Email us at to talk to a financial advisor today!

Email us at

Don’t Judge A Book By Its Cover

Goals of the Inflation Reduction Act

The Inflation Reduction Act of 2022 was officially signed into law by President Biden this month. While the name gives the impression that the bill is narrowly focused on inflation, in reality the bill is a complicated 730 page document of objectives and regulations covering a variety of issues. Most notably, the bill includes historic investments in energy and climate reform spanning a  ten year period. While the bill itself is long and complicated, the overall goals and methods are easily identifiable.

Broadly, the key focuses of the Inflation Reduction Act are increasing taxation and enforcement of taxation for wealthy corporations and individuals, climate and energy reform, and improving health-care programs to increase coverage and lower prices of certain drugs. The last focus is where the bill receives its namesake, to fight historical inflationary levels. However, inflation reduction measures only receive a small fraction of the allocated spending. Of the areas of spending, climate and clean energy receive the largest investment with a historic $379 billion investment. All of these key areas of focus could warrant further examination given the complexity and depth of each of the issues. However, for the sake of viewing this subject through an investment lens, we will briefly highlight the biggest areas of legislative change. We will then examine climate and clean energy reform specifically as this area receives the most funding and creates the most investment opportunities.

What does the IRA do?

The major source of funding for spending and investment in the Inflation Reduction Act comes from the tax reform aspects in the bill. The most significant of these being a minimum 15% corporate tax for enterprises with adjusted income exceeding $1 billion. According to summary documents on the tax effects of the Inflation Reduction Act, “up to 125 corporations that average nearly $9 billion in profit paid effective tax rates of 1%”. This provision alone will generate an estimated $313 billion over the life of the bill. In addition to this, the bill implements a 1% stock buyback fee or tax. In addition, the bill includes improved funding for the IRS to improve collection and increase the number of audits for individuals with annual income exceeding $400,000. These and other smaller changes are expected to generate a total of $468 billion in revenue for the bill.

The next area of focus for the Inflation Reduction Act is health care reform. The health care provisions include large investments but also generate substantial funds. Some of the key changes made include a) empowering Medicare to negotiate prices of certain medications, b) capping Medicare patients out of pocket payments to $2,000 a year, c) extending Affordable Care Act subsidies for three years, and d) establishing better controls over pharmaceutical companies’ medication price increases. These and other lesser changes made in the health care sections will save an estimated $322 billion of revenues and only require $98 billion of spending.

While the name of the Inflation Reduction Act would likely lead you to believe reducing inflation would be the main focus of the bill, many economists are skeptical that inflation will be reduced at all. According to a study from the Penn Wharton Budget Model, “the impact on inflation is statistically indistinguishable from zero” over the life of the bill. The bill is essentially designed to raise necessary funding through tax reform and healthcare savings and invest those funds into the Administration’s spending priorities in healthcare and climate reform. Any remaining funds are put towards reducing the U.S. budget deficit. While the Biden administration has claimed the Inflation Reduction Act will counter inflation through deficit reduction and fiscal policy with the 15% minimum tax rate, economists believe these methods are unlikely to have much, if any, effect. The estimated $300+ billion that will be put towards deficit reduction wouldn’t even cover the $400 billion deficit we have accumulated this year alone, not to mention the additional government deficits that will accumulate by the end of the bill’s life. Additionally, some economists disagree with the idea that deficit reduction has any effect on reducing inflation at all. Under our current system, the only real way to control inflation is through the Federal Reserve raising interest rates to control the quantity of money in the money supply. Unfortunately this is not something that can be accomplished overnight. For average Americans, most, if any, inflation reduction will be seen through slightly reduced energy prices from policy reforms and investments made in energy and climate change.

Climate and Clean Energy Reform

The largest focus of the Inflation Reduction Act is the reform and investment in our climate and energy sectors. As mentioned above, the bill allocates $387 billion of the total $485 billion of total funding for a variety of energy and climate-related improvements. This section of the Inflation Reduction Act has four core goals: 1) Lowering consumer energy costs by providing $9 billion in home energy rebate programs, ten years of consumer tax credits to make homes more energy efficient, additional tax credits for the purchase of electric vehicles, and other smaller things to lower consumer energy costs. 2) Improving American energy security and increasing domestic manufacturing by administering $30 billion in production tax credits for manufacturers creating clean energy tech. Grants and loans will also be administered to convert existing auto-manufacturers to electric vehicle production or building of new facilities as well as any other smaller incentives to increase U.S. production of clean energy technologies. 3) Decarbonize our economy by providing incentives in the form of grants, loans, and tax credits to improve our clean energy production and consumption, as well as other programs to reduce industrial emissions. 4) Investing in conservation, infrastructure, and rural development through investments in climate-smart agriculture, infrastructure projects to support rising demand for electricity and reduction in carbon emissions by roughly 40% by 2030, and other miscellaneous programs to improve conservation efforts. This historic investment in climate and clean energy improvements will likely create great investment opportunities in the next decade.

Opportunity to Invest?

