{"id":9940,"date":"2021-11-01T18:23:55","date_gmt":"2021-11-01T18:23:55","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9940"},"modified":"2022-02-26T13:05:37","modified_gmt":"2022-02-26T13:05:37","slug":"investing-in-esg-environmental-social-and-governance-companies","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/investing-in-esg-environmental-social-and-governance-companies\/","title":{"rendered":"Investing in ESG (Environmental, Social, and Governance) companies"},"content":{"rendered":"\n<p><em>Amy H. from Austin, TX\nasks: <\/em>Hi Mitch, I would like to hear your thoughts on ESG investing. Specifically,\nwhether it\u2019s a good long-term strategy, and if you think it could be a good\ntime to reduce traditional energy company holdings? Thank you.<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thanks for sending your question, Amy. For readers who\naren\u2019t familiar, \u201cESG\u201d investing refers to a fairly broad category of\n\u2018environmental, social, and governance\u2019 companies. These companies generally\nfocus on areas like clean energy, social impact, diversity, sustainability,\nresponsible sourcing, and so on. <\/p>\n\n\n\n<p>There is growing investor interest in these types of\ncompanies, particularly as climate narratives become a greater focus in\ncorporate boardrooms. That being said, the principles behind what qualifies a\ncompany as an ESG investment are, to date, quite vague. Third parties generally\ndetermine ESG status, and the qualifications are not very well defined.<sup>1<\/sup><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-4-steps-to-managing-retirement?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_10_29&amp;content=4_steps_to_managing_retirement_assets_guide\">Prepare for Retirement with These Four Steps<\/a><\/strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-4-steps-to-managing-retirement?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_10_29&amp;content=4_steps_to_managing_retirement_assets_guide\"><br><\/a> &nbsp;<br>Preparing for retirement is no easy task, but familiarizing yourself with different investment options, such as ESG investing, could help your plans! With the right guidance, retirement planning doesn\u2019t have to be a difficult process. Important factors that investors should consider before retirement include:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Determining your expenses<\/li><li>Determining your income<\/li><li>Matching your income source with your goals and time frame<\/li><\/ul>\n\n\n\n<p>Considering these factors can be a daunting task, but there are four simple steps that can help you plan for retirement! If you have $500,000 or more to invest, get the scoop on these simple steps with our guide. Click on the link below to get your copy today:<br> &nbsp;<br><a href=\"https:\/\/go.steadyinvestor.com\/arrow-4-steps-to-managing-retirement?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_10_29&amp;content=4_steps_to_managing_retirement_assets_guide\"> <\/a><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-4-steps-to-managing-retirement?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_10_29&amp;content=4_steps_to_managing_retirement_assets_guide\">Download \u201c4 Steps to Managing Your Retirement Assets!\u201d<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-4-steps-to-managing-retirement?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_10_29&amp;content=4_steps_to_managing_retirement_assets_guide\">2<\/a><\/sup><\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p>I\u2019ll focus my response on \u2018clean energy,\u2019 which is one of\nthe more popular categories of ESG investing. The bottom line for me is this:\ndoes the ESG company you\u2019re pursuing have growing earnings, with a history of\npositive earnings revisions and better-than-expected results? In my view, investors\nlooking into ESG should not treat the category any differently than you would a\ntraditional energy company, for instance. Oftentimes, when investors get too\nfocused on aligning values with investment decisions, it can lead to bias when evaluating\nfundamentals. In other words, make sure your ESG investments have strong\nfundamentals in addition to a strong mission. <\/p>\n\n\n\n<p>On the clean energy front, one key factor to consider is\nthat S&amp;P 500 energy companies only make up about 3% of the broad index, so\nan investor\u2019s energy exposure \u2013 whether it is clean energy, fossil fuel companies\nor some combination of the two \u2013 should not be a significant portion of an\noverall portfolio, in my view. <\/p>\n\n\n\n<p>I also believe the transition to renewable energy, while\nunderway, may not happen as rapidly as many may think. Renewables are\ncontributing an increasing amount to overall energy production in the U.S., but\noil and natural gas still have the biggest market share and are not likely to\nlose it in the next several years. In the meantime, we are likely to continue\nseeing patterns like the ones that have emerged this year \u2013 crude oil prices are\nat their highest level in seven years, and natural gas has roughly doubled in\n2021.<\/p>\n\n\n\n<p>\u2018Traditional\u2019 (fossil fuel) energy investors have seen the S&amp;P 500 energy sector surge 54% in 2021 (through October 25), while the broad S&amp;P 500 is up 21%. In my view, the argument is trying to find the middle ground between a very long-term view on clean energy and the short- to middle-term reality of earnings being generated by fossil fuel companies. I think the answer to your question is in finding a way to strike that balance while using fundamental and earnings analysis to see where you land. &nbsp;<\/p>\n\n\n\n<p>If you are looking for more tips for your\nlong-term investment strategy, there are additional steps you can take to help\nprepare your assets for retirement. I recommend investors, especially those\nnearing retirement, to go through these four steps outlined in our guide \u201c4\nSteps to Managing Your Retirement Assets<sup>3<\/sup>.\u201d This guide will help\ngive you some ideas for how to transition into retirement with confidence.<\/p>\n\n\n\n<p>If you have $500,000 or more to invest, click on the link below to get your copy of \u201c4 Steps to Managing Your Retirement Assets.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Evaluating ESG investments both in terms of strong fundamentals and a strong mission<\/p>\n","protected":false},"author":3,"featured_media":7436,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-9940","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9940","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9940"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9940\/revisions"}],"predecessor-version":[{"id":10277,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9940\/revisions\/10277"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9940"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9940"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9940"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}