As new signs of climate change emerge, here’s how you can invest in companies and funds that keep the environment safe
- Individual investors are expressing increased interest in environmental, social and corporate governance, or ESG, investments.
- ESG assets held by individual investors increased by 50% from 2018 to 2020.
- Evaluating those potential investments is key. Here's where to get started.
From Hurricane Ida to California wildfires, experts are pointing to signs of climate change.
Research shows individual investors are taking notice.
A recent survey conducted by professional services company Accenture found that 59% of investors who are working with financial advisors have asked them about ESG (environmental, social and corporate governance) or socially responsible investments.
Moreover, 84% of investors who made those inquiries planned to put their money in those kinds of investments in the next year.
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Not all who say they support socially responsible investing do it
Most U.S. investing that takes ESG into account is done by institutional investors, such as pensions, insurance funds and educational institutions. But individual investing in ESG-type investments is growing, according to the Forum for Sustainable and Responsible Investment, or US SIF, a non-profit company that tracks the sustainable and impact sector.
ESG assets held by individual investors increased by 50% from 2018 to 2020, to $4.6 trillion from $3 trillion.
"Climate, for most people, is something they more easily see a link to in the investment process," said Lisa Woll, CEO at US SIF.
Other issues — particularly increased interest in racial justice — are also drawing more interest from investors, she said.
Just like any other kind of investment, it's important to research those holdings to make sure they align with your values and goals.
These resources can help you get started, whether you're interested in stock or cash investment products, according to a recent report from US SIF.
Mutual funds and ETFs
A fund's prospectus will show whether its investment strategy takes ESG into account.
They also typically file N-PX reports with the Securities and Exchange Commission that show how it voted on resolutions brought by either shareholders or company management.
Other resources can also help.
US SIF provides an online chart of sustainable mutual funds and exchange-traded funds that are offered by its member firms. That enables investors to compare the funds' costs, performance, screens and voting records.
In addition, As You Sow, a non-profit focusing on corporate social responsibility, offers an online tool that compares where funds rank with regard to criteria such as deforestation, fossil fuels, gender equality, guns, weapons, tobacco and prisons.
Investment research firm Morningstar also provides ratings of funds based on their sustainability, impact or ESG factors.
Direct company stock ownership
Publicly traded companies often include information on their websites such as reports on corporate responsibility and sustainability, as well as policies and performance with regard to ESG.
Other resources that can help investors include Just Capital's ranking of companies based on factors including how it treats workers and its environmental impact. The Corporate Human Rights Benchmark and the Business & Human Rights Resource Centre also track how well companies are performing on human rights issues.
Cash investments
For bank accounts or certificates of deposit, there are community development banks and credit unions that help low- and moderate-income communities by supporting affordable housing, small businesses, non-profits and commercial real estate.
Websites such as Inclusiv, National Community Investment Fund, Community Development Bankers Association and the CDFI Funds can help identify those institutions.