Like many technological advancements in the past two decades, many renewable energy sources have gone from fringe and somewhat inefficient technologies to being extremely desirable and widely adopted. Since 2000, U.S. renewable energy sources have increased by 90%. This market has appeared to be a sound investment for many years now. With all of the incentives for advancement and increased adoption of these technologies from the Inflation Reduction Act, there has never been a more attractive time to invest in renewable and clean energy markets. For our purposes, we have our eyes on two exchange-traded funds(ETFs) in the clean energy and renewables space.

The first opportunity is iShares Global Clean Energy ETF (ticker: ICLN), one of the leading clean energy ETFs holding a portfolio of the industry’s top performing companies. Currently, ICLN holds over $5.5 billion in assets under management and is one of the most popular clean energy ETFs with an average trading volume of around 3.8 million. The second ETF we are watching is the First Trust NASDAQ Clean Edge Green Energy Index Fund (ticker: QCLN). QCLN, another of the more popular clean energy ETFs, holds over $2.35 billion in assets under management with a similar portfolio of top-performing stocks in the clean energy market but with a lower average trading volume of 309,670. Both of these opportunities have historically performed well over the long term. QCLN has been riskier, returning 22.7% per year over the last 10 years through July 31, 2022 and (8.3%) year-to-date compared to 15.9% annualized ten year return and 6.0% year-to-date for ICLN. QCLN’s 8% allocation to Tesla, Inc. (TSLA) might have something to do with its higher volatility. Given the significant investments that will be made in the clean energy and renewables market through the Inflation Reduction Act, this strong performance will likely continue.

In conclusion, the Inflation Reduction Act makes historic improvements to many different areas unrelated to current inflationary trends. Most significantly, the bill will incentivize the transition to a “greener” future as well as improve healthcare for millions of Americans by raising taxes and closing “loopholes” for certain profitable, yet low-tax corporations. The jury is still out on whether this act will successfully achieve its cover story of combatting inflation. However, fiscal policy reforms and deficit reduction efforts will at least ease the load on the Federal Reserve monetary policy somewhat.

Environmental, Social, and Governance Investing

What is ESG Investing? 

Earlier this year we introduced ESG investing to you as one of our 2022 investing themes to watch. Since then, it has continued to grow in interest not only for institutional investors but consumers as well. But what exactly is this phrase “ESG” and what does it mean as an investor? ESG stands for Environmental, Social, and Governance with the investment goal to put money to work to make the world a better place. An investment strategy geared towards ESG investing means investing in companies or funds that score well within the ESG standards set by independent research companies or groups. Investments are evaluated based on what kind of impact they have on the environment – positive or negative, how the company is improving society through its social impact, and in what ways the company’s leadership is paving the way for positive transformation organizationally through transparent and affirmative business practices. Overall, ESG investing aims to create an impact that is positive not only for the surrounding community and environment but for investor returns as well.

Rise and Growth of ESG Investing

ESG investing has grown in popularity within the last 5-10 years as more investors and shareholders are demanding companies be held accountable for their business activities and impacts on the surrounding community. Society as a whole is becoming increasingly concerned with social change and environmental impact which has trickled down to the investing world. While investment in positive change has been occurring long before the term ESG was coined, the 2015 Paris Agreement that pledged to limit global temperature increases caused societal and investor interest in the investment strategy to grow in popularity and as a method of capital allocation. The concept of ESG investing is now a mainstream theme and Morgan Stanley found that 79% of individual investors are interested in sustainable investing with millennials and younger investors showing the most interest. Growth in the sector has exploded in the past 5 years. Currently, it is estimated that there is $2.74 trillion invested in the ESG thematic globally and $357 billion invested in the U.S. This burst in interest was driven by increasing environmental concerns, the COVID-19 pandemic, and other societal issues.

Source: SustainFi

Regulation and Reporting for ESG Investing

ESG investing relies on independent research firms to provide scoring models and rating standards to evaluate companies on their ESG initiatives. Each research firm has different reporting standards but the pillars of Environmental, Social, and Governance remain. Some of the most popular reporting agencies are Bloomberg, S&P Dow Jones Indices, and MSCI, and typically their scoring follows a 100-point scale with the higher the score meaning the higher the rating. Companies in the U.S. are not presently required to report their ESG metrics. However, pressure from shareholders and other stakeholders has prompted many companies to start reporting their sustainability data.

A variety of reporting frameworks exist such as the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI) but there is no standardized reporting regulation globally. This discontinuity has caused speculation about reporting standards and an MIT study found that there is only a 60% correlation in ratings among different ESG reporting regimes. A conflict also exists on how much weight is placed on the individual factors within the diverse ESG standards. For example, Tesla and Exxon Mobil both received an “average” rating by MSCI even though some may argue that Tesla’s business model is much more sustainable while Exxon is an oil and gas company whose carbon based products are a major contributor to climate change. Exxon has much higher ratings for worker treatment and safety than Tesla does which raises its ESG ratings. As an individual investor, you have to decide which letter in the ESG acronym is the most important to you.

