April 2019: Try ESG Investing and be Socially Responsible with Your Investments

By Marguerita Cheng, CFP® • CEO, Blue Ocean Global Wealth

At tax time, we are reminded that a strong return on investment is not the only way to identify a “good” investment. If you are looking to positively impact the world with your investment decisions, while also growing your portfolio, you can seek investment opportunities in companies that follow environmental, social and governance (ESG) standards.

ESG investing is becoming a primary focus in a business’ succession plan to entice investors by offering socially responsible investing (SRI) options. When you invest in these companies, you support products and services that make a positive impact in the world.

What is ESG Investing?

As more investors consider their personal impact on the world, ESG investing is growing in popularity. Choosing to invest in socially responsible companies encourages the use of ethical practices and products. ESG factors are major components of SRI options:

Environmental: How does the company impact the environment? Does the company conserve natural resources?
Social: How does the company treat customers, employees or other stakeholders? Do they give back to their community by supporting social programs?
Governance: Is the company exploiting loopholes in legal guidelines? How are internal audits handled?

Who Should Consider Socially Responsible Investing?

SRI is an excellent choice for investors who want a personal connection to their investments because it allows individuals to consciously promote causes they are passionate about through their investment decisions. The ESG investing strategy might be right for you if you’re looking for ways to affect change in environmental, human rights, pay gaps, animal welfare or consumer protections issues. For instance, you might avoid investing in companies that pollute water sources if you are passionate about global access to clean water. Instead, a company that helps to bring clean water to developing countries might be a good option to add to your portfolio.

What Types of ESG Investments are Available?

ESG investing takes many forms. In addition to traditional stocks and bonds, which can focus on SRI if you prefer, several other types of investments with a wide range of SRI choices include:

Mutual funds and ETFs: The US SIF website has a list of over 200 socially responsible funds to help narrow your choices.
Alternative investments: Real estate funds, farmland investments and peer-to-peer lending can promote the environment, sustainability and small business growth.
Community investments: Investing in community organizations can have a local impact. Look for community development financial institutions (CDFIs) that provide services in low-income areas.
Micro-financing: Investing in micro-loans can support new startup businesses. Depending on the company you choose, you can help entrepreneurs in developing countries or focus on micro-loans for startups in the U.S.

How to Get Started with ESG Investing

Hopefully, you understand more about ESG and what it means to invest with social responsibility in mind. If you’re excited about making a real impact with your investments, consider what’s most important to you before getting started. For instance, your strategy could focus on governance criteria, such as CEO pay and political spending, or avoiding tobacco or weapons companies. Either way, you must understand that there are various ESG criteria.

Online brokers or investment platforms can help you buy or sell ESG investments, but you’ll make all of your own investment choices. Your best option is to contact a CFP® professional with a focus on ESG investing to help you identify your investing goals and set up the right strategy for your risk tolerance.

About Marguerita M. Cheng: The founder and Chief Executive Officer of Blue Ocean Global Wealth is a regular columnist for Investopedia & Kiplinger, and has worked as a spokesperson for the AARP Financial Freedom Campaign. Prior to launching her firm in September 2014, she was a Financial Advisor at Ameriprise Financial and an analyst and editor at Towa Securities in Tokyo, Japan.

She is the recipient of the Ameriprise Financial Presidential Award for Quality of Advice and the prestigious Japanese Monbukagakusho Scholarship. In 2017, she was named the #3 Most Influential Financial Advisor in the Investopedia Top 100, a Woman to Watch by InvestmentNews, and a Top 100 Minority Business Enterprise (MBE®) by the Capital Region Minority Supplier Development Council (CRMSDC).

Marguerita’s certifications include: CFP® professional, Chartered Retirement Planning Counselor^SM, Retirement Income Certified Professional® and a Certified Divorce Financial Analyst. As a Certified Financial Planner Board of Standards (CFP Board) Ambassador, Marguerita helps educate the public, policy makers, and media about the benefits of competent, ethical financial planning. She serves as a Women’s Initiative (WIN) Advocate and subject matter expert for CFP Board, contributing to the development of examination questions for the CFP® Certification Examination.

She volunteers for several organizations including: CFP Board Disciplinary and Ethics Commission (DEC) hearings, she has also served on the Financial Planning Association (FPA) National Board of Directors from 2013-2015 and is a past president of the Financial Planning Association of the National Capital Area (FPA NCA). Click here to learn more about Blue Ocean Global Wealth.

Thoughts, questions? Click here to contact Marguerita today.