ESG refers to the environmental, social and governance aspects of an investment. The ESG framework allows investors to evaluate companies based on non-financial factors, to measure an investment’s or company's sustainability.
Environmental factors consider the conservation of the natural world and its resources, including climate change, energy efficiency and waste management. Social factors examine the impact a company or investment has on the people it touches. This includes customer satisfaction, data protection, privacy and gender and diversity. While Governance factors assess how competently a company is run, analyzing issues such as bribery, corruption, executive compensation and lobbying.
ESG investments sometimes referred to as Impact investments, have become increasingly popular especially with institutional investors, such as foundations and endowments who wish to align their investments with their long-term goals and objectives. However, over time they have become increasingly in demand with individual investors as a means to invest in things that align with their value system. While it is not guaranteed that companies that adhere to ESG values will outperform companies that do not, the increased scrutiny has shifted more companies to focus on long-term ESG goals. As global trends continue to move towards sustainability, ESG investing is more and more relevant, and shareholders and management alike are taking notice.
One example of an ESG investment that Ulrich has allocated client capital to, is the Kimpact Evergreen Real Estate Investment Fund (“Kimpact”)Kimpact is an open-ended real estate fund that invests in affordable housing in the United States, including low income housing tax credit, self-regulated market rate, manufactured housing, and 55+ communities below the institutional radar, typically ranging between $5 - $30 million.
With Impact investments like Kimpact the benefits are twofold. Kimpact provides an attractive yield from rental income as well as capital appreciation from increased property values. The investment is also attractive, as it provides downside protection during a recession, as demand for affordable housing rises when the economy takes a downward turn. This ensures a low-risk and profitable investment while still helping to lift up communities and providing social programs that help affordable housing residents, such as flu shots and lunches for minors during the Summer when school is out of session.
There are currently no mandatory ESG disclosures at the federal level, though the SEC requires all public companies to disclose information that may be material to investors, including information on ESG-related risks. ESG investments will continue to grow as trends push investors to reevaluate where they invest their money. If you are moving into the world of ESG investments and need some guidance, Ulrich Investment Consultants can help you find the right investments for you. Reach out to us here: ulrichcg.com/contact-us/. We are ready to answer any questions you may have, and start finding the right solutions for you.
Disclaimer:
Ulrich Investment Consultants is registered as an investment adviser under the United States Investment Advisor Act of 1940, as amended, with the Securities and Exchange Commission. This is for informational purposes only and its contents should not be construed as a recommendation. The information on this social media site alone cannot, and should not be used in making investment decisions. Investors should carefully consider the investment objectives, risks, charges and expenses associated with any investment.