What happens when a ghost is lost in the fog? (ESG)

The educational portion of this newsletter focuses on ESG investing

Answer: He is mist.  

Hehe, happy Mischief Night, everyone!

Dow telling investors that Thursday’s gains weren’t an anomaly

Do you consider yourself someone who is always on time? If so, we think you’d hit it off with America’s dear old friend, pre-election market volatility.  

Reminder: markets are going to be extra sensitive over the next few weeks. 

If you’re alarmed by the sell-off from this week, the subsequent jump on Thursday, and the immediate decline this morning, and don’t know what to do, remind yourself that election SZN is upon us. 

No one knows the future, so do try to resist acting on impulse. Maybe don’t touch your portfolio at all and try meditating instead?

If you ever want to ask us anything, provide feedback, or submit a request, feel free to email or DM us on IG or Twitter.

This Week’s Biggest Headlines

  • Hummer has a new EV model and it’s v expensive. How much would you pay to no longer spend $$$ to top out at 9 mpg but still look super cool driving your military-style whip? With as little as $75,000, you can make this dream a reality! The new Hummer is slated for a Fall 2021 release. Read more.

  • Apple read the news about Google’s antitrust case, whispered “YOLO” to itself. Now that the Googs has been tapped for an anti-trust case for search, Apple has decided to step-up its efforts to develop its own search engine. Right now Google is paying Apple $8-12 billion to make Google its default search engine on iOS devices, something the DOJ has cited as anticompetitive. Will this move do Google a solid by making the market competitive? Maybe. But it’ll also nix the agreement that is currently earning Apple 20% of its Services income for the year. Read more.

Apple thanking Google for paying them billions as it builds a search engine to rival their own

  • Apple also reported its Q4 earnings (its fiscal year ended on September 26) and iPhone revenue is down 20.7% year-over-year. But don’t fret. The multi-trillion dollar company is developing a new version of its white knight: AirPods. If you like AirPods but think its long antennae looks stupid, and don’t want to shell out $249 for a pair of AirPods Pro, you’re in luck. The new, smaller AirPods will have shorter stems (like the Pro), a have replaceable ear tips to fit your ear (also like the Pro) and a more reasonable price tag.  Read more.
  • Ant Group has raised over $34 billion for a record-breaking IPO. Money never sleeps – especially if you’re Jack Ma. Ant Group has the largest share sale in Hong Kong and China and is not Ma’s first billion-dollar IPO to shatter records. In 2014, Alibaba opened on the NYSE after raising $21.8 billion – an IPO bigger than Google, Facebook and Twitter combined. Ant Group’s IPO will make Jack Ma the 11th richest person in the world. Read more.
  • WeWork is eyeing another IPO – this time with a more transparent valuation and different CEO. After then-CEO Adam Neumann came under fire in 2019 for being sketchy about its valuation and weird to his employees, the company ultimately received billions in bailout money from SoftBank, the company’s key investor. WeWork’s current CEO Sandeep Mathrani shares that the company still has some of the bailout money left, sees profitability on the horizon and will revisit the prospect of an IPO as early as 2021. Read more.
  • Missouri-based power company Ameren has revealed plans to build a massive 91 acre solar facility. This will be the largest solar facility for the company and is part of its long-term plan to go net-zero carbon emissions by 2050. Read more.

Our feelings toward renewable energy

Let’s not forget “the usual”

  • Finally some good news with the economy, right? Q3 GDP surged a record 33.1% rate – a great feat considering Q2 saw a contraction of 32.9%. Keep in mind that these are big swings, so the numbers don’t tell a clear story. When the economy shut down due to COVID, spending was limited, which explained the contraction. Q3 brought consumer spending via stimulus and non-essential businesses being open again. The real (aka non-annualized) numbers are much different. GDP contracted in Q2 by -9.49% and grew in Q3 by 7.4%, so there’s still some ways to go before the economy is truly out of the woods. Read more.

  • Unemployment has gone down again. It’s been the lowest since March, but is still pretty bad. It dropped 40,000 nationally to 751,000, beating estimates despite COVID cases rising. Read more.
  • There will be no stimulus in the foreseeable future. It is essential to increasing consumer spending, and, dare we say, stimulating the economy. A lot of important people want to ship Americans with a stimulus, including Fed Chairman Jerome Powell. Read more.
  • COVID is not taking a backseat to the flu. In fact, some may argue that it is forming an unlikely alliance. Yesterday, there were 90,000 recorded new cases, a 14-day change of 42%, and a little over 1,000 deaths. It’s not getting better across most states, nor is it in Europe. Read more.

