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Why Investors Need ESG In Their Portfolio

Last Updated on January 15, 2019 by Zion Miller

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Overview

MS has extensively covered small cap speculative plays and intends to increase coverage on longer term “safe” plays. To kick this off, we will take a look at ESG and why so much noise has been made around the acronym.

What Is ESG?

The concept of ESG was coined in 2005 when a study titled “who cares wins.” Since this article, ESG has been a hot topic recently as investors become increasingly concerned with potential scandals and pursing investments which are perceived to have beneficial impact when compared with typical corporations in the industry. Screen Shot 2018-12-31 at 7.40.01 PMA further look into ESG provides validation in this investment thesis, as the funds who pursue such criteria have traditionally outperformed the general markets and in a worst-case scenario match the returns of the highest revered indexes. Firms who target ESG who are within compliance of this criteria are clearly successful. This can be seen with statistics such as ESG currently having a rough valuation of $20trillion which loosely translates to a “quarter of all professionally managed assets,” as forbes writes in their article The Remarkable Rise Of ESG.

Why ESG?

A multitude of problems face businesses and our world. ESG is in essence growing to provide solutions to these various hurdles our world is faced with. Screen Shot 2018-12-31 at 8.04.07 PM.pngBy screening for compliant companies, ESG funds are shifting business practice to more sustainable practices and are often leading to higher returns than the market indexes viewed as the standard. In addition to the good “pr” brought about by investing sustainable practices, ESG shifts practice as it has been tracking results which are too disruptive to ignore. With such numbers, exchanges are rapidly moving towards adapting such practices with things such as the IFRS. For those of you unfamiliar, this project has set out to provide financial exchanges with a “standard for transparency, accountability and efficiency.” In essence this can be summed up as a GAAP approach to CSR reports. A standard to hold corporations to when it comes to their progressive CSR practices. This is a dire need as many companies leverage CSR reports in their annual reports, but do so as a marketing stunt in many investors eyes. There is little to no standard to hold these numbers to. ESG presents a challenge to our outdated practices, as it is pushing exchanges to recognize areas of business that have previously been overlooked.

Where Do I Start?

Although ESG has seen lot of growth, it can be difficult to find a starting point. Luckily MS has your back. Polen Growth is a decent place to start ones search. With assets coming in at $2.6 billion, the fund is minuscule but has realized a return in excess of 20%, validating the above data on ESG. An overview of their fundamentals and other data can be found by clicking the following. A further dive into top performing ESG funds reveals tickers such as VITAX. With assets coming in just shy of $25 billion, the fund has tracked nearly 24% through ESG compliant practices incorporated into their strategy. In contrast with these two tickers, the more aggressive investors may be inclined to pay attention to funds such as Leland Thompson Reuters Venture Capital (LDVIX). This fund has assets of $99.5 million but realized gains of 37.23%! Clearly ESG funds are successful and competitive when compared to general indexes.

 

Disclosure

MS Money Moves and it’s Chief Operating Officer who is a scientist and individual investor, as well as its affiliates are not registered financial advisors. Our posts should serve as educational material to help you conduct due diligence research. Posts and articles are not directives or recommendations to invest in any security. We reserve the right to buy or sell any security for ourselves without any notification except when required by law. We are not responsible for the action of our affiliates. Investment theses may change due to the variable nature of the securities market. Because of this there is great risk when investing in stocks and options which can result is capital loss. Additionally, past performance by MS Money Moves or any security is not a predictor of future performance. Everyone should conduct their own research and due diligence before making an investment decision. We recommend you consult a financial advisor regarding any investment action.

The biotech sector is especially volatile. Stock prices may fluctuate substantially based on material or nonmaterial developments. We encourage everyone to familiarize themselves with clinical trial processes, relevant terminology, FDA/SEC rules and regulations, and the general processes of drug & therapy development/approval. Always do independent research in a security prior to investing.

 

 




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