Sustainably Investing in Our Future

Published on: Nov 23, 2021
image_printPrint Article

While extreme weather events typically affect only certain parts of the country, there is increasing concern that climate change will affect the overall economy – including our investment portfolios.

 

Changes to the Thrift Savings Plan (TSP)

For this reason, the federal government is making composition changes to the Thrift Savings Plan (TSP), the retirement plan for federal employees. The TSP currently holds more than $762 billion in assets, making it the world’s largest defined contribution plan. Starting in 2022, the plan will offer participants the opportunity to customize their individual portfolios by choosing from more than 5,000 funds, which may include environmental, social, and corporate governance (ESG) options.[1][email protected] August 16, 2021. “Should the Federal Government ‘Green’ Its Pension Plan?” http://www3.weforum.org/docs/WEF_Davos_Lab_Youth_Recovery_Plan_2021.pdf. Accessed Aug. 20, 2021.

 

Other developed countries are ahead of the U.S. when it comes to promoting ESG options among federal pension funds. A recent report from Europe found that participants who invest their federal pension money in environmentally conscious companies are at least 20 times more effective at removing carbon compounds from the environment than those who take other actions, such as reducing their airline flights and using alternative energy. In the past, the choice to invest in green companies generally meant a trade-off for lower returns. Now, repositioning assets to support ESG companies is taking precedence to greatly reduce the world’s carbon footprint at a faster pace.

 

 

Potential Income Issues for Retirees

In the U.S., some economists believe that the combination of long-unsolved problems — such as the pending insolvency of Social Security — coupled with climate change and the recent economic damage created by the pandemic, is going to generate long-term income issues for retirees.

 

Olivia Mitchell, a Wharton School professor who specializes in retirement income research, had this advice for retirees. “People are just going to have to work longer if they possibly can. And if they can’t, they’d better start looking to move where they’re not subject to drought, fires, floods, hurricanes and all the other things that climate change brings with it,” Mitchell said. She also emphasized that those nearing retirement age should consider downsizing their homes, buying an electric car or growing a vegetable garden “because we’re going to need to be more self-reliant in this new world.”[2]Ibid.

When it comes to retirement planning, self-reliance may not always be your best option. Contact a Beacon Financial Advisor to help you devise a multi-faceted income plan for the future.

 

 

Sustainable Farming Solutions

Farmers also are looking for ways to create more sustainable crop generation for the future. The traditional blueprint is to clear trees for vast spaces of land to raise livestock and plant rows of single crops, which are called monocultures. At present, about half of all habitable land is used for growing food, and the globe is running out of room to meet this demand. A new trend in farming is called agroforestry, which is the blending of trees, crops, and livestock to create more sustainable yields. In fact, certain trees feed nitrogen into the soil, which eliminates the need for excessive fertilization. In some areas, the mix has produced up to 40% more than same-crop monocultures. Today, less than 2% of U.S. farmers practice agroforestry. There is enormous potential to deploy this farming technique to better protect farmland from the ravages of climate change while at the same time generating higher crop yields.[3]Johnathan Lambert. Science News. July 14, 2021. “Mixing trees and crops can help both farmers and the climate.” https://www.sciencenews.org/article/trees-crops-agroforestry-climate-biodiversity. … Continue reading

 

 

Growth Potential for the Future Industrial Economy

According to Morgan Stanley, one overlooked investment sector is the electrical industry. It has recently been overshadowed by high-profile investment themes such as electric vehicles, grid modernization, and distributed power. However, these innovations are all electrical equipment, a long-standing, lower-risk investment sector with explosive growth potential for the future industrial economy. Market analysts at Morgan Stanley project that the “electrification” theme could produce 6% compound annual growth throughout the next two decades.[4]Morgan Stanley. July 29, 2021. “Plugging into the Electrification Supercycle.” https://www.morganstanley.com/ideas/electrification-grid-energy-transition-opportunities. Accessed Aug. 20, 2021.

 

These investment opportunities are key to boosting both the future of the United States and our individual financial viability. Fortunately, the largely bipartisan infrastructure bill currently under consideration in Congress can further support these goals. As the largest federal allocation to infrastructure projects since the Great Recession, the investment gives a nod to the saying “you have to spend money to make money.” While it is expected to contribute to growing government debt, analysis by the Penn Wharton Budget Model refers to the investment as “productive assets” that will not only produce jobs and yield a higher income tax base but also generate improved transportation to help private firms get goods to market at a lower cost.[5][email protected] August 16, 2021. “How the $1 Trillion Infrastructure Bill Would Impact the … Continue reading

Schedule a Call Today!

