As a larger growing portion of the population is now realizing the benefits of living a sustainable lifestyle more individuals are now aligning their core beliefs and values with their retirement portfolios. Individuals, and corporations are now using their financial portfolio to influence the behavior of corporations. Social related investing (SRI) is a eight trillion dollar industry and rapidly growing….that now represents over 30% of all investments in the United States.
One out of every six dollars is invested In Social related investing! SRI can include, renewables, clean technology and eco investing. Renewable investments are becoming more central to a low carbon lifestyle dominated by wind and photovoltaic investments. United Nation reports now wind and solar renewable capacity grew twice as fast as much as coal and gas investments in 2020.
SRI aligns your personal values and beliefs incorporating an investment strategy that includes social and environmental investing for your individual retirement account (IRA). Only 20% of individuals currently use an individual retirement account, forty percent of the US population is unfamiliar with any type of IRA account! The convergence of these two rapidly growing trends/industries results in the emergence and rise of the greenIra.com retirement portfolio brand.
In Dubai a solar project now offers electricity at .058 per KWH which now produces electricity cheaper than the cost of natural gas. A Morocco offshore wind farm now produces electricity at .03 per KHW. In Nevada energy generators are currently selling electricity at .03 KHW far below the cost of coal based electricity. TXU a utility company in Texas gives electricity away for free from 9:00pm until 6:00am…..There is too much electricity and it needs to be consumed, because it is too difficult to turn off the wind farm turbines. In Australia and Germany there is now negative utility rates for renewable energy. Social related investing(SRI) has several approaches;
SCREENING; Which evaluates mutual funds, stocks, bonds, retirement strategies, investment portfolios based upon social, environment, ethical investing, and corporate responsibility. Social funds is one of the largest websites dedicated for personal social related investing. Covering corporate research, news events and shareholder actions. SRI investments are also known as: impact investing, ethical investing, or environmental social and governance (ESG) investing which rewards social investments that do good, benefits society on average and avoids/screens out traditional investments such as tobacco, gambling, pornography, firearms, and now a growing larger portion of Esgbrokers are eliminating and completely divesting all types of fossil fuel investments from their green securities portfolios as the growing unacceptable environmental risks of climate change, legal litigation, carbon tax, and fracking, is now considered an acceptable green underwriting strategy in actively managed EsgIra™ retirement portfolios.
Using social related investments (SRI) factors for better filter screens using data as investment companies and individuals research investments that manage resources better, pollute the environment less, or practice human rights. As the British Petroleum (BP) Gulf of Mexico deep water horizon oil spill catastrophe has now vividly demonstrated and become evident. Five years after the Gulf of Mexico oil spill BP, has committed to pay out 20 billion dollars in fines over an 18 year period. Fossil fuels are now classified as a stranded asset.
A stranded asset is defined as an asset that has suffered from unanticipated write down or converted into a liability due to outside current events such as Government regulation, climate change litigation, or changing financing strategies. The teacher retirement system of New York City lost over 130 million dollars from fossil fuel investments in 2015 acknowledges Investment Advisors an SEC register Investment portfolio advisor. On a global scale 15 Australia super funds lost over 5 billion dollars due to their fossil fuel investments. Each shareholder lost over $1,100 in their investment portfolio. It has now become evident divesting fossil fuels investments has now become a prudent fiduciary responsibility in retirement portfolios. J. P. Morgan the largest US bank will no longer finance coal projects in developed nations. University of California has divested 200 million dollars, Rockefeller family fund, Harvard University, and California’s pension funds have all divested their fossil fuel investments.
Over 80% of financial funds have committed to fossil fuel divestment. Over 600 institutions in 75 countries are now actively divesting these high carbon assets. The biggest divestment trend in history has now divested more than 5 trillion dollars in the last 5 years! Seventy five percent of divestment pledges have come from religious organizations, academic entities and individuals. Trillion’s of dollars has divested from pension funds, institutional investors, sovereign governments, government pensions and Insurance conglomerates worldwide.
