The Concerning Trend of Climate Change Vs. The Encouraging Trend of Socially Responsible Investing

My husband and I recently took our two young girls on a family trip to Lake Tahoe, NV. We totally unplugged to enjoy mother nature and teach our children how to love the outdoors as much as we do. Looking across the lake to the trails and mountains beyond, I wasn’t aware that fires were burning all around us. I only realized it once we tried to take our flight home yet was grounded because of poor visibility conditions due to the fires.

According to NBC, as of late July, more than 22,000 firefighters are fighting 85 major fires ranging across 13 states, which has already burned 2.7 million acres. That is 1 million more acres burned than in the same period in 2020, which was the worst on record.

So, while I might not have come home relaxed (it was a family trip after all), I returned re-energized to work with clients on their socially responsible investing (SRI).

SRI is a rapidly emerging investing style that seeks to combine social change with performance returns.

Investing with intent, purposeful performance, money that matters … one might think that these buzzword phrases will prove SRI to be simply another passing fad du jour.

However, based on my educational and practical experience in the field of wealth management, it is my opinion that the practices of investor intentionality and aligning investments with personal values are proving to be quite sticky indeed.

According to the US Forum for Sustainable and Responsible Investment’s 2020 trends report, $17.1 trillion of professionally managed assets in the U.S. was invested in a sustainable manner, increased from $12 trillion at the end of 2018 (up 42%!). Another way to look at this is that one in every three dollars invested in the U.S. is being done in an intentionally sustainable way.


Source: US SIF

U.S. SIF first started tracking this data with their inaugural trends report in 1995. At that time, $639 billion was reported as being sustainably invested in the US. Growth continued to climb steadily until around 2012. From 2012 to 2020, we see the most robust growth that has occurred since the trends report was first published. This growth from $639 billion in 1995 to $17.1 billion in 2020 represents a compound annual growth rate of 14%.


Source: US SIF

One of the least surprising trends is that climate change and carbon emissions remains one of the top criteria for selecting SRI investments among money managers and institutional investors. This comes at no surprise when research demonstrates that according to Bloomberg almost 10% (or 5 million) deaths globally can already be attributed to climate change. Based on our current trajectory, this trend will continue its increase.

At Parsec, it is one of our core beliefs that we should help our clients achieve their goals and align their financial journey with their values. One of the ways we answered this call to action was to introduce our SRI portfolio in 2020.

While there are many ways to be socially responsible, including evaluating companies for their carbon footprint, one of the ways that Parsec can move the needle is by evaluating each company’s social and corporate governance standards in additional to their environment standards (ESG), and then clearly communicating the results to enable clients to make the best decisions possible.

SRI considerations have not traditionally been incorporated into financial analysis, but ESG-related factors are increasingly recognized as relevant and material to financial performance. For investors and companies, ESG factors represent not just a means to mitigate risk, but also a source of opportunity in a portfolio.

There is much to consider when selecting an investment strategy that aligns with your values. To learn more about SRI, I encourage you to explore the US SIF website. I also encourage you to watch this webinar that I gave earlier this year on the topic, or visit our website: parsecfinancial.com/socially-responsible-investing

Ashley Gragtmans, CFP®, BFA™, CSRIC®
Senior Financial Advisor

Disclaimer: Some of the information in this article is provided through linked websites. Links on this website are for informational purposes only. We do not endorse the content nor the products of these linked websites.

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