Hi, I’m Erik Wolfers. I’m the founder and managing member of First & Main Financial. We’ve been helping clients with perfectly personalized financial solutions since 2001. Today, I want to talk a little bit about ESG investing—Environmental, Social and Global are what those three letters stand for. Some people haven’t heard of it and some people are sort of crazy for it. We have clients come to us periodically saying they really want to do ESG investing.
For a long time now, many people have been concerned with or aware of how corporations affect the rest of the world or their communities—with questions like, how big is their carbon footprint? How do they treat their employees? What kind of impact do they have in their community? There is a lot of information that can be realized about how people are trying to measure these things, and as of yet there’s no universal measure. There are people, conferences, committees trying to get agreement on these things and it has been happening for quite a while. People come to us and don’t want oil or fossil fuel production companies or they don’t want Facebook in their portfolio.
It’s hard to get an ESG product that really makes everybody happy. If you don’t want to own Chevron stock or Exxon Mobil—any sort of fossil fuel producing company, the stock market doesn’t care—you’re having no impact on the world by not owning fossil fuel companies. It’s a different argument to say, I don’t want any profits in my portfolio generated by those things.
I think it’s a strange concept because we need oil and we’re going to need to oil for many years to come. If we spend too much money trying to figure out how to invest in alternative renewable fuel sources, it will impact our economy and the global economy—which will keep tens of millions, possibly hundreds of millions of people in poverty. There is a lot of research and a big argument for keeping the global economy going at a pretty good clip, so that more people can get out of poverty and then respond to the changes in the earth’s climate or atmosphere as we go along. It’s irrefutably clear that the globe is getting warmer because of the release and addition of carbon by human beings, and there’s no solution for it yet. We’ve spent decades investing in solar panels and wind farms and those things amount to less than 3% of global energy production—and there’s no way to store the energy that comes from those things. Trying to not participate in the production of fossil fuels feels good to some people, but ultimately it does absolutely nothing. It also doesn’t help to acknowledge that we want as many people around the world to be lifted out of poverty and not burn things like wood or dung as their fuel source as well as wanting more people to have access to good health care and clean water and to be immunized against diseases where they can be immunized.
There are a lot of priorities that will help the globe over the long term, and the efforts, the movement are enormous. Every company has heard about ESG investing and they’re responding to it and they want to get good scores—so it’s already happening. If you were hoping for some magical ESG fun that’s going to give you everything that you want—it doesn’t exist. You may not even benefit at all by participating in ESG type funds or Investments because the world’s already going in that direction. In this way, whether you have an ESG label on the funds that you own or not, likely doesn’t matter at all. It’s an interesting concept and I’m happy to have discussions with people about it, but I think without more research there’s potential of doing more harm for yourself then good by just jumping into ESG.
If you are looking for some financial guidance; whether for a one time financial plan or continuing advice on your investments, we invite you to meet with a First & Main Financial planner for a free consultation. We would be more than happy to sit down with you, assess your situation and review our services to help navigate your financial future.