More than a “feel-good”
One myth of ESG investing is that investors must be willing to accept lower financial returns if they invest in companies and funds that employ ESG strategies. While past performance is not a guarantee of future results, studies show that many companies that pay attention to these important issues tend to reduce their overall financial and social risks, notes Ellenbogen. At the same time, firms tend to increase their reputation and overall performance.
“The result is that in many cases, these companies tend to remain more financially stable over time and their shares may hold strong or increase in value,” he explains. For instance, a company that reduces its waste via recycling may positively impact the environment, save significant money, and attract and retain values-minded customers all at same time.
The bottom line for you, as an investor: “Based on our research, a portfolio invested in ESG-focused investments has the potential to perform just as well or possibly better than a more traditional portfolio,” says Ellenbogen.
Adding values-based investments to your portfolio
Your Financial Advisor can help you increase your portfolio’s ESG attributes in many ways. “It starts with a frank conversation about what’s important to you,” notes Ellenbogen.
For instance, do you feel strongly about supporting companies that use carbon-neutral practices? Would you prefer to avoid companies that focus on weapon development or tobacco production?
“Once your Financial Advisor knows what you care about, he or she can help you make sure your portfolio reflects your deeply held values,” says Ellenbogen. In fact, thanks to a number of financial databases and tools that allow Financial Advisors to research companies’ and funds’ sustainability ratings in regard to ESG and related factors, advisors can use an ESG “lens” on investments in almost every market sector and to accommodate almost any level of financial risk.
For more information on applying ESG investing strategies to your portfolio, contact your Wells Fargo Advisors Financial Advisor.