Maybe you were sipping your morning coffee and checking the news or talking to a colleague on a Zoom call the first time you heard or saw it. Now you’re wondering “Exactly what is E… S… G...”
Let’s start by saying the ESG acronym has been getting a lot attention in investment circles and the media in the last few years.
ESG, which stands for Environmental, Social and Governance, can be traced back to the founding of the United Nation’s Principles for Responsible Investment (PRI) in 2006. According to Investopedia, as of January 2020 there are 2300 participating financial institutions committed to PRI with Assets Under Management of over $80 trillion US. Nothing to sneeze at.
E is for Environmental
I am going to take the time in the next few blog posts over the next couple of months to describe ESG and explain its role in Socially Responsible Investing (SRI) and in your portfolio.
And it only makes sense to start at the beginning – Environmental.
Generally, environmental concerns can be the most easily identified issue in our portfolio. It’s relatively easy to ask, “Do I have fossil fuel extraction companies in my plan?”
We Can Make a Difference
But that isn’t the only way we can be environmentally supportive in our investment decisions. In a stunning and widely reported move:
“In May 2017, 62% of ExxonMobile shareholders went against management’s recommendations by voting to require the world’s largest oil and gas company to report on the impacts of climate change to its business (an increase of 38% over the previous year). This response followed the Paris Climate agreement.”
This is an excellent example of shareholder engagement, an SRI concept I will discuss is greater detail in the months to come.
And it’s a prime example of how there are real opportunities for investors to have an impact by getting involved instead of just “getting out”.
Let’s Bring It All Back Home
If you are a long-time resident of Kitchener, you may remember when the city discovered a coal tar deposit on the site of an old manufactured-gas plant at Joseph and Gaukel Streets. This plant used coal to generate heat and electricity for residents between 1882 and 1958, when they started using natural gas piped in from Alberta. The residue was just buried on site for future generations to deal with. Sound familiar?
Even though the plant had already been closed for 50 years by the time clean up started, it was still an environmental disaster that had to be addressed.
Clean up costs ended up costing $19 million in 2006-2007. The same year as the founding of PRI, hmm.
Fixing Things Before They get Any Worse
This is just one example of the type of long term financial and environmental costs of poor environmental stewardship that are left for future generations to deal with. Water quality issues in Flint, Michigan and in First Nations communities across Canada are a couple of other high-profile examples.
You and I know we have to start properly addressing the types of environmental damage we are inflicting on our planet – the only one we have. One major way to do that is by reviewing and acting on the environmental aspects of our investments and our financial lives.
In my practice I do just that. If you want to join me then go ahead and
• call me at (519) 279-0186 or 1-888-868-6689
• send me an email at [email protected]
• or find a time that works for both of us on my calendar
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