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Over the next few months, we’ll be featuring various members of our financial planning team as guest contributors for the “From the Desk of Todd” article. We’re proud to have an extremely talented team here at PFG and with diverse interests and varying areas of expertise in financial planning, we thought it would be helpful for you to hear additional perspectives from our team.

For this month’s feature, Deborah Kelly, a CERTIFIED FINANCIAL PLANNER™ professional with Potomac Financial Group for over 10 years, wrote a thoughtful article on the benefits of Sustainable or ESG Investing. You may already actively incorporate Sustainable or ESG Investing into your portfolio, or perhaps you’ve been recently hearing about the benefits and would like to learn more. Either way, I invite you to read Deb’s article below as she defines Sustainable or ESG Investing and discusses the positive relationship between financial returns and environmental, social and governance issues.

Todd M. Wike, CFP®
Managing Partner, Potomac Financial Group
2019 RJFS Chairman’s Council Member*


Want to make a positive impact with your investments?  Consider Sustainable Investing (SI). 

SI is a strategy of purposely investing in companies improving our world.  SI is also referred to as ESG investing:  environmental, social, and governance.  Environmental relates to the conservation of the natural world and includes companies that address climate change, carbon emissions, waste management, water scarcity, air and water pollution, and more.  Social is for the consideration of people and relationships, which includes issues such as gender and diversity, human rights and labor standards as well as data protection and privacy.  Lastly, governance addresses the standards for running a company.  What is the board composition?  How are the executives compensated?  Issues such as bribery, corruption and political contributions are all considered.

The SI approach considers not only a company’s bottom line, but also the way it gets there.  Only companies that promote sustainability and adhere to strict guidelines for making a positive ESG impact may be included in a SI portfolio.  But, why include sustainable investing?

 Impact – Investors can make a positive impact on the world while potentially avoiding ties to questionable business practices.

Values alignment – By investing in companies whose practices they view as morally favorable, investors can align their portfolio with their personal values.

Risk mitigation – Through adherence to ESG principles, companies potentially mitigate regulatory and governance risks.

Long-term performance – There is growing evidence that integrating ESG principles into the investment process has the potential to positively impact risk-adjusted performance.  Research suggests that ESG performance is an effective risk indicator, as companies with poor ESG performance have been more prone to stock market underperformance, volatility, and bankruptcy risk.*  A 2016 study led by George Serafeim of Harvard Business School found that stocks of companies with strongest performance on material ESG issues outpaced those with poor ESG performance.

We’ve seen two big areas of change this year that appear to be accelerating the trend to ESG investment. Investors are looking closely at the response companies have made to these areas.

The first is COVID-related. Many companies have had to restructure their working conditions ensuring a healthy work-life balance for employees working from home, as well as creating a safe environment for employees and customers at the office or job site. Nature has been one of the biggest beneficiaries from a global pause in travel and movement. Where we once saw smog-filled cities around the world, we’re now seeing clear, clean air. Of course, some level of activity will no doubt return over time, but many companies and employees are learning how productive home offices, remote meetings and virtual conferences can be.  Moreover, the work-from-home transition has accelerated the transformation towards paperless offices.

Second, it has become increasingly clear that not enough has been done to close racial gaps and disparities that have existed for decades, and many companies have developed new or have renewed existing initiatives to help address this issue.

Companies are using these crises to make meaningful changes, not just to adapt to COVID-related challenges, but also to improve their environmental, social and corporate governance policies; increase technological investments that improve their resiliency; to build trust with employees, customers and shareholders; and to ultimately come out of this crisis stronger and better positioned.

Corporate leaders now recognize that effective management and communication of their sustainability efforts can benefit companies and all of their shareholders, from investors to employees to communities. More than 80% of S&P 500 companies now provide sustainability reports, a rapid rise from just 20% earlier this decade.  And, the popularity of ESG investing has been increasing.  In 2018, $1 in every $4 under professional management in the US was in sustainable investing.

Businesses recognize the importance of ESG criteria, and environmental, social, and governance issues are already deeply embedded in most company strategies.  As more and more investors recognize the positive relationship between financial returns and social and environmental issues, we expect to see increased investing in ESG-focused companies with the expectation that it can deliver returns both for investors, and for society at large.

If you’d like to learn more about sustainable investing and the ESG-investment opportunities available at Raymond James, please reach out to your Financial Advisor.

Deborah M. Kelly, CFP®, ChFEBC
Financial Advisor, RJFS


*This investment strategy may result in investment returns that may be lower or higher than if decisions were based solely on investment considerations and could result in either underperformance or outperformance of the market as a whole.

The information contained in this material does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Todd Wike or Deborah Kelly and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Raymond James is not affiliated with and does not endorse the services or opinions of the various podcasts or applications discussed in this material. *The ranking may not be representative of any one client’s experience, is not an endorsement, and is not indicative of advisors future performance. No fee is paid in exchange for this award/rating. Chairman’s Council Membership is based on prior fiscal year production. Re-qualification is required annually.