Opinion: My Experience with ESG Investing
I thought investing only in companies that do good was impossible. I was wrong.
By Jill Mersereau
Like many people, the economic downturn of this past spring had me thinking about the stock market — a lot. There were several nights where I stayed awake at night, worried whether the dwindling TSX and DOW would leave me unable to ever retire. I consulted with a savvy accountant, who assured me not to worry; things would return to normal in time. Sure enough, the stock market eventually began to settle, as did my nerves. But the crisis shook me and made me question what I had invested in. Were the companies governed well enough to recover from this and other crisis situations? How were they treating their employees, their customers, and their communities during this time? If a pandemic could have this effect on the market, what would a serious environmental crisis do? And finally, what were the companies I was investing in doing to prevent such a crisis? A friend told me that she only invests in companies that do good. ‘Interesting’, I thought, but how would you measure that? And who has time to do that kind of research?
A few months later, I came across the answer: Environmental, Social, & Governance (ESG) investing [full disclosure: as a content writer for Riddl, I was asked to research and write about ESG]. ESG investing is essentially socially responsible investing. It asks important questions around how a company acts as an environmental steward, how they treat their employees and communities, and how they govern themselves. Companies are given a rating based on these three pillars and investors who want to see their money put towards positive social and environmental impact can invest in companies with higher ratings. As I read more about ESG investing I learned that it’s a growing trend and the way of the future. The current global crisis has many, like me, pushing for more companies to disclose their ESG ratings and risks.
Pitchbook, a Morningstar company that serves the private-equity (PE) industry, released a report that looks at the effects of COVID-19 on the European market. In it, they stated: “We think investors will double down on ESG following this crisis, as society becomes more sensitive to companies doing the wrong thing.”
I was pleased to learn that research had already been done in this area in the form of ESG ratings. But would I have to select a portfolio of companies to invest in based on these ratings myself? I made an appointment with my financial advisor. Having heard of other advisors who urged their clients to invest in non-sustainable stocks, I was prepared for a bit of a debate.
“Yes, I’m interested in ESG investing,” I began, thinking I might have to explain this to him.
“Oh, that’s neat that you know about that!” he replied enthusiastically. “We offer a variety of ESG portfolio options. They do quite well. I’d be happy to move your funds over to an ESG portfolio if you like! I’ll even send you some info.”
I was surprised and relieved to learn that not only was ESG investing becoming more important to people like me, investment bankers are encouraging their clients to invest in these funds.
It’s been about four months since I made the switch, but I’m already seeing strong returns on my investments. As with any stocks, there are risks. But knowing my money is going towards positive social and environmental impact, that’s a risk I’m willing to take. We only have one planet; let’s put our money behind those organizations that are doing their part to improve it.
Jill Mersereau is a marketing consultant, freelance writer, and outdoor enthusiast who lives on the east coast of Canada.