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A new report by the Government Accountability Office (GAO) confirms the value of incorporating environmental, social, and corporate governance (ESG) investment criteria as options within retirement plans. (GAO Report Overview May '18)
GAO’s survey of academic research found that for investments using ESG criteria, there was a positive or neutral relationship to financial returns. In fact, the report shows:
- 90 percent of the studies found a neutral, positive or mixed (non-negative) relationship between ESG integration and financial performance. A 2017 DOL-commissioned study was also cited which suggested that ESG criteria integration, “generally produced investment performances comparable to or better than non-ESG investments.”
- It was also noted in the report that ESG factors can address and partially protect an investor from factors like: climate change risks, executive compensation issues, workplace safety problems and many others that can affect investment returns.
That’s the good news. The bad news is that although this report is just one in a long line of research showing that investing according to your values (ESG) does not mean you have to accept weaker returns, the vast majority of retirement plans in the US still do not incorporate ESG factors into their investments.
The myth of underperformance is unfortunately still alive and well.
If you’d like to find out more about how to make an impact with your invested assets, we would be happy to discuss the options and resources available to you. We are passionate about the work of Sustainable Investing!
Jack Schniepp is a CERTIFIED FINANCIAL PLANNER™ (CFP®, ChFC®), financial advisor and the owner of Cascade Financial Strategies. CFS is a registered investment advisor licensed in Oregon, California, Washington, Arizona and Idaho. They specialize in socially responsible investing which integrates environmental, social, and corporate governance (ESG) criteria into portfolio construction.
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Investment Advice is offered through Cascade Financial Strategies, a registered investment advisor licensed in Bend, Oregon, California and Idaho (We also operate in other states under the "de minimis" exemption, meaning having five or fewer clients within that state).
An investment advisor or IA rep may only transact business in a particular state after licensure or satisfying qualifications requirements of that state, or only if they are excluded or exempted from the state’s investment advisor or IA rep requirements; and follow up, individualized responses to consumers in a particular state by investment advisor or IA rep that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, shall not be made without first complying with the state’s investment advisor or IA rep requirements, or pursuant to an applicable state exemption or exclusion. For information concerning the licensure status or disciplinary history of an investment advisor or IA rep, please do not hesitate to contact your state securities law administrator. Cascade Financial Strategies