Happy Earth Day!
Today marks the 50th anniversary of the first Earth Day. Denis Hayes organized the first movement in 1970 that brought together 20 million people in the US - almost 10% of our population. His leadership prompted legislation that included the Clean Air Act, the Clean Water Act, and the Endangered Species Act. The establishment of the Environmental Protection Agency (EPA) soon followed with the obvious mission to help preserve our only home. The timing of these events should come as no surprise. Astronaut Mike Collins (piloting the Apollo 11 command module, Eagle) snapped this feature image 9 months and 2 days before the first Earth Day. It was striking how small, fragile, and perfect our world looked from 240,000 miles away!
Socially Responsible Investing
The Socially Responsible Investing (SRI) movement started in biblical times and gained momentum in the US during the Vietnam War. Obviously, the idea of "doing good" while "doing well" is not new. SRI became a way of screening out "sin" stocks from a portfolio for (mostly) moral purposes. After the idea of planetary sustainability took shape in the late 1900s, the investing profession focused more intently on factors that had predictive power in identifying stocks that were built to last and could stand the test of time. The phrase environmental, social, and governance (ESG) was first used in 2005 to describe the many facets of doing good and how to quantify the metric and compare companies progress over time and against each other. One might think that is impossible to outperform when paying close attention to the human side of the business - but this may be short sighted. The chart below compares the performance of the iShares MSCI USA ESG Select ETF (SUSA) against the iShares S&P 500 Index ETF (IVV). It can been seen that SUSA has lagged the overall performance of IVV over the past 15 years.
When taking a deeper look at the yearly returns shown in the following bar chart, it seems that SUSA has closed the performance gap over the past 5, 3, and 1 year periods. The relative performance during these respective periods are +0.13%, +0.24%, and +1.25% in favor of SUSA - even with its larger expense ratio (0.21% vs 0.05%). Investors are voting with their feet by contributing more consciously into ESG funds that may capitalize on long term sustainability. I see this as a trend that will only accelerate over the next 50 years.
Make An Impact!
Looking in from space (or when reading the recent headlines), it is easy to feel overwhelmed by how small and fragile life is here on our blue marble. The world has certainly seen worse suffering and we humans have always managed to make it through to the other side. One of the byproducts of our social distancing is the dramatic reduction in oil consumption and carbon emissions. Photos from New Delhi show what some describe as "alpine fresh" air in contrast to the typical urban smog. Surely, there are things we can all do to help manage the risk of COVID-19 and make an impact for a better planet. This is a list of initiatives JQR Capital is undertaking to help us bridge this gap.
- We are committed to being 100% virtual in serving our clients. This is both more convenient for our clients and safer for our planet.
- We plan to have 100% of our client portfolios invested in strategies that include ESG factors as a major part of the selection process.
- We pledge to give back 10% of our net income or 1% of our revenue (whichever is greater) toward the Environmental Defense Fund.
The Granby Oak tree is estimated to be over 500 years old - making it the longest living organism in the state of Connecticut. It has weathered countless storms and survived through wars and depressions. This local symbol of sustainability is in danger of succumbing to the perils of an another unseen enemy - climate change. Contrary to popular belief, the aliens will probably NOT solve this problem. We have to do this ourselves for the next 500 years. Let us all make an impact!