What’s New in ESG Portfolios and Investment Trends

Sunday, March 27, 2022

March 17, 2022 By Susan Kaplan

ESG factors are transforming both businesses and investing. ESG stands for Environmental, Social, and Governance, which are non-financial factors that have become an increasingly important part of the investment process.

Why are more investors are embracing the ESG investing movement in a bid to drive change and make the world a better place? People naturally want to align their investments with their values. In the old days, this meant sacrificing profit and focusing only on the long term. No longer; you don’t have to sacrifice returns to jump on the ESG train. Smart investors are seeking businesses that not only focus on increasing profits but also take steps to protect the planet, keep employees and customers satisfied and safe, and assist communities in need. Money invested just in ESG index and exchange-traded funds will jump to $1.2 trillion, according to BlackRock.

So what’s new in ESG that is creating this momentum?

1. Focus on ESG factors has actually increased the financial return of many portfolios. The S&P Composite 1500 ESG index, a broad measure of ESG-focused stocks covering U.S. companies of all sizes, returned 36.4% over the past year—barely a hair less than the 36.6% return of the S&P Composite 1500, its non-ESG cousin. Over the past three years, the ESG index has returned an annualized 18.6%, besting its counterpart’s 17.2% average yearly gain.

2. There has been criticism that it is difficult to quantify non-financial ESG factors compared to annual revenues or calculate a price-earnings ratio. In the past, ESG ratings, rankings and reports added more complexity than clarity, since the criteria is continually evolving, reporting isn’t standardized, and regulation is still emerging. The good news is that numerous institutions, such as the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and the Task Force on Climate-related Financial Disclosures (TCFD) are working to form standards and define materiality to facilitate incorporation of ESG factors into the investment process.

3. Companies are now getting vocal about their ESG efforts. Social media is one of the main reasons ESG has become so visible. Over the years, people have shunned “sin” stocks such as guns, tobacco, alcohol, etc., but this is a whole new level of awareness. People talk across social media platforms, and if a company isn’t treating its employees well, polluting the local water supply, employing children, or worse, word is going to spread quickly and it’s going to impact that company’s reputation. As more investors look into corporate responsibility, and more companies are going to step up to promote their ESG efforts.

4. The movement is no longer confined to millennials inheriting wealth or assets from their elders. ESG is gaining more traction across generations. According to a new national poll conducted by Kiplinger, more than 70% of respondents say a company’s environmental practices, social issues management and governance policies are very or somewhat important to them when choosing investments. Four in 10 respondents say they have purchased stocks or bonds in the past based on environmental, social or governance issues. Among millennials, the number jumps to nearly two-thirds. Almost eight in 10 (78%) say they are very or somewhat likely to add an ESG investment to their portfolio over the next one to two years.

5. Research shows that since the pandemic, social unrest and geo-political factors have exploded in the past 2 years, more respondents would be willing to sacrifice some performance on their investments to achieve an ESG goal. BUT THEY DON’T HAVE TO ANY MORE! Breaking it down by generation, 75% of millennial investors, 51% of Gen X investors and 35% of baby boomer investors would be willing to sacrifice some level of return. Almost half of respondents (49%) say that when it comes to ESG investing, they prefer mutual funds that hold a diversified portfolio of stocks with better environmental or social attributes. An even larger percentage of baby boomers (58%) say this is their preferred strategy.

Reach Out to Us: ESG is where purpose and profit can intersect. Buying stocks or funds that are planet- and people-friendly is becoming as important a goal among investors as saving for retirement. Whether you wish to make a positive impact on the environment, build a better future for all, or invest in your local community, ESG investments are worth consideration. Companies that consider these non-financial, yet material, metrics in their strategy are best poised to mitigate risk and succeed, thus increasing long-term business performance. We are here to assist you in making informed decisions.


Conservation of the natural world:

  • Climate change & carbon emissions
  • Air and water pollution
  • Biodiversity
  • Deforestation
  • Energy efficiency
  •  Waste management
  • Water scarcity


Consideration of people & relationships:

  • Customer satisfaction
  • Data protection and privacy
  • Gender and diversity
  • Employee engagement
  • Community relations
  • Human rights
  • Labor standards


Standards for running a company:

  • Board composition
  • Audit committee structure
  • Bribery and corruption
  • Executive compensation
  • Lobbying
  • Political contributions
  • Whistleblower schemes