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Our newsletter, to be delivered twice monthly, will explore pertinent issues related to smart technology, clean energy and sustainable agriculture. Our goal is to keep a finger on the pulse of industry trends and how they relate to Novus’s goals and success.
How to bring ESG into your 401(k)
There’s been some debate as to whether 401(k)s should include ESG-focused funds. Opponents have said that, absent a global standard for measuring ESG performance, including ESG funds in 401(k)s would be a “breach of fiduciary responsibility.”
But proponents argue that as interest in ESG grows — investors pumped $51.1 billion into U.S. sustainable funds last year, more than double the total in 2019 — individuals should be able to add these funds to their retirement-savings plans if they so desire.
Last spring the Department of Labor announced it would cease to enforce a Trump-era rule that required 401(k) plans to base decisions solely economic factors, which means individuals could see increased ESG options in their employee-sponsored retirement plans in the coming years.
But investors eager to incorporate ESG funds into their retirement plans might not have to wait for that to happen. As the Wall Street Journal reports, there are still ways to feather a nest egg with impact investments. Here are a few ideas.
- Take a closer look at your plan’s portfolio holdings. When you examine a fund’s portfolio holdings, check to see if it includes any of the same stocks held by big-name ESG funds like Parnassus Core Equity. If you see a lot of overlap, that one could be a winner. If you want to take a deeper dive, the research provider MSCI Inc. ranks individual stocks and funds on a continuum ranging from “leader” to “laggard.”
- Ask if your plan offers a self-directed brokerage window. Some employee-sponsored plans will allow you to buy stocks outside the plan’s offerings and include them in the same tax-deferred account. If you go this route, be sure to ask about any transaction fees so there’s no sticker shock.
- Consider setting up a sustainable supplement. If your 401(k) just doesn’t offer adequate ESG options, you can still set up a traditional or Roth IRA for those investments. Experts advise starting off with a broadly focused ESG fund — as opposed to one dedicated to a single issue like renewable —because these portfolios are more likely to match the performance of major market indexes like the S&P 500.
Nothing in this newsletter constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person
In Other News
NYSE to launch new eco asset class
The New York Stock Exchange has announced that it will launch a new eco asset class later this fall. Natural asset companies (NACs) allow governments and companies to assign value to “ecosystem services” provided by nature — think a forest’s carbon sequestration or drinking water provided by a river.
ESG modeling tool helps oil and gas companies clean up their operations
Currently, one of the best ways for oil and gas companies to assess their own ESG efforts is to compare their actions against their competitors. To add some objectivity — and efficiency — to this analysis, Enverus, an energy data analytics and SaaS technology company, has developed a data-driven tool that ranks oil and gas companies in specific competition areas.
Meet the MacArthur Foundation’s 2021 ‘Genius’ Grant Winners
The MacArthur Foundation recently announced 25 new names to add to its prestigious list of fellows. These awards are meant to recognize “exceptional creativity” in fields like the arts, sciences, humanities and advocacy. Several of this year’s honorees have made names for themselves through their social equity work.
All that ESG criticism you’ve been reading about? It’s actually a good thing
ESG critics have had some choice words — sometimes conveyed via emoji — about ESG ratings, but according to the founder of Morningstar’s Sustainalytics division, ratings diversity points to a healthy market.
Can bug-based kibble cut carbon emissions?
You might not have been thrilled to see your dog dining on cicadas during this summer’s swarm, but researchers estimate that the food we feed our dogs and cats accounts for about 30% of U.S. meat consumption. Switching to insect-based chow, however, could take a bite out of pet ownership’s eco impact. Still skeptical? The “edible insect market” is expected to hit $8 billion globally by 2030.
