At Earth Equity, we’re constantly trying to understand how uncertainties in the world will affect the future of investing. With nearly a fourth of the money that flowed into all U.S. stock and bond mutual funds last year going into sustainable funds, it’s becoming obvious that much of this growth is coming from younger investors who have been motivated to act while witnessing major events unfolding before us – we’re talking about climate change, COVID-19, and the election of the Biden-Harris Administration.
It’s real. Traditionally, fund managers have focused on indexing and owning the entire market – the good and the bad. But, at the end of the day, there’s only one way to benchmark the future and it’s not by looking at the past. And as we experience more events like the Texas freeze, which has made us painfully aware that our grid is antiquated and in much need of sustainable innovations, you simply must be intentional and use a positive investment philosophy when curating a portfolio. Sure, we can consider metrics like Environmental, Social, and Governance (ESG) scores, but we also need to dig deeper into the values and track records of each of our holdings.
Every day, we see funds sporting trendy ‘eco’ portfolio names and claiming to be sustainable, but you simply can’t trust many of them. There is so much greenwashing and misinformation diluting the sustainable, responsible, and impact (SRI) market, you really have to investigate each and every holding, think about the role it will play in a future you believe in, and ask yourself: What are the things that we need as a society going forward?
With COVID, We’re not sure anyone can explain exactly what happened in the market. The rapid and dramatic sell-off was probably premature and a bit overdone. During the crash, the valuation of companies was extremely low. And today’s valuation of companies is high, telling us the recovery should have taken longer.
As we move forward and learn from the pandemic, the market will most likely stagnate and we probably won’t see major gains in the near future. We may actually see corrections (a 10% or greater drop to reset valuations), but we probably won’t see another crash unless we discover super resistant variants to the vaccines.
Joe Biden has already published 37 executive orders, many of which address and even reverse policies from the Trump Administration. Perhaps one of the most impactful in our space was Biden’s reversal of the Department of Labor’s November 2020 ruling on ESG Funds which made incorporating ESG funds in retirement plans more difficult.
So, how much influence of the market does a single President really have? There are certain areas where the needle can be moved (e.g., tariffs, trade regulation, etc.), but moving the market as a whole … not so much. President Biden will have positive influence because he has made it the centerpiece of his administration and is putting people in place that can actually move change forward. Our hope is that because of the people he’s tapping and the policies they’ll be pushing forth, together, they can have a major impact.
We have to be hopeful because there is no alternative. One of the most important aspects of how we invest is that we do it positively. It’s easy to say you don’t want fossil fuels, but the hope comes in when you make the decision to be truly solutions based. It’s always what we can’t do right now, but it makes a huge difference when you live your life thinking about what can happen. That’s hope. That’s how we grow.
So when we’re asked why SRI investing has grown over the last nine months – quite frankly, we feel investors have simply had more time to look under the hood and are starting to ask the right questions informed by our shared experiences in the past year – what matters to me and what do I want to own?
With the launch of Earth Equity Align Digital, we have been able to fulfill our long-time vision of sustainable, responsible, and impact investing for all. So, if you have over $5,000 to invest and are looking to make a positive impact without having to do hours of research to ensure you’re not being greenwashed, take our questionnaire and be the change you want to see in the world.