Become a Personal Finance Expert
Subscribe to our personal finance newsletter three times a week and spend your money wisely.
Contextualize the financial news you need to know.
If you’re a little concerned about your 401(k) holdings, Opium, ugly, I have great news.Earlier this month, the Biden administration issued a rule This will help employers consider environmental, social and governance (ESG) factors when choosing a 401(k) investment fund.
ESG factors can allow potential investors to screen companies for risky or (sometimes seriously) unethical behavior, but those are also hotly debated categories among investment geeks. I have. Let’s clear up some misconceptions about ESG.
- Myth 1: Everyone does it. Earlier this year, Bloomberg report Global ESG assets could exceed $50 trillion by 2025. $30.6 trillion Still, ESG investing is relatively rare when it comes to 401(k)s. That could change with Biden’s new rules, which reverse Trump-era decisions that make it harder for 401(k) plans to pick up his ESG investments.
- Myth #2: ESG investing will ruin your portfolio. Yes, prioritizing ESG means there are some limitations. If you’re investing with ESG criteria in mind, you probably can’t invest a 401(k) fund into receiving candy from, say, the (very bogus) Toddlers International, Ltd. — Which brings us to our final myth.
- Myth 3: ESG investing is only for eco-warriors. When you think of ESG-forward companies, you might think of eco-friendly brands led by long-haired, sandal-wearing geniuses. Sorry dear readers, but that’s usually not the case. Many of his ESG rating agencies prioritize non-environmental factors (e.g. corporate governance) when evaluating companies.That’s how mega-oil producer ConocoPhillips Top of one ESG list.
And remember: Under the new rules, fiduciaries may consider ESG governance factors when making decisions for their clients. However, you don’t have to. So if you still want to invest in Taking Candy From Toddlers International, Ltd., give us more power.— Lillian