ESG Investing - (Environmental, Social, and Governance)

<p><strong>Josh: </strong> This is Josh Tirado, and this is the making smart decisions podcast. Today, we are going to dive into ESG investing. So ESG investing stands for environmental, social, and governance investing. It refers to a class investing that is also often called sustainable investing. This is more of an umbrella term for investments to seek positive returns while having longterm positive impacts on society, the environment, or the performance of ethical businesses at the same time, oftentimes in the past, this was just called socially responsible investing.</p><p>[00:02:13] A lot of times people see the term SRI or sustainable investing. In its early years, it was mostly focused on green companies and green energy companies back in the day. what that meant was while this was a worthwhile noble investment in a noble cause. The performance was not very good.</p><p>[00:02:35] The problem is when you just want to focus on nothing but green companies, you are really narrowing your pool of investment companies, investment choices. So they tended to be smaller companies, startups, riskier companies because of their size and their relative youth in business. And also they're all focused on the same industry.</p><p>[00:02:53] So you were really into this one niche. And if that niche didn't go well because of the current economic cycle or news, all of your green investments would suffer.</p><p>[00:03:04]So it became a problem. And this was early on when I started trying to use these investments with my clients that cared about this was we had to put aside a certain pocket of their investments to say, okay, this is going to be more aggressive, and this is going to be focused on green. And we still are well-diversified with the rest of the portfolio.</p><p>[00:03:25] That has evolved substantially over time. Things are just no longer just green investing. Now can have sustainable investing, which happens in a myriad of ways, not just energy. Okay. You can look at energy. You can look at forestry. You