This Earth Day, ‘Elevate’ (and Think ESG Investing)

April 21, 2023

 Earth Day is Saturday, April 22, so celebrate by getting out and soaking up the great outdoors! At Dynamic, you could say every day is Earth Day when it comes to the great outdoors—we take our “elevate” message to heart. Our scenic, outdoor imagery is a reminder to wealth advisors to get out and enjoy nature—it’s also a visual metaphor to pursue your passions and enjoy the things you love to do. Focus on your clients and do what you do best at your practice. Allow us to handle the rest.

Earth Day reminds us to consider our role in preserving the environment. Conservation efforts go well beyond physical clean-up or beautification activities as all of us can make small changes in our everyday lives to help make the world a better place. So, if you haven’t already, Earth Day is a compelling reminder to talk with your clients about incorporating an Environmental, Social, and Governance (ESG) investment strategy.

Talking to Clients about ESG Investing

ESG is an innovative type of investing strategy that allows investors to build a portfolio made up of assets from companies that adhere to strict ethical standards related to their environmental and social impact as well as their governance. Many investments have an ESG score that determines how well they adhere to guidelines in the three distinct categories based on a variety of factors:

Environmental: A focus on the conservation of the natural world. These factors include the company’s impact on climate change, from deforestation and carbon emissions to air and water pollution, as well as how it uses fossil fuels or green energy.

Social: A focus on the consideration of people and relationships. These aspects include things like employee diversity and protections, sexual harassment and protected class policies, fair labor practices, customer satisfaction and human rights issues.

Governance: A focus on enhancing the standards for running a company. Factors considered include board of directors’ composition and corporate conflicts of interest, as well as executive compensation and the company’s involvement in lawsuits and/or lobbying.

Why ESG Investing?

Research has shown that companies focused on ESG factors tend to be higher quality in nature, providing increased stability and potentially outperforming over time—all the while making the world a better place. Consider:

Higher Quality: More stable and profitable companies tend to share certain ESG characteristics, such as having excess cash to spend on environmental improvements, caring about employees and having diversified boards that keep all stakeholders in mind.

Lower Risk: Companies with higher ESG standards tend to have confident, experienced leaders that may be able to weather market downturns and potentially avoid lawsuits from financial and environmental wrongdoing.

Enhanced Risk-Adjusted Returns: Companies doing “good” for the world tend to do well financially. Such companies are often higher quality and can avoid unique risks across various market cycles, ultimately having higher potential to outperform over the long-term.

In a recent column published by the Massachusetts Institute of Technology’s Sloan Management Review on the shifting sentiment of ESG since 2021, its fundamental point remains clear: “Pleasing stakeholders and serving the common interest, including the planet’s, is how to create value today. It’s better business.”

Further, columnist Andrew Winston, a globally recognized expert on how to build resilient, profitable companies that help people and planet thrive, went on to cite a Cooley ESG metrics report:

“The percentage of S&P 500 companies including ESG metrics in compensation plans rose to 70% in 2022, up from 57% just a year earlier, with measurements of carbon footprint and diversity and inclusion growing the fastest.”

Dynamic ESG

As advocacy for a clean environment continues with increasing urgency, Dynamic has been doing its part since it was born in the computing cloud in 2009. Founded by Jim Cannon in the wake of the Great Recession, Dynamic was built to be resilient, using a best-of-fintech platform to support a remote workforce that’s still in play today—and reducing our carbon footprint by 127 tons annually.

Read Dynamic Does Its Part to Honor Earth Day

On Earth Day 2021, Dynamic launched ESG models across our network, making it easier for wealth advisors to guide clients on how to invest their money where their values are. The models range from 30 to 100 percent equity in 10% increments. They’re well diversified among various asset classes and utilize a low-cost, ETF lineup with all the holdings being ESG focused.

Visit Dynamic Investment Management to download the Dynamic ESG fact sheet. If you’d like to discuss how Dynamic can assist you in creating an investment portfolio tailored to meet your clients’ goals and reflect their values, contact us at (888) 997-4212, or request a free consultation today.

*Source: Carbon emission data from Morningstar Direct as of 3/31/2023. Carbon emission equivalencies from United States Environmental Protection Agency (EPA) ( Benchmark comprised of 75% iShares Russell 3000 ETF and 25% iShares MSCI ACWI ex-US ETF. For illustrative purposes only. Data subject to change.

This material has been distributed for information purposes only. All investments carry certain risk and there is no assurance that an investment will provide positive performance over any period of time. Because ESG criteria excludes some investments, ESG strategies may not be able to take advantage of the same opportunities or market trends as those that do not use such criteria.

Investment advisory services are offered through Dynamic Advisor Solutions, LLC, dba Dynamic Wealth Advisors, an SEC registered investment advisor.

Photo: Kelly Sikkema, Unsplash