Beating The Market By Saving The Planet

3103Beating The Market By Saving The Planet

Jeffrey Viksjo CFA

The term “overview effect” was coined in 1987 by author Frank White to describe the intense awe astronauts feel when viewing the earth from space. Astronauts report viewing the earth as incredibly “fragile” and have been documented to see the earth (and life itself) differently upon their return, wanting to protect the earth (and all its inhabitants) at all costs. The Earth’s paper-thin atmosphere is particularly striking from space, according to astronaut reports, since the atmosphere is the only thing protecting our home from the vastness of empty space.

 

While we all can’t be astronauts, I’m beginning to think the pandemic may be the “earth from space” moment for the rest of us. Emerging from our homes and seeing the world (and life) in a “fragile” new light, I would bet that most of us are feeling a greater desire to do good than we did before. The data backs me up. According to Morningstar, U.S. sustainable investment funds received $21.5 billion in net flows during the first quarter of 2021, breaking the previous record of $20.5 billion set in the fourth quarter of 2020, and more than double the same quarter a year-ago (prior to the pandemic).  This year’s first quarter haul was 5x that of flows in the first quarter of 2019. Investors are clearly putting more of an emphasis on lining up their values with their investments, post-pandemic.

 

But what are sustainable investments, exactly? The term “sustainable” is typically thought to refer to the environment (i.e. reducing carbon emissions or water consumption), but can include other areas too, such as promoting gender equality or reducing tobacco/alcohol exposure. The truth is, whatever your values (including religious-oriented views), we can craft an investment strategy made just for you. At Ogorek, we offer portfolios that are 100% “sustainable”, including individual bonds and stocks, mutual funds, and exchange-traded funds.

 

But what about the financial implications? Will I have to sacrifice higher returns to do good? Absolutely not. In fact, sustainable stock funds on average beat the overall stock market in 2020, and over the last 3, 5 and 10 years. Not only are sustainable investors aligning their money with their values, they are getting well paid to do it. There are several concrete reasons sustainable investments may continue to outperform:

 

  • Sustainable firms are ahead of the curve in the transition to the carbon-neutral economy, and will be better able to adapt to environmental concerns in the future (droughts, oil price shocks, etc.).
  • Interest in sustainable investments is likely only to continue to grow. This means shares of “sustainable” companies may begin to trade at a premium to their “non-sustainable” peers.

 

If you are ready for your “earth from space” moment, contact us to learn more about our custom sustainable portfolios. At Ogorek, we value your values.

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Comments:

Jon ORourke June 22 2021

Great Blog!