Key Takeaways
- What is ESG?: Environmental, Social, Governance. Scoring companies on being "good."
- The Trade-off: Does limiting your pool of stocks hurt returns? Data is mixed.
- Greenwashing: Many "Green" funds are full of Tech stocks and Oil companies. Look under the hood.
Introduction
You want to retire rich, but you also don't want to fund companies that destroy the planet or use child labor.
Enter ESG Investing. It promises the best of both worlds. But does it deliver?
Deep Dive: Voting with Dollars
The 3 Pillars
- Environmental: Carbon footprint, waste management.
- Social: Labor standards, diversity, community impact.
- Governance: CEO pay, anti-corruption, board structure.
The Argument FOR ESG
Companies that pollute or treat workers badly are ticking time bombs. They face lawsuits, regulations, and strikes. Therefore, "Good" companies are actually safer long-term investments.
The Argument AGAINST ESG
- Fees: ESG funds often charge higher fees (Expense Ratios) for doing the same thing as a generic index fund.
- Subjectivity: Who decides what is "Ethical"? Is Tesla good (EVs) or bad (governance)? It's messy.
Summary
If you care about impact, you might be better off buying the whole market (VTI) and donating your profits to charity, rather than paying higher fees for a confusing ESG fund.
