Investing has the potential to change not just your financial life, but the greater world. Learn more about what the “E” in “ESG” stands for and how your actions as an investor can affect the environment for the better.
For the past 50 years, Earth Day has been raising awareness about the impact governments, businesses and individuals have on the environment. This year, the goal for the global event will be to end all the talk and get people to take action. Organizers for Earth Day, which takes place on April 22, see this year as a key turning point in addressing global warming. To fight back, they’re advocating for divesting in fossil fuels and investing in solutions to large-scale environmental challenges.
Taking on these challenges can seem daunting, but everything from shifting personal behaviours to altering the way we invest can help. While the impact of COVID-19 has been devastating, the world’s co-ordinated response has shown that we’re capable of making massive shifts to confront a global crisis.
An unexpected side effect of the pandemic is that the shuttering of cities and travel has let us see how human activity affects the environment, as evidenced by the videos of Venice’s now-clear canals or the easing of air pollution across major Canadian cities.1 Changing how we behave undoubtedly makes an environmental difference.
Taking action on climate change
Investors don’t need to wait for Earth Day to make a positive impact on the environment. If preserving the planet is a cause near and dear to your heart, investments committed to those values provide opportunities to align your portfolio with your beliefs. Responsible Investing (RI) is an umbrella term for a variety of investing styles that look at securities through the lens of environmental, social and governance issues – also known as ESG. The ESG framework focuses on long-term investment themes tied to specific areas of sustainability designed to make the world better.
Simply put, the “E” in ESG is about factoring environmental concerns into your investment decisions. ESG considers a company’s performance as it relates to protecting the natural environment. This can include being committed to a low-carbon economy or defined sustainability standards, producing sustainable or environmentally-friendly products or services, or involvement in renewable energy.
Investing for the future
Unlike the past, when investors evaluated the performance of their investments based solely on financial measures, RI gives investors a way to factor environmental issues into their decisions. Increasingly, companies that don’t abide by environmentally-friendly practices are being viewed as higher risk and RI has been shown to provide competitive returns relative to traditional investments. In fact, RI equity mutual funds in Canada have outperformed their respective benchmarks well over half (63%) of the time.2 Results like that reinforce that investors can do well by doing good. If Earth Day inspires you to do something good for the environment via your investments, but you don’t know where to start, we can help. Contact one of our skilled and experienced Investment Advisors for guidance on RI today – so you can start honouring Earth Day every day.
Supporting Earth Day 2020
Due to COVID-19, Earth Day is taking a surprising turn this year by relocating to the internet. Even with physical distancing, you can be part of the Earth Day conversation across several digital platforms and participate in environment-related online teach-ins, virtual marches and social media campaigns. Keep track of Earth Day events with the hashtags #EarthDay2020 and #EarthRise or by following the Earth Day Network’s social media accounts: @earthdaynetwork. While Earth Day may be going digital, the goal remains the same: to mobilize people to change the world, not for just one day, but for all time.
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