Day Four - ESG Investing

What that means how it kind of spreads our money across loads of companies, how it's doing it algorithmically, so the proportion of our money in the different companies automatically changing for us.

We don't have to do that.

Amazing.

So I found this strategy and was like perfect.

I just spread my money out across all these companies.

And the whole point of it is that because your money is spread out across all these companies, it's really hard for it to go to zero because all of the companies would have to collapse or be deemed worthless.

But the problem was I was really caring about People planet, wanting my money to be ethical as much as I can be in the system we're operating under, right?

I want my money to be at least not in the harmful companies.

And I was like, well this index investing strategy invests in every single company, so that just doesn't work.

And then what I realized are that there are ESG versions of these index funds.

So, so ESG stands for environmental, social and Governance.

So we can get ESG index funds and the way that they work is normally by negative screening.

So they're just kind of not putting in the bad companies like gambling, tobacco, fossil fuels, controversial weapons.

Some of the worst offenders basically will not be included.

You don't get to pick, it's based on their guidelines, their parameters.

So that's kind of the trade off for having this all encompassing strategy where it's kind of done for us once we pick the right thing up front is that yeah, I don't have control over the companies.

But that's, that's also kind of the point of the strategy is that I don't have to have control of the company and pick them myself.

So the pros are I don't have to pick them myself.

The cons are, I don't get to pick them myself and pick the companies I may or may not want to be invested in.

You just have to go with whatever their guidelines are.

Now there are other ways to ethically invest.

They might also be called sri, Socially Responsible Investments.

Sometimes you can get funds that are fossil free.

and this is also really relevant to know these terms, they don't make it easy, do they?

There's just so many different terms for everything.

There is also impact investing, which is really where they try and hand pick the best companies that are actually doing good rather than just not putting in the bad companies.

And one way that I've, found it quite helpful because it's very imperfect.

I think a lot of people say, it's not worth doing ESG because it's not doing anything.

Some people say ESG isn't doing enough, it's just greenwashing.

Or I'm kind of of the opinion of I want to do something.

I accept that we are in a very flawed system.

I want to do what I can.

I accept that it's not perfect.

And the way that I kind of think about this is stuff like plastic.

Yes, I could try and avoid plastic as much as possible in when I'm buying things.

However, I live in a system where, like, lots of things come in plastic.

If I want to pop to the corner shop and get a yogurt pot, it's probably going to come in plastic.

Like, it's very hard to avoid.

And I kind of feel like that with the stock market, like, it's kind of hard to avoid some of the companies that I maybe personally feel like aren't doing the best for the world or people.

But I also have to engage with society and be a part of society and make sure I'm financially secure so it can be something to grapple with.

I don't think there's a perfect solution and I just wanted to be really open about that it's a nudge in the right direction.

It's showing consumer demand for these funds, for these investments that do take things into consideration.

And, you know, maybe these companies who aren't as good will not be able to get away with getting so many people's money if they don't adhere to better environmental, social and governance standards.

So that's where I'm at with it.

I understand why people do both ways, but they're some of the terms that we've kind of highlighted in here that you can look out for as well.

So we are nearly done.

I'm going to summarise in the next video and I will see you there.