ESG Investing: What It Means for You, and Our Investment Philosophy

If you have been following financial news over the past few years, you may have come across the terms “ESG”, “ESG Investing”, “ESG Initiatives” or “ESG issues.”. ESG is an investing principle that prioritizes Environmental, Social, and Corporate Governance issues in decision making.

The emergence of ESG represents a response to growing demand for corporate social responsibility and accountability. Oftentimes, specialist investors will invest based on these principles to move forward certain issues in a method referred to as “impact investing” to generate social and environmental impact in addition to a financial return.

As a result, many publicly traded companies are beginning to organize themselves on these issues and are reporting their performance on them every quarter. However, not all firms report their ESG performance in the same way, and neither do all investors prioritize ESG in equally.

As a result, many publicly traded companies are beginning to organize themselves on these issues and are reporting their performance on them every quarter.

Seeing this, you may ask “Does this affect my investment returns?” , “Am I invested in these companies?” , or “What does this mean for me?” The answers to these questions may be less complex than you think.

A recent paper from Harvard Business School titled “How ESG Issues Become Financially Material to Corporations and Their Investors” details how ESG considerations become financially important to companies. In an age where there is a lot of controversy over environmental and social issues for political reasons, this paper provides a framework to bridge the gap within the controversy.

The paper makes the case that regardless of motive, it is in the financial interest of companies to align themselves with environmentally friendly and socially beneficial causes. Furthermore, providing the public with clear indicators of good corporate governance creates confidence in the firm itself.

The paper makes the case that regardless of motive, it is in the financial interest of companies to align themselves with environmentally friendly and socially beneficial causes.

Seeing this, the paper cites certain case studies where ignoring these issues backfired. Namely, it cites pharmaceutical companies who hike prices of drugs, the Facebook-Cambridge Analytica scandal, and mining companies that ignore safety protocol as key examples.

Although it must be noted that performance of ESG related investments can vary widely by sector or region, focus on specific ESG issues can lead to firms achieving better risk mitigation or improved reputation. This can create better financial returns, but what measures each firm takes is unique to the firm itself.

During my time interning for Williams Wealth Management, I spent a great deal of time investigating different securities and asset classes to support the investment decisions made by our investment advisors.

During my time interning for Williams Wealth Management, I spent a great deal of time investigating different securities and asset classes to support the investment decisions made by our investment advisors.

Furthermore, my research in my Applied Economics graduate program is focused on uncovering investment opportunities that are beneficial not only to shareholders but to the rest of society.

Seeing this, we find that investigating which companies are creating innovations that are creating positive effects beyond their direct operations is worthwhile. As the interest in ESG investing grows, it’s clear that aligning investments with personal values can play a significant role in decision making.

At Williams Wealth Management, we are committed to understanding what truly matters to our clients. We personally select individual securities on behalf of our clients in lieu of third party managers, which means clients have control over what they own and the cost structure. We can consider client’s values in this process.

At Williams Wealth Management, we are committed to understanding what truly matters to our clients.

Our focus on transparency and the responsibility to deeply know our clients informs our security selection process and communications, helping to ensure that any investment choices reflect both financial goals and personal values of our clients.

Justin Chamberlin, Intern

This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or advisor for specific information pertaining to your situation.