ESG INVESTING NAVIGATES POLITICAL BACKLASH

ESG, an investing style that eyes a company’s profits, risks and long-term sustainability through an environmental, social or corporate-governance lens, is weathering a political storm.

-  BY ADAM SHELL

The values-based strategy, also known as socially conscious or sustainable investing, traces its modern-day roots back to the latter part of the 20th century. Now, “ESG is a four-letter word,” says Paul Beland, global head of research for wealth management at CFRA Research. But backlash aside, ESG investing principles are as relevant today as they were 40 years ago, says Robert Klaber, director of sustainability research and a portfolio manager at Parnassus Investments, and they’re still materially pertinent to a company’s bottom line and investment prospects. “We believe these investment concepts are durable for the long run,” he says.

Since our last update of the Kiplinger ESG 20, our favorite stocks and funds that stand out on ESG and financial metrics, the headwinds have stiffened. The Trump administration is less climate-friendly, intensely scrutinizing ESG and pushing for a federal government ban of DEI (diversity, equity and inclusion) initiatives. Wall Street’s top regulator is moving closer to rescinding a rule requiring public companies to quantify the business risk caused by climate change. Employer-sponsored plans, such as 401(k)s, are in the crosshairs, too. A U.S. district court ruling in Texas earlier this year found that American Airlines violated the law by including funds in its retirement savings plan from an investment firm considering ESG factors in its proxy voting and other related shareholder engagement measures.

Given the controversy, we want to reiterate that the Kiplinger ESG 20 comprises companies we think are good businesses with good investment prospects. Our picks include some of the best companies and stocks on the planet, such as computer chip designer Nvidia and software giant Microsoft. Our role is to provide readers with a broad range of investment options and strategies to consider as they look to increase their wealth.