With the historic agreement achieved at the Paris Cop21 summit, 195 countries have adopted to combat climate change signing legally binding instruments of ratification, to limit global warming to below 2 degrees Celsius. Sustainability has taken a chair in the world wide corporate boardroom. Greenhouse gas emissions, a low carbon world, resiliency, and on going documented accountability is now the common mindset of every single country in the world. Less than 20% of the entire worlds fossil fuels can be extracted and used from the earth if we are to contain global warming to the two degrees threshold. Carbon tracker an independent think thank issued the original stranded asset report in 2012 within several weeks of the reports public release billions of dollars in fossil fuel investments lost financial value.
SHAREHOLDER ADVOCACY: Involves investors who are actively involved in corporate issues and who take an active/influential role which could include key aspects such as climate change, pollution, human rights and corporate governance. These individuals put pressure on corporate management to do the right thing. This investor pressure is directed at improving corporate green polices and sustainable practices.
One key financial tool that is utilized by investors is through the ownership of stocks, bonds, securities and using their corresponding proxy votes to influence direct corporate behavior. Individual investors, pension funds and mutual fund mangers now review corporations annual sustainability reporting. Reviewing business conduct for offsetting negative environmental and social impacts where ever they occur to insure a global smart supply line. Stakeholders also review corporations shared value adhering to environmental business challenges with good business practices.
Friends of the Earth(FOE) recently created a free on line database Deforerstationfreefunds.org which includes over 6,000 mutual funds. Currently focusing on one single industry palm oil related holdings. This is due to the fact palm oil is the fastest growing cause of global rain forest deforestation and human rights abuses. Thereby FOE is using transparent social advocacy for multinational companies to eliminate the rapid deforestation from palm oil global supply chains. US mutual funds had an investment of over five billion dollars in palm oil industries in 2016. This on line tool brings transparency to the industry forcing mutual fund managers to focus more on sustainable supply lines. FOE will expand this shareholder advocacy tool to other agriculture industries in the near future. The US palm oil industry is over 60 billion dollars in 2014. Palm oil investments are unknowingly imbedded in individual EsgIra™ accounts and shareholders are totally unaware of their devastating worldwide climate effects.
COMMUNITY INVESTING: Provides access to financial capitol from green lenders and green investors to secure financial resources to finance traditionally under served communities worldwide. Community investing is one of the fastest growing areas of SRI investing over the last three (3) years. Growing over from 40 billion dollars to over 90 billion dollars in financial assets under management. segments served by community investing include: healthcare, business creation, housing, and development opportunities.
The Ethical401k fiduciaries direct investing funding to these underserved areas which have been traditionally overlooked by traditional investors. The World Bank, the biggest provider of public finance to the undeveloped world has recently made a significant shift in lending focus to cut greenhouse gas emissions and will now spend 28% of its investments on climate change projects following the 2016 Paris agreement. These new investments will include energy efficiency, renewable energy, smart irrigation watering systems, urban infrastructure and healthcare. The new climate economy will require 90 trillion dollars in green infrastructure by 2050.This includes water infrastructure, low carbon transport railways, electric vehicles, urban metros, and retrofitted buildings. Green infrastructure manages storm water run off, using native process of soils to slowdown and filter storm water runoff.
Traditional and Roth A Green IRA is an investment tool that can be set up by individuals that have self employment income. These green IRAs have a maximum amount set by law. A traditional green IRA can be tax deductible depending on the individuals annual income and tax filing status while a Roth green IRA contributions are not tax deductible. A Roth green IRA can be set up by individuals, pay tax on the initial deposits, regulated by your age, wait minimum 5 yrs, at age 59.5 you can start withdrawing funds tax free form a Roth green Ira.
A self directed Green IRA allows individuals to use their own expertise to select different types of unique alternative investments specifically tailored for the individual instead of traditional mutual funds, stocks and bonds. The self directed green IRA may be little known to many investment advisers as there may be no mutual fund or related commission so there is very little incentive recommending the self directed green IRA to an individual.
Sep and simple green 401k The employees company contributions are made to Sep and simple 401k retirement account. Employer’s have no filing requirements. There are specific rules governing employee eligibility under the Sep and simple 401k plans. Savings incentive match plan for employees (simple). This plan Is limited to companies with less than 100 employees. The contributions are made by both from the employer and the employee. Allowing the employees to contribute a percentage of their pre tax income . The employer is required to match the employee contribution up to 3%. Sep 401k simplified employee pension . (SEP) available to any business.
