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Sustainable Finance: Integrating ESG in Wealth Management

Sustainable investing is a new emerging investment strategy. In this strategy, you can invest specifically in environmental, social, and government-responsible companies that prioritize these elements in their business practices. This allows you to use your own personal principles to dictate your investment portfolio and participate in long-term wealth growth. Below is more information about sustainable finance and integrating ESG in wealth management.

Overall, a sustainable investing strategy is a method that not only considers the financial gain you could experience from the investment, but also the impact on the environment, society, and government that your investment could have. An example of sustainable investments is choosing a company that focuses on creating renewable energy to shift away from utilizing fossil fuels, which negatively impacts the environment.

Below are additional examples of ESG principles:

- Environmental principles can include focusing on carbon emissions output, deforestation, and air pollution impact.

- Social principles focus on how a company affects people inside and outside of their company, such as data security, diversity initiatives, and human rights.

- Governance includes how the company is run, so several principles could be political contributions, the pay of executives, and lobbying.

There are several ways that you can incorporate ESG into your wealth management:

ESG Funds

ESG funds are mutual funds composed of companies that prioritize ESG principles and sustainability. There is a wide variety of ESG funds, including broad mixtures of companies that all participate in ESG principles and extremely specific funds that focus on a certain ESG principle, such as renewable energy. This variety allows you to tailor your investments to align with your personal values. ESG funds are also one of the most accessible and easiest ways to begin incorporating these values into your investment portfolio.

Individual Stocks

If you would prefer to start with individual company stocks, that is another option. If your values align closely with one specific company, you can purchase their stock directly. This could be a company that focuses on a specific cause you also support, such as human rights. However, this is riskier than investing in ESG funds since there is not any diversification.

Sustainable investing does not force you to forgo positive investment performance by focusing on ESG principles. According to Motley Fool, in 2021, 66% of ESG funds beat the average stock market return. More than half of ESG funds outperform index funds of similar size and category in three and five-year stretches. Over the past 20 years, companies that have ESG values have shown consistent growth and returns. ESG funds have also shown resilience during stock market downturns, providing more stability in your investment portfolio. Investing with a sustainability focus can not only help you impact the world but build long-term wealth.

ESG is the future of long-term wealth growth. To begin prioritizing and integrating ESG into your investment portfolio, enlist the help of a knowledgeable and trustworthy financial advisor to help you reach your goals. Our advisors at Genesis Financial Group can help implement ESG principles into your investments and financial planning strategies. Schedule a consultation with us today to get started.