[CAN] ESG Investing - It Ain't Easy Being Green!

[Blissful Biker]

We strive to make good lifestyle choices, to do our part for the planet.  Some are easy like riding a bike instead of driving.  Others are a little harder like convincing my teenage boys that tofu can replace meat, at least on Mondays.   Many people, companies and countries are doing good things, but I see a pressing need for the rate of change to accelerate.  How can I help?  I am thinking aligning my investments with my values might be the next step. 




I was recently engaged with a sustainability related initiative at work and through the course of reading sustainability reports and talking with various executives I saw that the company is making real and positive changes in response to the ESG investing trend.  In addition to attracting investors they want to score well against our competitors in ESG metrics as our clients are taking notice.  So I can see that ESG investing actually does drive change and want to do my part to contribute.

But how?  What is the optimum ESG portfolio for mustachains?

I began DIY investing in ETFs in 2017 through the help of this forum and the Canadian Couch Potatoe.  I feel relatively comfortable with my plain vanilla ETFs and would like to transition to equally plain vanilla ESG ETFs, but there are so many options! 

Anyone here also on this journey?  Or has anyone got it all figured out?  :)

I'll share some of my research and ideas.  But first I am heading out for a ski with the dog on the local trails.  Life is good.

[Blissful Biker]

ESG Returns - Will they match the market?



Can I have my cake and eat it too?  Can I invest in socially responsible companies and still earn a return similar to the broad market?   I believe the answer is yes.

ESG funds are relatively new but the performance data that I have found generally shows them as beating the market.  The past can not be relied upon to predict the future, especially when only looking at a decade of data, but it feels reasonable to assert that transitioning to ESG funds does not mean accepting lower returns. 

Let's take for example the recently launched iShares ESG asset allocation ETFs.  The Canadian Couch Potato has done an excellent overview of them:  https://canadiancouchpotato.com/2020/11/23/inside-the-ishares-esg-asset-allocation-etfs/



The Couch Potato generated historical returns based on the performance of the underlying assets.   In each case, the ESGs outperformed the market as defined by the performance of iShares traditional suite of asset allocation ETFs (Core Portfolio).



ESGs tend to be heavily weighted in technology, which has had a terrific run, and under weighted in energy, which has been struggling.  Is it reasonable to assume these trends will continue indefinitely?  Probably not.

I see plenty of debate on line about whether or not ESG funds will compromise your returns in the long run.  What do you think?

[Chaplin]

Great topic! I'm in a similar situation: we've been making gradual improvements to reduce our impact, but haven't tackled the investment side of it. It was a big job just to get everything switched to DIY investing with ETFs (Canadian Couch Potato rocks!) and that taxed what little brainpower I had left after work. Since then I haven't spent much time looking into ESG investing other than a little reading. Perhaps this thread will get me started.

Although I've been able to have an impact at work because of my role in capital projects (lighting improvements, vehicle selection, replacing less efficient machinery), most people can probably have more impact in FIRE by living "light" lives, volunteering (Plug-in-BC and BC Sustainable Energy Association, here I come!), and perhaps more than anything through investing choices, so this is a very timely topic.