Anthony Saffer VP / Financial Advisor CFP®, CKA®,

Alex Okugawa  / Financial Advisor CFP®, CKA®, CEPA® 

Alex Okugawa 0:00
ESG investing has become popular in recent times. Today, we are going to quickly discuss what it is. And if you should consider it for your portfolio. Stay tuned.

Alex Okugawa 0:21
Okay, Anthony. So ESG stands for Environmental, Social, and Governance. And essentially what ESG investing looks to do is screen certain investments or companies that have used either positively or negatively.

Anthony Saffer 0:39
Right. And so this could be lots of different things, right. And it’s based on values. So you may have an issue with tobacco, with alcohol, with weaponry, with abortion, there’s, there’s all kinds of things that are out there. And people have different views, obviously, on one side or the other. Yeah, and so even an ESG fund could be invested a certain way that made meet the values of one person, but maybe not the other.

Alex Okugawa 1:00
And, of course, in this day and age, you know, it’s all about individualism. Everyone wants, you know, things customized to them, I want to customize my clothes, my car, I want to customize my phone. And so we’re now at a point where you can even you know, customize your investments in the way those things are invested in the companies that you choose.

Anthony Saffer 1:20
Yeah, technology has made big advances in this area. And so it’s much more attractive in a lot of ways. It’s it, you know, 10 to 15 years ago, you looked at funds like this. And I mean, the costs were so much higher, you really saw the difference in the in the investment performance. But technology has really helped that out quite a bit.

Alex Okugawa 1:39
So it’s, it’s been a pro and those areas, I think, where ESG investing has a little bit of a black eye is, in many cases, ESG investing is more about the marketing than it is the substance. And what I mean by that is a lot of companies are finding that because ESG investing, it’s a hot topic, and everyone wants to get in on it. So you just slap, you know, ESG or some type of screening name on your investment fund. And people tend to pile into that, because it’s hot, they think you know, what’s going on is good, but they’re not actually digging under the hood.

Anthony Saffer 2:16
Yeah, and it’s a good point, because ESG investing is not new, but it is more attractive, people are looking at it. And so that, you know, gets the attention of business to say, Hey, we’re going to market towards this. And you really do need to look under the hood of that and say, Okay, what am I actually getting with this specific investment strategy? And does it align with my values? And then the other thing I’d add to that, though, is, you’re going to get some difference, some what we call a tracking error, and we posted a video on this pretty recently, we’ll post a link to that. But if if something is invested differently, that means it’s going to differ from what the perform differently and perform differently good or bad.

Alex Okugawa 2:56
It’s fine when it’s good, but it’s not fine when it’s bad.

Anthony Saffer 2:58
Yeah, there’s lots of arguments out there. Many people are vehemently against ESG type investing because it’s subtract something from what the market holds. Other people will argue differently to say, Well, hey, if we’re screening out certain companies that we really don’t think are good, that we should have outperformance.

Alex Okugawa 3:15
Now, obviously, there’s a lot of pros and cons out here. I mean, we’re just touching on the very basics. This is a quick overview. But as you can see, the discussion of if I should invest in ESG investing or not, does it belong in my portfolio really requires a more in depth, personalized conversation, what are your convictions? What are your goals? What are your values, what are you hoping to accomplish, and this is all the stuff that gets wrapped up within a financial plan to then drive the investment process and the philosophy. If this is something that you’re interested in learning more about, we’d love to talk with you. Give us a call or visit our website.

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