 

What to hear more about this topic? Subscribe to our YouTube Channel. 

At Beacon Capital Management, we believe having peace of mind in retirement, requires considering all of your options, and creating a plan. If you like this article, check out the Beacon Retirement Strategies Podcast, where we talk to some of the sharpest and most professional financial advisors in Nashville. We understand that retirement planning can feel complicated and overwhelming, so we take a few moments to break down some of the more complex parts of retirement so you can have a better understanding of how they apply to you.

Disclosure

Disclosures: Beacon Capital Management, LLC “(Beacon Capital”), is an independent financial services firm helping our clients to create retirement strategies using a variety of investments and insurance products to custom suit their needs and objectives. Advisory services are offered for a fee by Beacon Capital, a registered investment advisor with the Securities and Exchange Commission (“SEC“).  SEC registration does not imply a certain level of skill or training.  Investing involves risk.  Past performance is not a guarantee or indicative of future returns.  The value of your investment(s) will fluctuate, and you may gain or lose money.  Beacon Capital is not affiliated with Beacon Accounting and Tax, or Knight Legal. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.  None of the information contained on this website shall constitute an offer to sell or solicit any offer to buy a security or any insurance product. Commentary & Third-Party Disclosures Beacon Capital’s article on this Site is for informational purposes only and does not constitute a recommendation to buy or sell securities. You should not rely on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific situation.  Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. This article may contain links to other third-party websites, including links to the websites of companies and/or governmental agencies that provide related information, products, and services. These external links are provided solely for convenience, and the inclusion of such links does not necessarily imply an affiliation, sponsorship, or endorsement of those links. Beacon Capital does not endorse, approve, certify, or control these external Internet addresses and cannot guarantee or assume responsibility for the accuracy, completeness, efficacy, timeliness, or correct sequencing of information located at such addresses. Third-party data is obtained from sources believed to be reliable but Beacon Capital cannot guarantee the accuracy, timeliness, completeness, or fitness of any third-party data. Tax Disclosures Beacon Capital does not represent in any manner that the tax consequences described herein will be achieved or that Beacon Capital’s activities in managing a client’s investments will result in any particular tax consequence. The tax consequences that Beacon Capital may pursue are complex and uncertain and may be challenged by the Internal Revenue Services (“IRS”). The information with regard to this activity was not prepared to be used, and it cannot be used, by any Client to avoid penalties or interest. Clients should confer with their personal tax advisors regarding the tax consequences of investing with Beacon Capital, based on their particular circumstances. Clients and their personal tax advisors are responsible for how the transactions conducted in an account are reported to the IRS or any other taxing authority on the Client’s personal tax returns.  Beacon Capital assumes no responsibility for the tax consequences to any Client of any transaction. We are not tax professionals. Clients should consult qualified legal or tax professionals, such as tax attorneys or CPAs, regarding their specific situation. Trademarks Beacon Capital, the Beacon Capital logo, and other marks are registered trademarks and service marks of Beacon Capital. Other third-party marks displayed are trademarks of their respective owners, and the use of such trademarks does not imply an association with those third parties or an endorsement of any third-party goods or services.

References

References
1 [email protected] August 16, 2021. “Should the Federal Government ‘Green’ Its Pension Plan?” http://www3.weforum.org/docs/WEF_Davos_Lab_Youth_Recovery_Plan_2021.pdf. Accessed Aug. 20, 2021.
2 Ibid.
3 Johnathan Lambert. Science News. July 14, 2021. “Mixing trees and crops can help both farmers and the climate.” https://www.sciencenews.org/article/trees-crops-agroforestry-climate-biodiversity. Accessed Aug. 20, 2021.
4 Morgan Stanley. July 29, 2021. “Plugging into the Electrification Supercycle.” https://www.morganstanley.com/ideas/electrification-grid-energy-transition-opportunities. Accessed Aug. 20, 2021.
5 [email protected] August 16, 2021. “How the $1 Trillion Infrastructure Bill Would Impact the Economy.” https://knowledge.wharton.upenn.edu/article/how-will-the-1-trillion-infrastructure-bill-impact-the-economy/. Accessed Aug. 20, 2021.

Pin It on Pinterest

Loading...