Investing in ESG

As in any investment strategy, you need to ask yourself what your investment goals and purposes are and consider your risk and return profile. The same goes for choosing an ESG investing strategy. Think about which issues within the ESG framework you are the most concerned with. For many investors, current economic concerns may drive their portfolio allocation decisions. Rising energy costs and fossil fuel concerns have many people looking to alternative energy sources to invest in. Solar, wind, and geothermal energy have all caught the attention of investors and consumers as oil and natural gas prices have been on the rise throughout much of 2022, making the switch to alternative energy more competitive across various applications. An alternative energy ETF that has been gaining investor attention is the iShares Global Clean Energy ETF (TICKER: ICLN). With $4.8 billion assets under management, it is one of the largest alternative energy ETFs with holdings in multiple solar, wind, and energy technology companies. It has a AAA rating in ESG standards from MSCI which is the highest rating given. Another ESG ETF we have been watching is ALPS Advisors’ Clean Energy ETF (TICKER: ACES) that has $658 of assets under management. ACES has a more diverse allocation of companies involved in solar, wind, energy management and storage, bioenergy, hydrogen/geothermal, electric vehicles, and fuel cell technology. Another fund with a diverse ESG themed allocation is Northern Trust Corporation’s ESG index fund (TICKER: ESG). It has diverse holdings in major large-cap stocks investing in technology, health care, energy, and industrials. Microsoft is its largest single company holding which has a AAA rating by MSCI for ESG standards.

Source: Getty Images

Future of ESG

Investors and markets of today are much more varied and dynamic than they were 50 years ago. Investors today are generally more passionate about making a positive impact on their communities and allocating capital with purpose to ensure its being put to work for the greater good of society, the planet, and future generations. Broadridge Financial Solutions predicts that investments in ESG will reach $30 trillion by 2030. Not only are investors demanding more sustainable investment options, but they also want better corporate transparency and the application of uniformed standards to hold companies accountable. It is expected that the U.S. Securities and Exchange Commission will issue more rigorous ESG reporting guidance and regulations for corporate disclosures on carbon emissions and environmental sustainability. While investors are interested in driving change, they also want to maintain strong portfolio returns. This doesn’t appear to have been an issue for ESG Themed Funds historically. Morningstar research found that ESG funds produce a good return on equity with lower volatility when compared to traditional funds. Environmental, Social, and Governance investing is here to stay and with the help of technology, data management, and uniform reporting, today’s investors will be more empowered to invest with purpose and include ESG holdings in their portfolios that are aligned with their investment preferences. For more information of ESG themed investments, please visit us at

Investing with Purpose: Mid-Year Reflections and Resolutions

Investing with Purpose isn’t an oxymoron. At Servant Financial, we believe that profit and principles go hand-in-hand. In early 2021, we identified five purposeful investing opportunities for this year and beyond. In light of the COVID pandemic, turbulent economic conditions, and the accelerating sustainability movement, we predicted growth in ESG investments, alternative investments, essential businesses, inflation hedges, and education.

As we pass the halfway point of 2021, we take the opportunity to reflect: were our predictions directionally accurate? Simultaneously, we look forward: what developments do we expect over the remainder of the year and beyond?

1. ESG Investments

ESG, or environmental, social, governance, refers to a company’s attitude and behavior toward its employees and community. ESG investing prioritizes the wellbeing of employees, society, and the earth. This trend is especially appealing to millennials and women, who continue to demonstrate their support for ESG investments in 2021.

In the first quarter of 2021, US sustainable funds set a new net inflow record of $21.5 billion. One analysis of 27 ESG funds from December 31, 2020 to May 17, 2021, found that 16 of the funds outperformed the S&P 500. ESG has become a momentum factor, as ESG funds and their underlying equities attract more fund flows which beget more fund flows. Experts predict that the sustainability market will only continue its tremendous growth—by 2030, the ESG market could reach $1 trillion.

Servant Financial’s ESG research continued in 2021. In recent articles, we explored markets and trends in energy storage, organics, and carbon credits. At Servant Financial, we are committed to learning and innovation to help you invest in a sustainable future.

2. Alternative Investments

Alternative, or nontraditional, investments not only diversify your investment portfolio but have tremendous potential to benefit communities in unique ways. Alternative investments look beyond traditional stocks and bonds: real estate, infrastructure, gold, and bitcoin are just a few of the myriad alternative investing possibilities.

Servant Financial has identified farmland as a meaningful and profitable alternative investment. Traditionally, the farmland market has boasted high returns and low volatility; furthermore, investors profit not only from land value appreciation but also regular rent collection.

Farmland, however, is more than a vehicle for profit—it provides a means for doing good. In January 2021, Servant Financial partnered with Farmland Partners (NYSE: FPI), the farmland industry’s leading REIT,  to launch the Promised Land Opportunity Zone Fund. Promised Land purchases farmland in Qualified Opportunity Zones, economically-challenged areas designated by the IRS for preferential tax treatment. After acquiring the properties, Promised Land improves the farmland, perhaps by upgrading irrigation and drainage systems, increasing grain storage, or installing solar panels or wind turbines. In turn, land improvements benefit investors and farmers and revitalize rural communities.

