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ESG Is Part of Our Fiduciary Duty

ESG Is Part of Our Fiduciary Duty

January 17, 2019

The concepts of socially responsible investing (SRI) and impact investing grow in popularity more and more every year. Environmental, social, and governance (ESG) criteria assist investment managers in finding financial opportunities that their clients can confidently say yes to. Some people argue that ESG investing limits profit, and therefore, goes against a financial advisor’s fiduciary duty. We beg to differ.

As interest in impact investing continues to rise, more research is being done that back up its effectiveness. The information that is being published suggests that good corporate sustainability performance is actually associated with good financial results. With diligence, research, and laser focus, it is possible to identify companies that meet criteria for performance and for their ability to make a positive impact on societies around the world.

An example of ESG factors that many now consider to be extremely relevant in the finance world are those that fall into the environmental category and are related to climate change. The concern around this social issue grows with each passing year and, as a result, people are becoming more actively involved in the prevention of it. Whether it’s through daily choices, volunteer work, or even investments there are many ways that you can push back on climate change.

Because of the growing concern about the state of our natural environment, which is warranted with scientific certainty, there are plenty of businesses out there making positive changes. From companies using partial solar power to the companies that actually make the solar panels, there are many guilt-free investing opportunities. Not only are corporate entities out there making change, but investors increasingly support more progressive companies while avoiding those that don’t seem to care about their carbon practices. For this reason, even people who are not that worried about the environment would be smart to consider ESG factors anyway. The more popular companies who put a premium on good stewardship become, the more stable they will be in the stock market, which could in turn make companies who do not do so become volatile.

Socially responsible investing has been going strong for over a decade, so while cynics may argue that examining ESG factors is just an investing fad, the upward trend would suggest otherwise. With modern technology, it’s pretty easy for individual investors to do enough research on their own to know that they want their savings and investments to reflect their values. Technology also makes it easier for researchers to gather and process non-traditional financial information.  

With accurate information and clients who know what they want, financial advisors can use ESG criteria with little to no problems. While using these factors is not the primary focus of InTrack’s strategy, it is one that several of our clients are passionate about and that we research, monitor, and invest in when appropriate. We’re interested in ESG investing because with it, our clients do not have to compromise on returns and at the same time, the common good does not get lost in short-term profit making.