This Type of Investing Lets You Invest With Your Values

If you care about social and environmental issues, you’re probably interested in ESG investing. That stands for environmental, social and governance, which lets investors look at non-financial factors when they consider what stocks to invest in.

ESG criteria can be applied to stocks, mutual funds and exchange-traded funds (ETFs). Those considerations can include any of the following:

• Environmental factors, including climate change, pollution and waste, water usage, carbon emissions
• Social factors such as employee gender and diversity, or human rights at home and overseas, along with data privacy
• Governance characteristics, which may address corporate governance, business ethics and executive pay

If you’re interested in investments that align with the things you care about, consider that more-conscious investing can mean many different factors. Fidelity Investments points out in its Q4 2022 “Sustainable Investing and Environmental Social Governance (ESG) Overview” that ESG isn’t just a matter of excluding companies for certain practices, but also including those that align to sustainability. That could mean choosing organizations that make political contributions to candidates you support, or that strive for diverse board membership, or that comply with environmental regulations.

Over the past 20 years, ESG interest has soared. Investments into ESG funds have increased substantially even in the last few years, according Fidelity:

• Total assets in 2018: $89 billion
• Total assets in 2021 $357 billion

Something to think about, says Priya Malani, co-founder and CEO of Stash Wealth, a financial planning and advising firm for millennials: “ESG, as a label, is not regulated… Anyone can call themselves sustainable, from Johnson & Johnson to Hormel to ExxonMobile,” she says.

“This is the first time in modern history that investors have attempted to value something beyond financial returns, so it is going to be rife with challenges,” says Angela Barbash, cofounder and CEO of Revalue, a values-driven investment advisory firm.

Not everyone’s a fan of ESG investing, and not just because it’s still evolving. It’s also getting pulled into politics. GOP lawmakers are rolling up their sleeves to try to eliminate ESG investments from 401(k) plans. Our story takes a look at how that could affect the way you save for retirement.

— Jill Cornfield, deputy editor

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