Since its launch, Promised Land has acquired over 3,700 acres of farmland in three states, and the fund continues to grow. Witnessing our Promised Land vision materialize encourages us to continue to invest with purpose.

3. Essential Businesses

Over the past 16 months, the tumultuous events of the COVID pandemic have underscored the necessity of essential businesses. Crisis forced reconsideration of priorities, needs, and wants: ultimately, humans need food, shelter, healthcare, and energy. Over the past months, essential industries have demonstrated substantial growth, with impressive performances from the energy, real estate, and healthcare sectors.

Investing in these essentials, however, is not only financially savvy but socially impactful. In a recent article on the food industry, we highlighted the prevalence of food insecurity in America. Tragically, over 10% of American households experienced food insecurity in 2019. Further, about 19 million Americans live in food deserts, areas with limited access to food. Especially vulnerable to food insecurity are rural counties: 87% of the least food-secure counties are rural.

US food desert map.

These surprising, grievous statistics motivated us to take action. Why not augment Promised Land’s strategy—investing in and actively improving farmland in rural Opportunity Zones—to combat food insecurity in these communities? Currently, we are mapping the overlap between food deserts and Opportunity Zones. After identifying target counties, we plan to evaluate strategies and partnerships to invest in and improve food access in these vulnerable regions. Our two-pronged approach—improving both farmland and food access—will address food insecurity on both the production and distribution levels.

4. Inflation Hedges

Groceries, gas, hotels, hospitals: as any post-COVID consumer can attest, prices are on the rise. In the past year, prices have increased by 5.5%, the highest rate of inflation since 2008. While economists foresaw price jumps in the wake of the economic emergence from the pandemic, inflation rates have been higher than predicted. Although many experts are hopeful that inflation rates will dissipate as economic conditions normalize, continued inflation is a distinct and alarming possibility.

High inflation rates threaten investors; investment shares may be stable or increase in price, but if their growth rates cannot keep up with inflation, then these assets lose real worth.  For example, US 10-year treasuries nominally yielding 1.3% have a negative real yield of (4.2%) with an inflation rate of 5.5%. Intent on protecting the value of their assets, investors are increasingly turning to inflation hedges, investments which boast relatively stable or diminishing supplies, i.e. scarcity value. While the value of the dollar decreases, inflation hedges like gold, bitcoin, commodities, and real estate resist price fluctuations or may rise in value with inflation.  For example, farmland values are highly correlated with inflation.

Correspondingly, the prices of inflation-protected assets are important indicators of current inflation trends. Although gold value has slightly declined in the past twelve months, prices remain significantly higher than before the outbreak of the pandemic. Meanwhile, bitcoin prices have fluctuated greatly over the course of the pandemic; nevertheless, bitcoin prices are currently three times the price of twelve months ago.

As Federal Reserve Chairman Jerome Powell’s recent comments indicate, inflation rates will likely remain high in the coming months; the Fed has signaled markets that it will allow near-term inflation to run higher than its 2.0% inflation target. Consequently, savvy investors should consider safeguarding their portfolios with inflation hedges.

5. Education

Education is both personally and economically empowering. Teaching skills essential for high-wage jobs, education develops human capital, increases earning power, and alleviates poverty. According to UNICEF, an individual’s income increases 10% with every year of education received.

Conversely, barriers to a quality education hinder development; this fact has caused particular alarm during the pandemic, as many students were forced to pivot to virtual or hybrid learning. The fallout from this transition is staggering: 97% of educators report that students experienced at least some learning loss, while 53% described that learning loss as significant. This learning loss translates to real earning loss. McKinsey & Company predicts that white students will experience a 1.6% annual income reduction and Black students a 3.3% annual income reduction because of substandard virtual learning.

Educators report learning losses during the pandemic.

As these disturbing statistics indicate, improving and investing in education and educational infrastructure is urgent. Edtech companies are one appealing option. Innovative technologies enable independent learning and could allow students to make up for learning loss. Further, as the pandemic’s resolution remains uncertain, developing more effective virtual learning technologies and investing in broadband and other infrastructure in low-income communities is crucial.

Charter schools, high in demand especially in low-income communities, provide another investment opportunity. Investors can provide low-interest loans or purchase charter school bonds.

Finally, we believe there exists a strong correlation between Opportunity Zones (low income communities), food deserts, and educational deserts. In the coming months, we plan to explore this overlap and devise investment strategies to improve the lives of children and families across the country.


2021 has witnessed both frustration and excitement, turmoil and healing. Although the details of our post-COVID world remain uncertain, we are hopeful that the future will bring stability and opportunity. As we reflect on the past six months, we remain confident that our investments can build a bold, auspicious tomorrow. ESG investments, alternative investments, essential businesses, inflation hedges, and education provide opportunities to make a profit while making a difference. From farmland to food access, education to renewable energy, investing with purpose addresses societal challenges with integrity, creativity, and compassion.

Investing With Purpose in 2021



At Servant Financial, our mission is to help you invest with purpose, but what does that mean? Everyone has different purposes and dreams in life to achieve fulfillment and happiness. We’re here to help you define yours and to find the investments that align with your unique values and preferences.

