How to Invest In ESG for a Better World

Usually when we think about money, investing in particular, we think about how we can build our own future. Did you know there’s a way to invest in yourself and in a better world at the same time, through thematic investing?

MoneyLion’s Greater Good portfolio theme is an easy way to access investments that meet certain standards aimed at improving society and the environment — while simultaneously growing your portfolio. 

How do I invest in companies that make a difference?

Socially Responsible Investing (SRI) is an investment principle that centers on making the world a better place. SRI, as its name suggests, often focuses on the ethics and values of industries and companies. For example, SRI would generally avoid companies related to non environmentally friendly activity, tobacco and firearms, etc. Similarly, impact investing is any strategy that invests in making a difference in social or other broad issues, while also seeking to generate a financial return. Impact investing is one way for investors to support and “give back” to the causes they care about.

But let’s be real, just because something is good for the world doesn’t mean it’s an economically viable choice for an investor — that’ll yield a good return. And alternatively, just because an investment performs well, doesn’t mean that the nature of the company is socially conscious. So an investor has to assess both! That’s where MoneyLion’s Greater Good portfolio theme comes in.

MoneyLion’s Greater Good portfolio theme helps you put your money where your heart (and return) is. It’s diversified across several ETFs that are constructed with a focus on three sub-themes related to SRI and impacting investing: Environment, Social, and Governance (ESG). The ESG approach keeps tabs on companies’ management practices, how they follow sustainable practices, and community improvement. 

ESG investments make sense for many investors

Investing based on environmental, social and governance considerations has become increasingly popular in recent years. Not only do some investors find ESG investing to be consistent with their own personal values, but there is evidence that ESG investments can outperform by avoiding companies with poor practices that are often risk factors for companies. 

Companies with a history of poor corporate governance are often more susceptible to bad decision-making, unwanted publicity from scandals, and other factors that could negatively affect their stock price. As a result, lots of investors prefer to invest in companies with higher ESG standards. And, in turn, some companies are more likely to change their practices to better comply with ESG principles. For instance, they may stop using less environmentally friendly sources of energy in favor of renewable and carbon-neutral ones. This may increase their ESG ratings and, in some cases, their stock prices.

This popularity of ESG investing has helped contribute to the high performance of ESG. One study estimates the size of sustainable investing assets at $12 trillion — that’s about a quarter of managed assets in the US!  And it’s expected to grow even more over the next few decades. BlackRock, the largest asset manager in terms of assets, has declared that, “sustainability should be our new standard for investing.”

How do ESG strategies decide what to invest in?

There are more and more ways for investors to hop on the ESG bandwagon, with the simplest being a growing selection of ETFs that can be easily added to portfolios. These ETFs screen stocks and bonds based on ESG criteria and only invest in those that make the cut. For instance, ESG investing would most likely pass on companies that contribute to climate change, risk worker safety, or have a history of corporate scandals. 

They also track changes to ratings over time to ensure that they’re only investing in companies that consistently support ESG principles. Many fund managers and research companies seek to evaluate companies in a systematic fashion, for instance by giving each company a rating based on a set of ESG criteria. Ratings can change over time based on how companies adjust their practices.

Our Greater Good portfolio theme is an excellent way to tap into the power of ESG investing without having to do the initial and ongoing research yourself. Partnering with Wilshire, a leader in asset management,  we’ve taken care of carefully selecting an ESG strategy that offers growth while contributing to the greater good, and we manage it closely for you.

What’s in the Greater Good Portfolio and who’s it for?

MoneyLion’s Greater Good portfolio takes a moderate approach to risk, investing in low-cost, broad based stock and bond ETFs, that provide exposure to companies across US and international markets, and that offers light exposure to emerging markets. And all ETFs in the Greater Good portfolio are constructed by large fund companies such as BlackRock to meet strict ESG standards and guidelines. 

It’s a great way for many investors to not only invest in responsible and sustainable companies, but to diversify their portfolios in a way that might improve their returns and risk over time. As ESG becomes more popular, it is likely that an increasing number of companies and funds will cater to these principles.

Interested in investing in yourself and a better world? 

Download the MoneyLion app and check out our fully managed portfolio. It’s personalized to your needs with no minimums or management fees. And you can add the Greater Good portfolio plus others (Earn & Grow and Future Innovations) to customize your portfolio even more. 

Or you can learn more about how investing at MoneyLion works.

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