What are the Differences Between ESG, SRI, and Impact Investing I Need to Know?

More people want their money to make a positive impact on society and the world, so consider impact investing. According to a survey from the U.S. Forum for Sustainable and Responsible Investment, socially responsible investing and a subset of it—impact investing—has accounted for more than $1 out of every $4 under professional management in the United States. This equals more than $12 trillion in assets under management every year. 

Along with this growing trend, there are many funds and strategies that integrate ethical considerations into the investment process. Environmental, social, and governance (ESG), Socially responsible investing (SRI), and impact investing are terms often used interchangeably with the assumption that they all have the same meaning and approach. However, there are many differences that affect how portfolios should be structured and which investments are best for meeting social impact goals.  

What is ESG?

ESG refers to the environmental, social, and governance practices of an investment that can have a material impact on the performance of that investment. The integration of these factors is used to enhance traditional financial analysis by identifying potential risks and opportunities beyond just technical valuations. The main objection remains financial performance, however, even though there is an overlay of social consciousness. Investments with good ESG scores have the potential to drive returns. Some common environmental factors are energy consumption, pollution, climate change, waste production, natural resource preservation, and animal welfare. Some social factors are human rights, child and forced labor, community engagement, health and safety, stakeholder relations, and employee relations. The governance factors are quality of management, board independence, conflicts of interest, executive compensation, transparency and disclosure, and shareholder rights. 

What is SRI?

Socially responsible investing goes farther than ESG investing by actively eliminating or selecting investments that correspond to certain ethical guidelines. Underlying motives can include religion, personal values, or political beliefs. Unlike ESG analysis which shapes valuations, SRI uses ESG factors to apply positive or negative screens on investments. For instance, an investor might avoid any fund that invests in companies that are linked to firearm production. An investor might also opt to allocate a fixed portion of their portfolio to companies that give to charitable causes. Other negative SRI screens include human rights and labor violations, environmental damage. Others include terrorism affiliations, gambling, production of weapons and defense tools, and alcohol, tobacco, and other addictive substances. Making a profit is still important, but it has to be balanced against principles. The goal is to make returns without going against one’s social conscience.

What is Impact Investing?

In impact investing positive outcomes are important. Investments need to have a positive impact, so the goal for impact investing is to help an organization or business meet certain goals that benefit society or the environment. Investing in a non-profit that is dedicated to the development and research of clean energy is an example of impact investing. People don't care about the success of this and whether they earn money to the same extent as social and ESG investing.

An example of a tool used in impact investing is a microfinance loan. This helps people with little or no access to capital start a new business. High-net-worth individuals find this attractive and are willing to take some risk to invest in them. Businesses started with microfinance loans are helping to provide competitive returns to their investors through the bonds that back them. Sometimes impact investing has been able to make higher returns for their investors than the overall market did. 

In conclusion, around half of investors own responsible investments. In addition, around the same number are willing to change their entire portfolio to be responsible. The desire to invest ethically is only growing. Given the growing complexity of investment concepts and products, the implementation of this desire is not easy. This is why educating yourself and getting advice from knowledgeable individuals is a smart thing to do.

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The Top Tech Stocks You Should Consider Investing In

There is a lot of money in technology right now. There is no denying that. The technology sector consists of businesses that sell goods and services in software, computers, electronics. This also includes artificial intelligence (AI) and other industries that are related to information technology (IT). The tech sector is also comprised of companies with the largest market capitalizations in the world. For example, Microsoft Corp., Apple Inc., and Amazon.com Inc.

 Tech stocks that are represented by the Technology Select Sector SPDR ETF (XLK) have outperformed the broader market. They have had a total return of 87.7%, above the Russell 1000’s total return of 83.1% over the past year. Here are the top tech stocks with the best value, fastest growth, and the most momentum at the current moment. In addition, if you want to read more about tech stocks, read this article by Sure Dividend: 3 Technology Stocks For The Future.

