Sustainability & Investing

[brutzel1]

Hi all,

after spending the better part of the last 6 months to read through FIRE blogs, listen to podcasts etc. I have developed a pretty good understanding in what I want my own investment strategy to look like. Yesterday I did a bit of googling for 'sustainable investing' and FIRE but while a few Mr Money Mustache articles popped up, I couldn't find anything that was talking about the controversial idea what we all invest our money in.

This is not meant to change anyone's mind when it comes to the investments we each choose, but I am looking for articles/discussions/opinions on what the Pros & Cons are to actually select funds that aim to support sustainability. Yes there were quite a few articles on this blog about living a very conscious/sustainable life, but most still seem to invest in VTSAX.

Can anyone point me toward some articles that talk about this topic? Since most all of us love Vanguard, I was glad to find this here about two index ETFs that have an environmental, social, and governance (ESG) focus:

https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/NewsInstInfo092018

I am still at the very beginning of my research on this topic but overall I am interested on what choices I can make to support sustainability specifically when it comes to investing my money in the right places. Any input is appreciated!

cheers,
Johannes

[The Guru]

three things. First off , welcome to MMM!

Second congrats on your interest in responsible investing. FWIW I've been committed to this for probably 10+ years and believe in it, even if it sacrifices a bit in return (which it doesn't necessarily: Vanguard's FTSE Social Index performance has been right in line w/ VTSAX for the last 10 years).

To respond to yopur question- I'm amazed that you haven't found more info online. Try broadening your searches using some synonyms for "sustainability" such as ESG (Environmental, Social and Governance),  Social or Impact Investing and see what comes up.

Good luck!

[frugledoc]

Just buy the whole market and donate time/money to sustainable activities to counterbalance.

Either that or help yet another underperforming fund manager buy their next flash car and pay for their kids private education. 

I find the fund companies to be so unethical it rules out giving them money

[MustacheAndaHalf]

I'm not aware of a mutual fund with a sustainability goal that has impacted a company's decisions.

I personally view sustainable investing as an illusion, since it does not cause change.  It means avoiding certain companies when you invest.  Can you trace how not buying a company winds up making a change in that company's boardroom decisions?

I can't.  Investing in other companies will barely register, let alone the absence of a small purchase at the companies you don't buy.  It's lost in the noise of much larger transactions, and trying to incorporate new information into stock prices.  How could a company detect that your buy order is missing?

I'd recommend your make your voice heard in a way that doesn't rely on other people paying close attention to your investments.

[flipboard]

I have two concerns:
 - ESG is stock-picking
 - ESG as currently implemented is a load of BS. The criteria are both arbitrary and very odd. They do not match my view of what ESG would mean.

[onlykelsey]

I agree with everyone else's recommendations, honestly.  But, if you want to explore something, Quakers often deal with these issues due to pacifism, etc. http://www.friendsfiduciary.org/about-us/ (I have no vested interest)

[Boofinator]

To echo what most of the others have said, as long as businesses are profitable and legal, people will invest in their stock. Theoretically, if a large amount of people avoid buying these stocks for ethical concerns, it will counterintuitively increase their returns (due to their stock prices decreasing as they become unpopular cigar butts).

I'd focus instead on living your life sustainably, and if you really want to make a difference, get involved with an organization (or even politics, if that's your thing).

ETA: On the other hand, business owners do generally (though not always) have a vested interest in a higher stock price, so if this movement became really huge you might generate the response you are trying to achieve (a shift to sustainable business practices).

[gaja]

The Norwegian pension fund does a lot of work of these types of topics, you can probably find something to read there: https://www.nbim.no/en/

I invest for the long run, and believe it makes economic sense to choose companies that think consider ethics and sustainability. I haven't moved all my money over yet, but see that the money in the sustainable funds (index minus a few) do just as well as the money in the "normal" index funds.

[brutzel1]

Thanks for all your input!

That's exactly what I wanted to get at: Trying to figure out for myself if selecting funds with a sustainability goal actually makes a difference or if we have a much better way to influence the world and/or what we believe in by focusing on things outside of investments.

My controversial question - one that I have asked myself is: Where can I theoretically have a greater impact?

1. Invest normally and - assuming I'd get a higher return - invest the surplus in projects that focus on making a difference? For example you could argue that I'd be able to retire 1 yr earlier and I could spend that year fully focusing on making a difference. Or I'd take the extra money and donate to the right places etc.
2. Choose investment vehicles with a sustainability approach and hopefully do my part in investing in companies that fit that criteria.

I don't know if there is a right answer to this. But I'm curious. Yes you could try to do it all but first and foremost I am trying to decide if sustainability index funds 'make sense'.

If there is an article on this blog here - or related blogs - about this topic, I'd love to read it! The lack of it made me wonder if it is either an uncomfortable truth for many to face (if you pursue this), or if it barely makes a difference with the options we all currently have at our disposal

thanks guys!

[Boofinator]

Dr. Doom wrote a good article on sustainability.

https://livingafi.com/2016/06/17/unloading-guns-from-a-portfolio/