) to go into more detail on this topic and to answer individual questions.

 

PLEASE REMEMBER:

- Investing and investment management involves risk, including the loss of your initial investment or any investment gains.

- Past performance is no guarantee of future results.

- This generic information is provided for educational purposes only and should not be construed as a recommendation for any individual to take a specific action.

- Please invest prudently and seek professional help from a financial advisor, investment manager, accountant, lawyer or other professional on matters that you are unsure of or that are unique to your personal circumstances.

- Financial Advisor and Investment Management Services provided by J. Bradford Investment Management, Nashua NH.