Financial Services

The 'Trump effect' is slowing climate change progress, but investors are fighting back and winning

President Donald Trump loves climate-wrecking coal and hates the climate-saving Paris Agreement.

Meanwhile, forward-looking impact investors hate the problems of burning coal and its financial downside – and love portfolios of companies and funds pursuing climate solutions, which can have stronger returns.

This love-hate split has motivated investors – and eco-focused ESG investment funds — seeking to save the planet from Trump’s policies. (Note: ESG stands for “environmental, social and governance.”)

In fact, $12 trillion — or $1 in every $4 of assets professionally managed in the U.S. — is invested in portfolios seeking to be sustainable, responsible and impactful. This is up 38 percent since 2016 and up 18 times since 1995, and it includes more than 180 mutual funds and dozens of exchange-traded funds, according to the US SIF Foundation, the socially responsible investing industry trade association.

More from Impact Investing:
From ESG to SRI, decoding impact investing lingo
Why investors like Bezos and Gates pour money into clean tech
What Warren Buffett thinks about climate change

While Trump seems to hate science, investors are loving physics genius Isaac Newton’s third law of motion: “For every action, there is an equal and opposite reaction.”

Trump’s August 2018 “affordable clean energy” rule seeks to transfer pollution-control laws to the states, likely to result in more polluted air and rivers. But savvy fossil-fuel-free-focused investors are trumping this by avoiding the 18 percent drop in coal stocks (Van Eck KOL ETF) since then, compared to the S&P 500‘s flat performance over the eight months from July 28, 2018, to March 27, 2019.

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Trump announced in July 2017 the intent to withdraw from the Paris Agreement, which was signed by 195 countries in November 2015. That same month, the Etho Climate Leadership Index US launched its ETF, investing in a diversified mix of 400 equities with lower emissions and carbon footprints — and no fossil-fuel producers.

Since that Etho launch on Nov. 19, 2015, it has cumulatively returned 44 percent, while the S&P500 SPY ETF has returned 34 percent. Etho founder Ian Monroe said: “The most efficient and sustainable companies are simply making investors more money” by reducing energy, water, waste and emissions. Companies that don’t can be much riskier.


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