Whatever your purpose may be, there is likely an investment that will align with that goal and help you achieve it. Whether you want to create more financial security for your family, support your local community, save for retirement, or protect the environment, there are several investment opportunities to help you do so. Here are 5 purposeful investments that we believe will be trending this year and beyond:

1) ESG Investments

ESG stands for environmental, social, governance. ESG criteria are a way of assessing potential investments. These criteria evaluate a company’s environmental impact, its relationship with its employees, and its overall effect on the community in which it is located. 

As described in our previous blog “Investing With Purpose,” ESG mandates account for one out of every four dollars under professional management in the United States, and one out of every two dollars in Europe. ESG is most popular among millennials, women, and high-net-worth individuals. 95% of millennials surveyed by Morgan Stanley in 2019 expressed interest in sustainable investing and 90% want to tailor their investments to their impact goals derived from personal values and beliefs. 

ESG investing came of age in 2020, and millennials will continue to drive socially responsible investing trends in 2021 and for decades to come. Investments that satisfy ESG criteria can guide your decisions, making it easier for you to have confidence that your investments align with your purpose.

2) Alternative Investments 

Alternative investments are a great way to create an investment portfolio that reflects your values. While traditional investments in stocks and bonds can provide a core component of a well diversified portfolio, a traditional 60/40 portfolio (equity/bonds) will simply not provide the same level of diversification as a portfolio that includes alternative investments.

Types of alternative investments include real estate, infrastructure, commodities, precious metals and alternative currencies. One alternative investment that Servant has recently pursued is U.S. farmland.  

Farmland has proven to be a unique asset class that has historically delivered superior risk-adjusted returns and enhanced portfolio diversification. According to the TIAA Center for Farmland Research data, U.S. farmland has delivered annualized returns of 12.2% with volatility of 7% for the 48-year period ended December, 2018.  These risk-adjusted returns were superior to any other major asset class.  

Furthermore, TIAA data indicates that farmland has displayed negative or low correlation to other major asset classes. Farmland performance has historically been most correlated with broad inflation indices.

Servant Financial’s research of farmland and Opportunity Zone tax legislation culminated recently in a strategic alliance announced on January 21, 2021 with the farmland industry’s leading REIT, Farmland Partners.

Alternative investments like farmland or Bitcoin can open the door to non-correlated markets with different return and risk profiles which may better align with your goals and preferences. Alternative investments are also a great way to supplement your traditional investments in order to build more robust and personalized portfolios.

3) Essential Businesses 

Essential businesses have been and continue to be great investments, particularly in periods of economic uncertainty.  In the post-COVID-19 world, Servant Financial has been focused on three essentials for human existence: (1) people need to eat; (2) people need a place to live; and (3) people need energy sources to fuel their homes and transportation.

However, what businesses are deemed “essential” are constantly changing, particularly as human interactions become increasingly digital. In the modern era, we think of additional essential business like work-from-home technology solutions and delivery services, both of which hold strong and purposeful investment opportunities.

Our initial exploration into the essential business theme was in the agricultural space with work in U.S. farmland.  Other essential industries  that we foresee opportunities in and will continue to explore are non-traditional, more transient and spacious housing; renewable energy and carbon sequestration techniques; and continued digitization of human exchanges.

4) Inflation Hedges 

A common objective for all investors, both young and old, is to protect the buying power of their savings and investments from losing value to inflation. Whenever inflation rises faster than the growth and income of an investment, an investor loses real buying power.  This universal investment purpose is heightened in the current low interest rate environment with the 10-year U.S Treasury yielding just 1.1% and inflation running close to 2%.  

Under these circumstances, investors are increasingly seeking inflation hedges to replace or supplement the fixed income portion of their portfolios. Inflation hedges are investments that tend to move in tandem with inflation, such as commodities and real estate. Commodities and real estate are typically costly to produce or construct. As the cost of production increases in the form of labor and capital inputs, commodity and real estate prices must rise to make it economic for the miners and developers to continue production.

This purposeful repositioning of portfolios with inflation hedges is becoming a virtual imperative in 2021.  We believe that the Federal Reserve under Jerome Powell and the U.S. Treasury Department under Secretary Janet Yellen have effectively been merged into a single government enterprise intent on releasing the beast of inflation.  After its latest policy meeting, Chairman Powell statedFrankly, we welcome somewhat higher inflation. The kind of troubling inflation that people like me grew up with seems far away and unlikely.” 

Signs everywhere suggest markets are rotating into inflation hedges with gold up 24% and Bitcoin (digital gold) up 273% in 2020; both outperformed every other major asset class. Commodities are also reviving after a 10-year bear market. Natural resources like agriculture, energy and metals are setting up for an extended 1970s-like run that seems more likely than Chairman Powell intimated.

5) Education 

In 2020, education was drastically transformed as schools and universities were forced to adopt online-learning approaches in the post-COVID world.  Much like the virus accelerated the work-from-home and business digitization trends, it  accelerated the digitization and decentralization trends toward distance learning.   

