Sustainable Ag

Where Making Money Meets Making A Difference

For an increasing number of investors, doing well is no longer enough: their assets must also do good. Environmental, Social, and Governance investing — known more commonly as ESG investing — helps you align your investing dollars with causes and personal beliefs.

There are several options in the ESG space, although most are found through conventional investments. Although these options provide you with a way to invest based on your principles, they may not be best positioned to incorporate diversity into your overall portfolio. There have never been as many ESG stocks, investment funds, and bonds, but there are only a handful of alternative investments that can say the same thing.

If you’re interested in learning more about ESG, alternative investments, or a combination of the two, there’s a lot to love about ESG-friendly alternative investments. Plus, because you’re exploring opportunities beyond the stock market, you may even be able to put yourself in a more financially savvy position by diversifying into the world of alternatives.

First, What is ESG?

ESG is shorthand for investments that make a difference—this could be in regard to the environment and climate change, socially responsible companies, or businesses that have a solid track record in terms of ethical corporate principles.

There are several ways in which you can determine which kinds of investments fit within this category. Experts consider ESG to be what are called intangible assets. Unlike cash reserves, property, or revenue, which are all tangible assets, intangible assets seek to put a number value against behaviors, principles, and practices that aren’t so easily quantified on their own.

As you might expect, ESG is not a one-size-fits-all investment category. There are different approaches to ESG based on your own values. For instance, some investments derive their ESG status by way of their positive impact on the environment; others because they align with the religious beliefs of the investor.

The Benefits of ESG

When you invest in assets that align with ESG principles, you’re doing more than merely reflecting your own values within your financial strategy. You’re also positioning yourself to earn competitive returns—sometimes with historical performance that even beats out a non-ESG guided portfolio.

Standard & Poor’s research on ESG exchange-traded and mutual fund performance in 2020 indicated that 19 out of the 26 tracked grew during the year. This growth ranged from 27.3 percent to 55 percent. Meanwhile, the S&P 500 itself only rose by 27.1 during the same timeframe.  

ESG can also help you broaden your array of investments. Many businesses qualify as ESG investments if they meet a certain criteria. Typically this criteria includes a cap on how much of a company’s revenue comes from fossil fuels, weapons manufacturing, alcohol, and gambling. One prominent fund in the ESG space limits these revenue sources to 10% or more, while other investment opportunities may have their own threshold.

All this being said, there are different levels of benefit depending on how you allocate your ESG investments. The wide variety of ESG investment funds is an easy option, but may not provide you with the same level of direct impact as, say, farmland investing. If you want your investing dollars to go as far as possible with ESG opportunities, you may also want to consider how much of a direct impact your investment has.

Why Farmland is the Ideal ESG Alternative Investment

Alternative investing in the ESG space offers you unique opportunities to put your money toward causes you care about. This is best exemplified by farmland investing, where your investment dollar goes toward empowering farmers to enhance and embrace sustainable practices. Investing in alternatives that are designed with ESG in mind can help you seek out opportunities to beat average market returns while also directly promoting sustainability.

For example, if you invest in a farm through FarmTogether, your allocation can help a farmer equip their land with solar panels, supplying the power grid with green energy in the process. You’ll also be improving the property value of the farm itself, which can boost your investment’s overall appreciation.

Diversification also offers another major benefit to those who seek out ESG alternative investments. Farmland, for example, has a low correlation with the stock market. This means that stock market movements do not tend to closely impact the value of farmland. A drop in market value may not have an effect on your alternative investment in farmland. This means farmland investing offers an ESG solution that also helps you hedge against volatility.

Bolstering Your ESG Strategy with FarmTogether

Farmland investing makes for a great addition to your new or existing ESG portfolio. The best way to get started in this sector is to partner with a firm that has market-leading expertise. When you invest in farmland through FarmTogether, you’re investing in some of the country’s finest farms, as well as those that have high growth potential for investors.

The FarmTogether investment team does all of the due diligence checks, financial research, and other critical checks before deciding to include a farm within its range of investment opportunities. That means you don’t have to go through the once-arduous process of finding your own farmland investment opportunities.

Better still, you don’t have to worry about going it alone with your farmland investment. That’s because FarmTogether empowers you to include farmland in your portfolio through fractional ownership. You and other investors own a direct stake in the farm that’s proportional to the amount of money invested. This makes it easier for you to control how much of your overall portfolio is dedicated to farmland, and to make it fit better within your preferred investment strategies.

ESG investing is getting more attention than ever before. Investors are increasingly hungry for ways to grow their money in a way that aligns with their morals. The sheer variety of ESG investment opportunities out there makes this a reality—often with market-beating returns too. Not all ESG plays are alike, however: only farmland investing gives you a unique ESG value proposition within the world of alternatives.

When it comes to farmland investing, no one understands the landscape better than FarmTogether. For accredited investors, getting started is as easy as signing up for an account.

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Disclaimer: FarmTogether is not a registered broker-dealer, investment adviser or investment manager. FarmTogether does not provide tax, legal or investment advice. This material has been prepared for informational and educational purposes only. You should consult your own tax, legal and investment advisors before engaging in any transaction.

Sara Spaventa
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