There is far too much going on in the world today to only see the monetary returns that our financial assets are creating. In fact, our responsibility lies far beyond just throwing our money into an investment account and focusing only on returns, especially as Christians. What if there was another way to make an even bigger impact in the world in a positive way? Actually, there is!
Instead of concentrating only on investment returns, what if we focused on HOW our money is invested and WHAT it is affecting. We have future generations to think about, so don’t you want your money to support industries and companies that are working towards making a positive impact on our world for the long haul? With so many crazy things going on (Thanks, 2020), it is important to do our part as much as possible with keeping the world on a positive, uphill climb.
How Can I Make A Positive Change With My Investments?
“How do I do this?” you may ask yourself. It’s something called ESG Investing – Environmental, Social, and Governance. It has also gone by other names like socially responsible investing and values based investing. In the Christian arena, we know it more specifically as biblically responsible or faith based investing. However, right now we are only going to cover ESG investing, what it is, how it started, and why it is important.
What Is ESG Investing and How Did it Get Started?
Like the abbreviation implies, ESG investing focuses on environmental, social, and governance issues in an investment portfolio. It is a form of sustainable investing that not only considers the financial returns, but also the overall impact. Long gone are the days of throwing money in the stock market and only looking at growth. Many of today’s investors desire their financial assets to do more than just bank a temporary, monetary return. They want their assets to also amass intangible returns by investing in a way that positively affects our world and its communities.
You may understand what ESG stands for, but how does it work and how these factors are measured? Here is a quick breakdown.
The ENVIRONMENTAL criteria for ESG investing include how a business is performing when it comes to the environment and working towards a greener initiative. Are they a steward of nature by incorporating recycling programs? Are they working towards limiting their greenhouse gas emissions? If the company is factory based, is their production generating sustainable products?
The SOCIAL aspect of ESG investing has to do with how the company is managing its employees and their relationship with suppliers, the community, and their customers. It concerns how the business is giving back to the community, as well as their employees. Are they providing healthcare, fair wages, and moderate vacation days? Are they holding fundraisers for local non profits or donating to organizations that prioritize human rights and equality, even in other countries where they do business?
GOVERNANCE, like the name implies, has to do with the “governers” of a business, i.e. the leadership and the controls that are enlisted. Is the salary that leadership receives a fair amount? Are there the necessary audits and internal controls being done AND are they coming back positive? Also, ESG investing looks for diversity in the company and if it is responsive to shareholders.
How Is It Different From Socially Responsible Investing?
While the two are very similar, there are a few differences that we need to mention. ESG investing focuses specifically on three distinct areas – Environmental, Social, and Governance. It is very precise in its categories, whereas terms like values based investing, socially responsible investing, sustainable investing, and/or ethical investing encompass broader terms. ESG investments, historically speaking, were not only filtering out “bad” companies, but were also including companies that they deemed were making a positive impact in the world. Today, however, most of the socially responsible investing terms are used interchangeably.
Christian Financial Advisors® Uses Faith Based Investing
It is very important to look into exactly what exclusionary investment portfolios look like for different companies. Here at Christian Financial Advisors®, we stick to faith based and biblically responsible investing, a subset of socially responsible investing.
We tend to filter out a few more things that we deem “negative” and anti biblical that may not be filtered out in ESG and Socially Responsible Investing while still investing in companies that are doing good in our world.
Is It Right For You?
ESG investing is akin to the phrase “voting with your dollars”. You might be one of the millions of people who choose to shop at a specific business because of what they believe in and support. For example, choosing to shop local instead of going to big name stores, but this isn’t the only way that you can make an impact. By using strategies like ESG investing, your dollars are working for you and what you believe in. If you are wanting to make a greater, positive impact in our world today, then ESG investing may just be the right choice for you. It really is a great way to still make returns while making a difference.
At Christian Financial Advisors®, we focus specifically on companies that do not go against biblical principles. Many Christians are now actively searching for the biblically responsible investing subset, which we are more than happy to help you with!