These trends will be highly disruptive to the highly centralized and structured educational networks established at the grade school, high school, college, and university levels over the past few hundred years.  Online learning, digital classrooms, and alternative universities are becoming more popular and more desirable than traditional schools in many consumers’ minds. We see these trends accelerating.

Education is always a purposeful investment, and now, there will be more opportunities than ever to get involved with  the transformational and highly scalable  future of education either as a student or an investor.

Each of these 5 investment trends for 2021 contains many and varied investment opportunities, giving you the freedom to pursue your specific needs, values, and preferences.  We believe that investing with purpose is largely about the future. Consider: how would you like to see the world and humanity transformed for the better? Investing with your eyes fixated in the rearview mirror may feel safe and comfortable, but will that approach prove foolhardy in the long run? Your purpose is a vision for the future; your investments should target and advance that purpose. 

Purposeful investing creates a more meaningful connection between investors and their life goals and passions. Financial goals and life goals can be one and the same. Purposeful investing is the best way to create harmony between financial needs and your dreams for fulfillment, happiness, and achieving your life’s purpose. 

Contact us today to learn more about investing with purpose and the opportunities that Servant Financial can help you discover on your life journey.

Soak Up the Sun — Investing in Solar Power

Solar photovoltaic (PV) energy is 2020’s fastest growing renewable energy source. According to the National Renewable Energy Laboratory, the United States installed a record-high 7.2 gigawatts (GW) of direct current PV in the first half (H1) of 2020, up 48% from H1 in 2019. Gains in the solar industry are making PV power sources increasingly competitive with fossil fuels.

The solar utility sector saw more growth than the commercial and residentials sectors in 2020. Solar in the utility sector saw 89% year-over-year growth in H1 2020. Commercial sector PV installations decreased 14% and residential PV installations were relatively flat. 

Almost 60% of US PV capacity installments this year took place in California, Texas, and Florida. Environment America’s Shining Cities 2020 report found Honolulu has the highest solar PV installed per capita, with 840.88 watts per person in 2019. Los Angeles leads the nation in total installed solar PV capacity, with 483.8 MW by the end of 2019. 

Solar energy provided about 2% of the total electricity produced in the United States in 2019. Last year, the solar industry employed around 250,000 people and generated $18.7 billion of investment in the U.S. economy. The country has over 85 GW of installed solar capacity, enough to power 16 million homes. 

U.S. electricity generation from renewable sources
U.S. Energy Information Administration

Solar power is now one of the cheapest sources of electricity. In the past decade, the solar industry has seen a 90% drop in the cost of solar modules. From 2010 to 2019, electricity costs from large-scale solar PV installations dropped from about $0.38 per kilowatt-hour to $0.07 per kilowatt-hour. 

Despite higher upfront installation costs, solar power is less expensive than carbon-based power in the long-run. The cost of a residential solar system depends on its geographic location, size, and brand. Installed residential solar systems in the U.S. have an average price of $2.57 per watt and total costs ranging from $10,250 to $12,528 after the solar Investment Tax Credit (ITC)

The ITC is a 26% tax credit for solar systems on residential and commercial properties. Since the implementation of the ITC in 2006, the U.S. solar industry grew by more than 10,000%. Furthermore, the industry saw an average annual growth of 50% over the last decade alone.

U.S. tariff policy also plays an important role in the success of the solar industry. According to the Congressional Research Service, 98% of solar cell and module production occurs outside of the United States. The cost of imported panels has decreased significantly, enabling record-high levels of solar imports despite continued tariffs: 14.2 GW of PV modules and 1.3 GW of PV cells in H1 2020.

These leading five markets collectively installed 24 GW of PV in the first half of 2020, approximately the same level as in 2019 (NREL 2020 Solar Industry Update)

Gains for solar in the early 2020 stock market diminished with the COVID-19 induced economic downturn in March. At the time, the solar sector experienced stronger than expected demand and good financial performance from companies. Consequently, solar stocks outperformed the rest of the market.

According to the MAC Global Solar Energy Stock Index, solar stocks bounced back since spring 2020 due to affordability, the viability of solar-plus-storage, and Joe Biden’s apparent presidential victory and clean energy agenda. Bloomberg New Energy Finance (BNEF) forecasted U.S. solar installs in 2020 will grow by +21% to 13.4 GW.

The Invesco Solar ETF (TAN) represents  solar stock performance very well. In September 2020, TAN outperformed the broader market with a total return of 77.3% over the past year. In comparison, the Russell 1000 Index saw a total return of 13.8%. Expectations about Joe Biden’s election victory and increased investment in renewable energy drove TAN up over 120% from the beginning of 2020 to date.  

Sunrun (RUN) and Tesla (TSLA) are the largest solar installation companies in the United States. Sunrun spiked over 300% this year and acquired Vivint Solar for $3.2 billion in July a deal that merged the nation’s two largest rooftop solar companies. 