The Ethical401k is set up by the employer. Each employee has their own account. Each employee is covered equally under the plan. The employer is the only one to make contributions to the Ethical401k. The employee is vested after the employer contribution is made. This means the financial contribution belongs to the employee. There are early financial withdrawal penalties associated with the sep plan. Realizing a market void exists, on March 1, 2016 Morningstar a top provider of independent market research, introduced a sustainability rating to help portfolio managers, financial advisors and individuals, evaluate mutual funds, and exchange traded funds based upon environmental, social and governance factors (ESG). Currently rolling out worldwide to over 20K mutual funds to help all types of individuals: identify, evaluate and compare sustainability factors in mutual fund portfolios.
Sustainability rating icons range from one globe (low) to five globes (high). Morningstar sustainability rating score is based upon the individual ESG ratings from the individual mutual fund companies, and research provided by third party, sustainalytics an award winning research firm specializing in environmental, social and governance (ESG) research. After calculating a portfolio score Morningstar then compares the mutual fund to its industry peers worldwide. Of the over 20k mutual funds Morningstar researches and evaluates, 10% percent receive five globes, 22% receive four globes, 35% receive three globes, 22% receive two globes and 10% receive one globe. Corresponding sustainability ratings range from low, below average, average, above average and high.
Social related investing(SRI) represents only 2% of all mutual funds, however interest is rapidly growing worldwide with sustainability reporting becoming commonplace. Seventy percent of women, and eighty percent of millennial’s are the two fastest growing segments of the market. Millennial’s are expected to inherit approximately 50 trillion dollars from the baby boomer generation. Recognizing this market shift Morning star implemented a sustainability rating visual screening tool to help new investors evaluate: environmental, climate change, waste management, worldwide supply lines, human rights and political lobbying efforts.
In 2017 Morgan Stanley latest sustainable signals research report found over 86% of millennial’s are interested in sustainable investing. Eighty nine percent (89%) of millennial’s are interested in ESG investments that can be customized to their individual interests. Nine out of 10 (90%) of millennial investors are interested in pursuing sustainable investments for their Ethical401k, GreenIra, EsgIra, Climate401k.com and Esgretirement.com plans.
WHAT IS ESG?
As SRI has traditionally embraced screening as a financial tool. Screening of traditional “sin stocks” Non financial factors can now effect retirement portfolio financial performance. A new more recent technology is being adopted and is rapidly gaining traction in the financial markets.
ESG the acronym stands for Environment, Social, Governance. Initially brushed off as a passing fad, irrelevant, a side show, ESG is now the centerpiece worldwide in every major financial transaction. Esgunderwriting.com is incorporated into individual retirement portfolios identifying superior risk adjusted returns. What was once considered irrelevant, non financial data is now equal to, if not more relevant than past financial performance. Externalities unreported in the past now incorporating ESG underwriting accounts for: Environmental pollution, Co2 emitted gases. Social consequences, LBGT, gender bonds, work equality/conditions, Governance board equality/compensation, ethical decisions, and evaluation of all potential risks. Including supply line risks.
ESG underwriting includes: positive screening, best in class, high ESG scores, which leads to favorable lower rate financing. Recently ESG Etf’s have now passed one trillion dollars in managed funds.
Employer sponsored 401k’s are limited by the plans administrator. Currently only 5% of 401k funds incorporate ESG principals. Which means your 401k may not align with your investment values. Over 70% of worldwide investors say it is important to align their values and ethics with investments. With the surprise election of Joe Biden, there will be a reversal of the Trump policies allowing ESG stocks, bonds, ETFS into employer sponsored 401k retirement accounts.
With a knowledgeable ESG Broker you could develop an ESG strategy that aligns with your ESG retirement goals, clarify ESG terminology, structure an employer sponsored 401k and maybe add a flexible Roth green Ira to your sustainable retirement planning.
WHAT ARE ESG CORE METRICS?
As with any new emerging product there is an adoption period. “crossing the chasm”. ESG scores, terminology, data sources, disclosures, selected data, There is currently voluntary disclosures with zero standards. Leading to a mosh pit of confusing green washing disclosures.
BFD on May 5, 2020 A world leader in mining Rio Tinto blew up an Aboriginal site. Totally legal according to a 1972 law. Business as usual. Until ESG stakeholders flex their non financial muscle and heads roll CEO Jacques, Salisbury, and Niven all fired. Not enough ESG governance, entire transparency, experts hired, an entire corporation revision required under the “G” in ESG Governance. Yes the day of past financial performance quarter by quarter analysis is now obsolete.
