ESG FOR F.I.R.E.: Ouch! That Hurts!

“If you want to beat the S&P 500, start thinking of the index as a filter and not a benchmark. It’s the starting line; not the finish line.” Andrew D. Ellis, Founder, ThinkingLonger, LLC

Jon Hale, a fellow Medium writer, called our attention a while ago to the SEC’s Division of Examinations which released a Risk Alert on Environmental, Social, and Corporate Governance (ESG) investing “resulting from recent examinations of advisors who serve clients directly or who offer ESG models and separately managed accounts, as well as those who offer public funds.” The SEC takes no position on the economic merits of ESG investing. Rather, the SEC is reminding everyone to mean what they say and say what they mean. Fair enough. But, let’s dig a little deeper.

You would think that ESG investing would naturally be in sync with our “lean” F.I.R.E. friends whose minimalist approach to savings, investments and life-styles would be supportive of ESG objectives. But, that may not be true.

Remember, the F.I.R.E. movement is “a program of extreme savings and investment that allows proponents to retire far earlier than traditional budgets and retirement plans would allow.” Implicit in this approach is a commitment to maximizing the profitability of one’s investments, thereby allowing for the earliest possible retirement. Yet, investing in ESG…