Companies' % of Residential Installs
Source: Corporate filing, SEIA/Wood Mackenzie Solar Market Insight Q3 2020 (NREL 2020 Solar Industry Update)

In June 2020, Tesla announced they will deliver the lowest price for solar of any national provider with a price-match guarantee. The company currently charges $1.49 per watt of solar on existing roofs and installed over 3.6 GW of clean solar energy across 400,000 roofs—the equivalent of 10 million traditional solar panels

Tesla CEO Elon Musk expects Tesla Energy to eventually grow to the size of Tesla Automotive. Musk believes energy storage will play a key role in that process. “In order to achieve a sustainable energy future, we have to have sustainable energy generation… so you need to have a lot of batteries to store [renewable] energy because the wind doesn’t always blow and the sun doesn’t always shine.” 

Tesla’s lithium-ion battery energy storage business has a new publicly traded competitor, Eos Energy Enterprises. Eos developed the Znyth® aqueous zinc battery to “overcome the limitations of conventional lithium-ion technology.” Eos promotes their Znyth® battery as a more sustainable, scalable, efficient, and safer energy storage alternative to lithium-ion batteries.

Solar Power’s Bright Future

Solar power converts sunlight into electricity. It is a clean energy alternative to fossil fuels, with a smaller environmental impact and carbon footprint. Solar panels are most effective in direct sunlight. However, they can still generate electricity in cloudy weather or cold temperatures. 

The sun is a promising energy source that can produce billions of years of electricity. On the contrary, fossil fuels are finite resources that could be used up within the next few centuries. The U.S. Energy Information Administration estimates the United States has enough dry natural gas to last about 92 years and enough recoverable coal reserves to last about 357 years.   

Greater investment in solar power can lead to greater national energy independence and less dependence on foreign fossil fuels. There are plenty of regions in the US, especially the Southwest, with sufficiently  high annual percentages of sunlight. 

Individual homeowners can attain a degree of energy self-reliance by buying into solar for its increasing efficiency and decreasing costs. Many solar array warranties cover about 25-30 years and arrays often last longer due to their durability. The median average photovoltaic degradation rate is a 0.5% loss of energy efficiency per year, so the solar panels on a roof could still be operating at 88% of their original capacity after a 25-year warranty. 

According to EnergySage, the typical solar panel payback period in the U.S. to break even on a solar energy investment is 8 years. After 20 years, a solar panel investment on your home or business can accrue savings ranging from $10,000 to $30,000. 

Solar’s Dark Side

Solar power is an intermittent energy source because the sun does not shine at all hours of the day. The intermittent nature of solar power makes it a non-dispatchable energy source. This means the electricity produced cannot be used at any given time to meet electricity demands. 

Electricity storage solutions address the intermittent nature of renewable energy like solar, wind, and wave power. MAC Solar Index believes solar-plus-storage will become even cheaper in coming years. Lithium-battery prices already dropped by 85% from 2010 to 2019. MAC predicts they will drop by another 52% by 2030.

Kauai Island Utility Cooperative solar plus storage plant
Kauai Island Utility Cooperative solar plus storage plant (PV Magazine)

Photovoltaic cells contain rare earth metals like cadmium, gallium, and indium. These metals are limited resources  their extraction for solar panels and other electronics must be carefully monitored in order to prevent total depletion.  

Solar modules are hard to recycle. Their components including plexiglass, metal framing, wires, glass sheets, and silicon solar cells must be separated in order to be recycled. This is a tedious process that requires advanced machinery. Complexity and cost increase the risk that a landfill becomes a solar panel’s final resting place. 

Improper disposal and breakage of solar panels can cause toxic chemicals like lead and cadmium to leach into the soil.  The International Renewable Energy Agency (IRENA) in 2016 estimated there was about 250,000 metric tonnes of solar panel waste in the world at the end of that year. 

IRENA projected solar waste could reach 78 million metric tonnes by 2050. Many experts are pushing for mandatory recycling of solar panels to curb future solar panel pollution. The cost of the recycling process currently exceeds the value of the materials that would be recovered. Policies that ban or incentivize solar recycling will be critical to the long term sustainability of solar operations. 

Soak Up the Benefits of Solar Power and Invest in Solar Energy

If you’re looking to invest in solar energy, TAN is the best pure solar ETF. To invest in solar and other clean energy companies, the ALPS Clean Energy ETF (ACES) suggested in our previous blog continues to be our favorite diversified renewable energy play.

For those wanting to invest closer to home, you can install solar panels on your own roof. Residential solar is a sustainable energy option that can increase the value of your home. In addition, solar panels pay for themselves after approximately 8 years of savings. Calculate how much you can save with solar here

How Does Community Solar Work?
Clearway Community Solar 

If you don’t want to install solar panels on your home, consider subscribing to a community solar project. Subscribers receive cost-reducing community solar credits on their electric bills for the renewable power produced. 

Trajectory Energy Partners and Clearway Energy is one such community solar project that offers Illinois residents with a ComEd or Ameren electric bill a 20-year community solar contract with no upfront investments. The program helps subscribers support local renewable power operations and save up to 50% on annual electricity supply costs. 

The future of solar energy is bright. Solar power is an indispensable element of the transition to a net-zero carbon emissions future. Solar energy’s marginal cost of production is zero we simply need to capture its rays. By letting solar PV soak up the sun, the more sparkling our environment will be for future generations.