Not only will ESG investing make you feel good about yourself, you could achieve solid returns


ESG is all about putting your money where your values are – literally. This practice takes investors a step beyond merely shopping local or avoiding big box stores. When you invest according to ESG guidelines, you’re putting your capital to work with companies that shares your values and beliefs in the way they work.

ESG stands for “Environmental, Social, and Governance,” and is synonymous with sustainable investing, impacting investing, and socially responsible investing.

This practice is growing amongst younger crowds especially, although older investors are beginning to see the potential merits. In fact, many companies now offer financial products that follow ESG criteria, while others are working to better their scores to appeal to a broader range of investors.

ESG scores are assigned in slightly different ways but all follow similar guidance for environmental, social, and governance factors.

Environmental Factors

A company’s environmental score takes into account the extent to which they are a steward of nature. Several factors make up a company’s environmental impact, such as their:

  • Energy use
  • Waste and pollution production
  • Natural resource use and conservation
  • Treatment of animals

This aspect of ESG is used to examine both how their practices impact nature, as well as how they may help nature, by evaluating their potential risks.

Social Factors

A company’s social score examines how they manage their business relationships with employees, vendors, and customers, as well as the community as a whole.

For example, a company with a poor social score may frequently partner with companies that hold dissimilar or contradictory values that negatively impact their workers or have a poor track record in diversity and equal opportunity hiring practices, or a history of human rights violations in developing countries.

Governance Factors
A company’s governance score looks at how a company is governed and who is in charge. Factors that affect governance include:

  • Executive pay against worker pay
  • Diversity in leadership
  • Responsiveness to shareholder demands

In essence, a company’s high governance score indicates the organization plays fair with political contributions and doesn’t engage in shady dealings.

The Evolution of ESG Investing

ESG investing gained prominence during the social movements in the 1960s, 70s, and 80s. At that time, it was known as SRI – socially responsible investing.

Over time, SRI and ESG investing grew more distinct. While both are designed to cultivate responsible portfolios, there are a few key differences.

SRI investors often use an exclusionary approach to screen investments, and tend to focus on companies that are “morally good” according to personal ethical guidelines. They may filter out entire industries, such as “sin stocks” like alcohol and tobacco companies, as well as industries engaged in weapons production or wartime activities.

However, ESG investing may exclude much of an industry while still including companies that have positive impacts in society or on the environment. It also relies on ESG analysis to shape an overall valuation of the company.

Why ESG Investing?

There’s evidence that ESG investments perform similarly to traditional investments – at less risk to the investor.

There’s evidence that ESG investments perform similarly to traditional investments – at less risk to the investor.

For example, a recent study from MSCI found that ESG investments have positive impact valuations and performance. 

In fact, their findings show that companies that adhere to ESG guidelines experienced less profit and earnings volatility, lower capital costs, and fewer instances of fraud, accounting violations, and natural resource violations.

Conversely, companies with lower ESG scores showed that they were more prone to high capital costs, volatility in the stock market, and at a higher risk of major ethical and regulation violations. These lead to lower profitability and dividend payments, higher betas, and more incidences of corruption, fraud, and even bribery.

Other studies have shown that ESG may actually outperform conventional investments.

For example, JUST Capital maintains a fund that selects ESG investments from the top 50% of companies in the Russell 1000. Since their inception in November 2016, JULCD has returned 16.54% annualized returns compared to 15.31% from the Russell 1000.

Risks of an ESG Approach

The largest drawback of an ESG approach is the extent to which it can impact diversity in your portfolio. For instance:

  • Some ESG funds exclude entire industries, meaning investors could miss out on gains
  • Many companies that adhere to ESG guidelines are large-cap, which limits your exposure to small- and mid-cap stocks.

This impact on your diversity has the potential to limit your returns. 

However, ESG investors can mitigate some of these risks by including companies and industries that have proven track records of making improvements in ESG standards.

The Bottom Line?

ESG investing is about aligning your portfolio with your moral compass. It’s fast becoming a popular investment strategy, especially for millennials (are you or are you not excited to see the numbers for Gen Z?).

In truly fascinating fashion, when today’s youth claims they want to help improve the planet, that doesn’t only mean donating your time volunteering. 

Corporate responsibility is becoming more of a priority, as it effects the image of a brand, so holding a business accountable for its practices by choosing to not invest in them – and instead investing in a direct competitor that does carry a high ESG score, could be the most savvy approach to activism (because money).

It’s a superpower all can wield if willing and committed to the cause.

Money Clinic podcast: How to get started in ESG investing. A podcast by the Financial Times, this episode focuses on how to overcome certain challenges when building an effective ESG investing portfolio.