Best Value Tech Stocks

Value investing is a factor-based investing strategy in which you pick stocks that you think are trading for less than what they are worth. You do this by measuring the ratio of the stock’s price to one or more fundamental business metrics such as the price-to-earnings ratio (P/E Ratio). Value investors believe that if a business is cheap compared to its intrinsic value, the stock price could possibly rise faster than others as the price comes back in line with the worth of the company. Here are some examples:

Vontier Corp.

Vontier is a global industrial technology company with a focus on mobility and smart transportation. They specialize in areas like mobility technologies, retail, and commercial fueling, fleet management, and vehicle diagnostics and maintenance. They also have more than 8,300 employees in over 150 locations around the world. 

Synex Corp

They provide IT supply chain services to the tech industry. This includes distribution, integration, and logistics services. They distribute over 30,000 tech products from manufacturers around the world. In addition, they provide solutions to more than 20,000 resellers and customers. They recently announced a merger with Tech Data Corp., a wholesale tech distributor. The merger deal was valued at $7.2 billion, including net debt, and is expected to close later this year. 

Intel Corp.

Intel designs and manufactures computer components and related products. This includes chipsets, server products, processors, memory, and storage. Their products are designed for a range of emerging and traditional computing technologies. For example, 5G networks, cloud computing, and AI. The company recently announced its plan to increase its semiconductor manufacturing capacity. They will invest about $20 billion which could help alleviate the semiconductor storage happening right now.

Fastest Growing Tech Stocks

These are the top tech stocks, ranked based on their most recent quarterly year-over-year (YOY) percentage revenue growth. Their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are essential. This is why ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter that could make one figure or more unrepresentative of the business in general. 

Advanced Micro Devices Inc.

They are a global semiconductor company that sells chipsets, graphic processing units (GPUs), microprocessors, development services, technology for game consoles, and server and embedded processors. 

Square Inc.

They are a financial services and online payments company, providing merchants with hardware solutions for processing credit and debit card transactions, point of sale, and other payment and business-management software. The company also gives a Cash App for individual consumers so they can easily send and receive money and other financial services. At the end of last year, they had over 210 million buyer profiles and about 295 million items listed by sellers. Square announced in March that it had completed the charter approval process with the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Services. Their approval for the charter is conditional on its bank maintaining a high level of capital than other banks. 

SolarWinds Corp.

They provide IT infrastructure management software. Their products enable enterprises to monitor and manage the performance of their IT environments in the cloud, via hybrid models, or on-premises. They are currently being investigated by several government agencies after their software was compromised last year in a cyberattack by suspected Russian hackers. They had infected software developed by SolarWinds with malicious code, compromising critical systems of the long list of major U.S. corporations, small companies, and a number of government agencies. 

Aspen Technology Inc.

They make software that enables customers to better operate, design, and maintain their complex manufacturing environments. They are currently developing AI solutions to embed throughout industrial manufacturing environments.

Tech Stocks with the Most Momentum

Momentum investing is a factor-based investing strategy where you invest in a stock whose price has risen faster than the overall market. These investors think that stocks that have outperformed the market will continue to do so. Their reasoning is that the factors that cause them to outperform will not suddenly disappear. Others seek to benefit from the stock’s outperformance and will often buy the stock and bid it at higher prices. 

Enphase Energy Inc.

They are a renewable energy company that designs and manufactures solar panels, energy storage, and other products. They announced in early February that they had agreed to acquire the Solar Design Services business of DIN Engineering Services LLP. The financial terms of the transaction were not disclosed. 

HubSpot Inc.

HubSpot Inc. sells cloud-based marketing and sales software to corporate customers. They offer customer relationship management (CRM), content management software (CMS), marketing and sales, and other business management solutions. They serve more than 100,000 customers in over 120 countries. The comapny announced in mid-February that they will acquire The Hustle, a media company that produces a podcast, newsletter, and premium research content. 

The Trade Desk Inc.

They offer a cloud-based platform that enables customers to create, optimize, and manage more expressive data-driven digital advertising campaigns. Markets can use the platform to tailor ad campaigns across ad formats like video, display, audio, native, and social. They announced in mid-January that they appointed Michelle Hulst who had previously served as Trade Desk’s executive vice president of Global Data and Strategy, to CFO. 

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