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It’s that time of year again: Earth Day!
You’re probably thinking it’s about planting trees or maybe getting lectured about my plastic water bottle habits and carbon emissions – or actually using that compost bin that’s unassembled in the shed.
But here’s a plot twist: Earth Day is directly linked to your wallet.
Yes, you read that right. Let’s connect the green dots for you: ESG investing, sustainability (in life and in the environment), and feeling good about the legacy you’re leaving behind.
What is ESG Investing and Why Should I Care?
Okay, before we get into the money-making magic, let’s define ESG.
ESG stands for Environmental, Social, and Governance. It’s a framework that evaluates a company’s sustainability based on three factors:
- Environmental: How eco-friendly is the company? Does it have a carbon footprint the size of a small country, or is it actively pushing green energy solutions?
- Social: How do they treat their employees? Are they supporting diversity? And, most importantly, how are they treating the world’s most vulnerable populations?
- Governance: How does the company operate? Is it transparent? Do they have ethical leaders, or are they run by power-hungry executives?
Historically, the healthcare industry has shown less enthusiasm for ESG initiatives and has been slower to embrace them than other business sectors.
Most hospitals, however, have an open commitment to diversity and the public good, with the term “ESG” lumped into their mission statement. Increasingly, many organizations are building on these green “roots” to develop more in-depth programs that support environmental sustainability.
A Healthcare Shift
The plain fact is that more healthcare organizations are voluntarily shifting — some at gunpoint — to more climate-friendly operations.
There have been discussions of proposed climate discord requirements wherein companies would need to make public statements about their GHG emissions and climate risk assessment, including impact assessment and mitigation strategies.
In the European Union, member countries have adopted the Corporate Sustainability Reporting Directive (CSRD), which requires transparent disclosure about ESG activities, including governance, sustainability, risk, and progress toward related goals. The CSRD will create reporting obligations for those not held to the CSRD, as many U.S. parent entities operate within the EU.
There are further financial implications for the healthcare industry. ESG due diligence is becoming a top concern for major donors and charitable trusts, and many believe ESG performance scoring will factor into future Medicare payments.
Regardless of your personal stance, healthcare is getting greener. And there’s money to be made in ESG investing.
Also read: The Reality of ESG and Green Investing
Doctors: Making Tough Calls for the Greater Good
Doctors already know all about making tough calls for the greater good. ESG investing allows you to make those same calls – but with your money. It’s your chance to invest in companies that align with eco-friendly causes, whether it’s reducing your carbon footprint or supporting greater sustainability in healthcare.
ESG investing delivers
But do ESG investments really deliver? Some critics say that it sacrifices returns, but recent studies tell a different story.
According to Morgan Stanley, sustainable funds performed similarly to traditional funds between 2004 and 2018, and ESG funds showed lower downside risk during market turbulence. And in 2020, ESGs outperformed traditional funds by 4.3 points.
Although recent performance reports are underwhelming – ESG funds underperformed traditional funds by 1.3 points in the second half of 2024 – ESG shows solid, long-term growth. Investing is rapidly growing in popularity. Sustainable funds reached a record high of $3.56 trillion assets under management (AUM) by the end of 2024.
Overall, ESG funds can deliver environmental and market sustainability.
Trump and Musk and Vance, Oh My!
Political drama may well have reached its apex, and ESG is one of many hot-button issues. Trump has spoken out against “woke capitalism,” taking aim at DEI (Diversity, Equity, & Inclusion) and climate action initiatives.
But investment analysts believe that ESG funds are here to stay: Despite recent political headwinds, the returns are too good to ignore.
Furthermore, Trump’s right-hand man, Elon Musk, is a leader in green technology. For over two decades, Musk has been a major investor in Tesla, the globe’s second-largest manufacturer of electric vehicles (EVs). Since 2008, he has led operations as Tesla’s CEO.
Still, Tesla has been removed from ESG indexes (like the S&P 500 ESG Index) because ESG also looks at governance and social factors when scoring companies. But with any “green” company, ESG frameworks are subjective.
Bottom line: There’s a captive market for “green” products and the innovation behind them, regardless of the customer or manufacturer’s ethos. Regardless of personal values, it seems everyone’s excited about the technology fueling EVs, hydrogen fuel cells, and solid-state batteries.
How Doctors Can Get Started with ESG Investing
Earth Day may just be the gentle push you need to jump in. Apart from working with a financial advisor, there are other ways that you can get started yourself.
Two paths to consider are Robo-Advisor or DIY.
Robo-advisors
If you want to keep it simple, robo-advisors are a solid option.
Robo-advisors offer automated investment platforms. The investor sets their goals, risk tolerance, and timelines, then the robo-advisors build a diversified portfolio that aligns with their needs. The portfolio usually contains a large mix of ETFs and is designed for hands-off, long-term investing.
Betterment and Wealthfront are two popular robo-advisor platforms that offer ESG-friendly investment options.
DIY
With the DIY route, you can open a brokerage account and use screening tools to find companies with high ESG scores or eco-focused ETFs.
Stash, Robinhood, SoFi Invest, and Merrill Edge are some popular DIY brokerage apps you may have heard of.
While it sounds time-consuming to create an account and select ESG funds, these platforms are built to make investing simple and accessible for everyday investors.
In fact, I opened a Stash account last fall and invested over $5,000. I did so to gain a more hands-on understanding of investing and to actually try out a platform I was asked to review.
Admittedly, I spent very little time choosing my investments. Instead, selected pre-built ETFs themed around technology, clean energy, or “copycat” funds, funds where the holdings mimic expert-curated ETFs.
A Note of Caution: ESG Isn’t Always What It Seems
ESG investing sounds warm, altruistic, and do-goodery – but it’s not perfect and far from being a green panacea to the world’s woes.
Some experts point out that ESG ratings don’t always capture the full story. For example, another Physician on Fire article points out that Tesla has received lower ESG scores than tobacco companies like Philip Morris. Why? Because many ESG rating systems focus heavily on a company’s financial exposure to risks rather than its actual environmental or social impact.
In other words, an ESG score might reflect how much pollution or poor labor practices threaten the company’s bottom line, not necessarily how much the company is polluting or exploiting labor. That’s an important distinction for anyone serious about aligning their investments with their values.
Greenwashing is a real concern, too. Some companies use ESG-friendly language in marketing without backing it up with meaningful action. As with medicine, due diligence is critical. Don’t rely solely on ESG scores; take time to understand what companies are doing to support sustainability and social responsibility.
It’s also smart to work with an advisor who has an ESG investing certificate. These specialist advisors understand the strengths and limitations of ESG data, including scoring systems and methodologies, and recognize that high ESG scores do not always mean that a company is truly green or ethical in its behavior.
The good news? Many companies are making real progress, and diligent investors can still build a portfolio that aligns with their green values and long-term money goals. But as with any good diagnosis, it takes more than a cursory glance.
Your Money, Your Planet, Your Legacy
ESG investing isn’t just about being a do-gooder because no one wants to do good at the cost of their financial well-being. ESG investing, done rights, offers you a chance to make a real impact with your money, improving your patients’ lives and your portfolio returns.
As with medicine, patience is key. Results don’t happen overnight, and the benefits of ESG take time to materialize. But over time, it’s a win-win-win: for your wallet, your patients, and your broader legacy.
We need more good doctors who are thinking long-term – about their patients, their portfolios, and yes, even the planet.
With a professional creed of “First, do no harm,” it’s worth considering how our investments reflect those same values.
