A new form of investing is rapidly increasing among consumers and investment insiders. Socially responsible investing is defined as “the practice of investing money in companies and funds that have positive social impacts (Chen 2022).” ESG funds, an abbreviation for environmental, social, and governance, are a form of socially responsible investing, looking at companies’ relations to those key terms.
Matthew Blume, a wealth manager at Pekin Hardy Strauss wealth management, oversees the Appleseed Fund, which is the firm’s ESG fund. He also administers the firm’s ESG-related research and other sustainability efforts.
“We have a very strict set of specific screens, [which we apply] to alcohol, tobacco, firearms, pornography, gambling, fossil fuels, and too big to fail banks, [which is] any financial institution that is deemed to be a systemically important financial institution by the Federal Reserve,” said Blume. He added that individual clients can also choose criteria for their portfolios.
ESG funds focus on supporting companies that demonstrate a commitment to positively impacting communities rather than investing in the types of industries. Examples of these types of companies are Tesla, Patagonia, and Starbucks (esgthereport.com). Additionally, tech stocks account for about one-quarter of the assets of the average large-cap E.S.G. fund, compared with only one-fifth of the assets of the average traditional large-cap fund, according to Morningstar (NYT, 2022).
CNBC’s Noah Shieldlower found that ESG funds make up just 6% of exchange-traded funds by number and 1.5% by ETF assets (CNBC, 2022). Despite this metric, many financial institutions have opened ESG funds, sometimes due to high demand from clients.
Chicago-based asset management firm Nuveen hosts a myriad of socially responsible funds. Doshi Parth, vice president of global products at the company, recently launched an ESG product. He explained that Nuveen heavily researches companies before making investments.
“There's a [variety] of criteria that we would analyze and ultimately look for investments that align with that. Many of our funds and investment processes are designed to … look for and measure the impact against UN Sustainable Development Goals, [which are] a dozen or so goals for the globe to work towards, [which] provides a good framework to measure impact against,” said Parth.
List Sources:
Matthew Blume, wealth manager at Pekin Hardy Strauss wealth management, matt@pekinhardy.com
Doshi Parth, vice president of global products at Nuveen, Parth.Doshi@nuveen.com