Should ESG Products Be In My Retirement Plan?

April 21, 2022

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April is the month created for Earth Day, although it might not seem as relevant today with a war going on in Europe. In case you didn’t know, Friday, April 22nd is International Earth Day.

For my first Earth Day, we were in Central Park in NYC to hear Simon & Garfunkel. Plenty of sun and fun. I was a bit shocked to hear that the crowd that day generated millions of pounds of garbage, much of it having to be cleaned up by hand. Perhaps that is where I developed my East Coast cynicism.

In our world of investments, whether in your IRA or 401(k), the question keeps coming up to me:

Should I invest for profit and total gain, or for should I align my investments with my values?

I certainly cannot answer this question as it’s just too personal, but it’s a good discussion to have.

What does ESG mean?

ESG stands for companies that exude Environmental and Social Governance in their behavior.

So, companies that pollute more than average are out of this conversation. Those could include oil companies, gas companies, and utilities. Most “old” manufacturing sectors would be disallowed as well, including steel and metal manufacturers, defense contractors, and many companies in the commodity business.

Most software companies and “white collar” companies would be included here as acceptable, and you know what the Tech Sector has accomplished in the last decade.

Interestingly, companies that do business with dictators should be considered unacceptable, but Apple is still the darling of the ESG investment community despite having most of its product line manufactured in China. A nation that has 1 million Uyghurs in “re-education” camps is certainly not a positive global influence on human rights. Even Alphabet (Google) has a subsidiary that does work for the Chinese Army, and they are in almost every ESG Large Cap fund.