ESG Investing: Why Progress and Profits Aren’t Mutually Exclusive

The rise of socially conscious investing, also known as ESG (environmental, social and governance) investing, has created, and will continue to create, opportunities for investors to put their money where their morals are.

By investing with companies such as FarmTogether, you can have a hand in reversing the effects of some of the planet’s most alarming crises, from food shortages to climate destruction. By pouring money into such outfits, the hope is that their ESG goals will not only be accomplished, but adopted by other companies and corporations.

An obvious question is: “What about the returns?”

Let’s just say that ESG investing wouldn’t be the force it is today if people weren’t already making a whole lot of money off of it.

The state of ESG investing, circa now

More than $51 billion worth of capital made its way into sustainable investment funds in the U.S. in 2020. That’s more than double the amount invested in 2019, and a tenfold increase over 2018, according to data from financial services firm Morningstar.

Those investments have been paying off, too. In the first year of the COVID-19 pandemic, multiple investment funds with ESG leanings outperformed the market.

After analyzing 26 ESG ETFs and mutual funds with more than $250 million in assets under management, S&P Global Market Intelligence found that in the 12 months ending March 5, 2021, 19 of the funds outpaced the S&P 500, posting gains of between 27% and 55%.

Those that underperformed the S&P, which grew by 271% over the same 12-month period, still managed to generate returns of between roughly 18% and 26%. In a 2021 letter to his fellow CEOs, none other than Blackrock head Larry Fink touted the disruptive potential of ESG investing.

"As more and more investors choose to tilt their investments towards sustainability-focused companies, the tectonic shift we are seeing will accelerate further,” Fink wrote. “And because this will have such a dramatic impact on how capital is allocated, every management team and board will need to consider how this will impact their company's stock."

Solid returns and boundless upside should check two critical boxes for investors. But if you’re new to the concept of ESG investing, you’re probably wondering where putting your money will do the most good — for the planet and your portfolio.

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FarmTogether: The ESG investor’s new best friend

When it comes to deciding which companies are a fit for your ESG investor dollars, you want to be on the lookout for outfits that have already displayed a talent for turning a responsible business model into solid returns. One company successfully flying the flag for ESG is farmland investment platform FarmTogether. “Long-term food security and sustainability are core to our mission. It’s really the ‘why’ for FarmTogether,” says company COO David Chan.

In order to continue feeding the growing global population amidst increasingly scarce natural resources, Chan explains, farmers are turning toward sustainable, “carbon-smart” farming practices. Most, however, lack the capital and financing these transitions require, presenting a threat to both food security and environmental integrity.

“FarmTogether was founded to channel this capital to drive agriculture toward sustainability on a massive scale, while opening a vital asset class to all investors,” he says.

In addition to driving impact — sustainable agricultural practices often result in more productive, more valuable land — FarmTogether’s approach is also driving income.

“Farmland investments have had stronger risk-adjusted returns than stocks, bonds, real estate and gold,” Chan says. “By implementing climate-smart practices, farmers can reduce costs and increase their bottom line, meaning better returns for themselves and our investors.”

ESG in action

Sustainability is baked into each step of FarmTogether’s business model, from choosing the operators the company leases its properties to to the nitty-gritty decisions that make each of its farms profitable.

“We work with our operators to implement micro-drip irrigation technology and climate-smart farming methods, such as cover cropping, minimizing tillage, and crop rotations, to make farms more efficient,” Chan says. “When applicable, we work with farmers to transition properties to organic operations, including our current offering, Daybreak Pear & Apple Orchard."