The new universal standard is entering the market. ESG core metrics, 21 primary metrics/disclosures that are material and specific to each individual industry. These 21 primary quantitative metrics to align ESG reporting, peer comparisons, ESG terminology, classification. Designed to provide investors about specific metrics to determine to meet investors own values/ethics.
There is an additional 34 secondary ESG metrics/disclosures. Designed to extrapolate intrinsic non financial data pertinent to individual corporations.
Recently, the federal Department of Labor(DOL) replaced language from a 2008 governance, which had driven fiduciaries and investors away from environmental, social and governance funds.(ESG) The updated DOL ruling allows ESG investing for fiduciaries and investors without being penalized for ERISA violations. However with the 2016 election of president Trump this rule has now been suspended for further review and revision. Sustainability is now recognized as a major corporate guidance, employee retirement plans can benefit by selecting and contributing to an Climate401k. The DOL also implemented a salient step regulating investment brokers and their fiduciary obligations overseeing retirements accounts. Previously fiduciary investment advisors only had to suggest or recommend “suitable” investments concerning retirement accounts. There is no current fiduciary standard. The Obama administration studied this effect and determined investment advisors were recommending investments based upon the commission they would receive. This led to consumers spending 17 billion dollars more annually in brokers commissions leading to annual returns lowered by 1%.
Slowly phasing in 2017 and 2018 fiduciary retirement investment advisors are now required to put “customers first” Specifically act on a customers best interest regarding all types of IRA transactions. However this has been immediately halted under the surprise election of president Trump. With a friendly Republican federal administration, controlling Senate and the white house, the focus has shifted towards US growth.
The Trump administration has signaled this Obama administration regulation was an impediment to future financial regulation reform. Under the current Trump proposal growth first and ESG underwriting is eliminated. Incorporating ESG underwriting is not part of the fiduciary obligations of current 401k administrators. It is an individual choice based on your values. All this has changed under the Biden administration, a complete reversal from Trump policies will be enacted. Allowing ESG securities in all types of retirement accounts. The DOL 2022 ESG rule clarifies climate change and other ESG factors are relevant to risk/return of potential investment. The 2022 DOL ESG rule does not mandate that fiduciaries must or should consider ESG factors in retirement plans.
However GOP officials have initiated an Anti-Esg campaign. Fabricating false statement that ESG is mandated by Liberals. Pursuing Federal court legislation to overturn the Biden DOL ESG rule. Stating ESG is mandated and effects pensions, retirement plans, and 401k plans. Requiring fiduciaries to make investment decisions based only on financial factors(pecuniary factors). If an investment manager uses ESG non financial factors in any form, investment mangers will be barred from managing pensions, states retirement assets, or underwriting state/municipal bonds. This Blue vs Red state anti-Esg campaign has adversely effected the US standing on the world stage. With the EU/Asia/ME continents having a green taxonomy or Esg underwriting guidelines. This GOP Anti-Esg campaign has reduce the US as a world leader. As multinationals and investors now look outside the US for ESG leadership.
The Trump administration has also rolled back US commitments and funding to climate change, clean water and international climate agreements. President Trump recently approved the controversial Keystone pipeline allowing transpiration of Canadian tar sands into the United States. President Biden immediately stopped the Keystone pipeline after taking office. Biden also halted all oil and gas leases on Federal land.
Tar sands ARE THE DIRTEST FOSSIL FUEL which adversely effect the environment and climate change. After more than 10 years of litigation over the keystone pipeline, the environmentalists and climate change has now taken center stage in the United States
All of the different types of green IRA’s and employer sponsored green 401K’s offer substantial tax advantages to their beneficiaries. The IRA is one of the most misunderstood financial instruments by the public at large. Establishing a Green Ira, EsgIra,.com or an Climate401K.com can be a smart investment strategy accumulating tax free funds for decades. All matching funds contributed to the green Ira by the employer is comparable to receiving tax free investment funds. These funds can enjoy compounding interest for decades! Consult you tax adviser to learn all the details
Brand Your Company Green!
To purchase, advertise, joint venture or inquire about Greenappraiser.com or any of our category defining domain names