ESG Investing Allows Individuals to Make Responsible Choices

When making financial investments, many individuals only consider how those decisions will personally affect them. Jeffery Price—managing director and wealth management advisor at Merrill Lynch, Pierce, Fenner & Smith Inc.—says individuals actually can make investments that have a global impact.

“ESG Investing, sometimes known as impact investing, captures the notion of using non-financial factors that incorporate the environmental impact, social impact and governance attributes of a corporation,” he says. “The data we use helps us to evaluate whether companies run themselves responsibly and consider the environmental impact, such as emissions or resource use; social impact, such as employee training or diversity policies; and governance attributes, such as board structure or shareholder rights.”

Jeffery says Merrill Lynch advisors also can construct portfolios that align with individuals’ faith values.   

Advisors screen companies and avoid those ranking poorly in areas of concern to investors. The result: a socially conscious form of investing that is quickly gaining popularity. Individuals around the world are beginning to demand that their investments reflect their social and environmental values.

“We conservatively estimate that inflows into ESG-type strategies over the next few decades could be roughly equivalent to the size of the S&P 500 today,” Jeffery says. “Trends in the U.S. investment landscape indicate that trillions of dollars could be allocated to ESG-oriented equity investments and thus to stocks that are attractive on ESG metrics.”

He says ESG investing is a smart way to invest.

“In addition to potential inflows, ESG investing has worked. What if we told you that we could help you to identify the following: stocks less likely to go bankrupt over the next five years; stocks less likely to have large price declines; stocks less likely to have earnings decline or increased EPS volatility; stocks that were likely to become high-quality stocks; stocks that were likely to see extreme inflows over the next few decades; stocks with three-year returns significantly better than their peers?”

As for risks involved with ESG investing, Jeffery says, “In general and always, risk and return potential varies depending on investment type. They should be considered and discussed with your advisor before making any decisions.”

For more information, contact Merrill Lynch Wealth Management Advisor Jeffery Price of the Southlake office at 817.410.4940.