To talk more about investing in solar, or other investment opportunities, contact us today. Together, we can find the right investments for you, the ones that align with your values and help you to reach your financial and life goals.

Investing with Purpose

ESGESG and SRI Investing

Investors use Environmental, Social, and Governance (ESG) criteria to guide more sustainable and socially responsible investment. ESG falls under the umbrella of socially responsible investing, or SRI. SRI is any investment strategy that considers both financial returns and social and environmental impacts when evaluating the suitability of investments.

Incorporation of ESG criteria helps asset owners align investment decisions to their values and beliefs. It facilitates investing with purpose. ESG links health and wealth outcomes, highlighting the interdependence of healthy populations, environments, and economies.

Environmental criteria address issues like climate change, pollution reduction, and sustainable utilization of natural resources. They increase pressure for regulations that establish environmental liability and steer markets towards sustainable products and services. The criteria also help evaluate practices like greenhouse gas emissions, water usage, and waste disposal. Furthermore, they encourage companies to exhibit transparency surrounding these practices.

Social criteria look at how a company interacts with employees, suppliers, customers, and communities. It addresses workplace health and safety, discriminatory practices, diversity, human rights issues, and again, transparency about these practices.

Governance criteria assess company leadership, board structure and diversity, executive pay, audits, internal controls, and shareholder rights. It evaluates accounting and disclosure practices and controls to prevent corruption and bribery issues.

The more sustainable a company, the higher its ESG score. Investment strategies that integrate ESG criteria into portfolios decrease the weight of companies with lower ESG scores and increase the weight of companies with higher ESG scores. Third parties evaluate company disclosures to subjectively generate these scores.

Several ESG ratings firms now exist to assess and score the ESG disclosures, such as Sustainalytics (with an ownership stake by Morningstar), Institutional Shareholder Services, and MSCI. Think of these as the Moody’s and Standard and Poor’s for sustainability.

Types of Sustainable Investing

ESG integration is one of the most common types of sustainable investment strategies. Restriction screening is also very popular, eliminating industries like tobacco, weaponry, or environmentally damaging operations. Morgan Stanley defined five types of sustainable investing or SRI:

  • ESG Integration – Proactively considering ESG criteria alongside financial analysis.
    Restriction Screening – Exclusionary, negative or values-based screening of investments.
  • Impact Investing – Seeking to make investments that intentionally generate measurable positive social and/or environmental outcomes.
  • Thematic Investing – Pursuing strategies that address sustainability trends such as clean energy, water, agriculture or community development.
  • Shareholder Engagement – Direct company engagement or activist approaches.

The Rise of Socially Responsible Investing

Amy Domini is known as the godmother of socially responsible investing. She started the SRI movement in the 1990s and made the Time 100 list of the world’s most influential people in 2005. She said, “We must continue to stand together to demand that the search for monetary profits not come at the detriment of universal human dignity nor the undermining of ecological sustainability.”

The emergence of the term “ESG” traces back to a 2004 report by the Global Compact titled “Who Cares Wins.” It was published in response to growing investor demand for more sustainable investment avenues and laid the foundations for a common understanding of ESG investment criteria.

The report stated a belief that markets did not fully recognize the significance of emerging trends pressuring companies to improve corporate governance, transparency and accountability, nor the high stakes of reputational risks related to ESG issues.

It emphasized the long-term importance of sustainable development, saying, “A better inclusion of environmental, social and corporate governance (ESG) factors in investment decisions will ultimately contribute to more stable and predictable markets, which is in the interest of all market actors.”

The incorporation of ESG principles and the practice of SRI have exploded in popularity. In 2017, 48% of retail and institutional investors worldwide applied ESG principles to at least a quarter of their portfolios. By 2019, that percentage surged to 75%. The European Union (“EU”) holds the most sustainable invested assets at $14.1 trillion US dollar (USD) equivalents. The United States follows with $12 trillion USD of sustainably invested assets.

SRI now accounts for one out of every four dollars under professional management in the United States. In Europe, it accounts for one out of every two dollars. Sustainable investing is often a voluntary and strategic venture motivated by constituent demand, perceived potential for attractive financial performance, and evolving regulations driving greater disclosure on ESG factors.

Client demand from retail and institutional investors is the top reason for the incorporation of ESG factors in financial reporting disclosures. In the United States, corporations that provide ESG disclosures do so voluntarily. Unlike the EU, there is no definitive accounting or financial reporting framework in the U.S. under which ESG factors are measured and reported to stakeholders.

ESG is most popular among millennials, women, and high-net-worth individuals. 95% of millennials surveyed by Morgan Stanley in 2019 expressed interest in sustainable investing and 90% want to tailor their investments to their impact goals derived from personal values and beliefs.

Millennials are poised to inherit over $68 trillion from their predecessors by 2030. Accordingly, the millennial ‘approach to investing’ will be an important determinant in the demand for ESG investments going forward.

The Deloitte Center for Financial Services (DCFS) projects client demand will accelerate ESG-mandated asset growth by three times that of non-ESG-mandated assets to comprise half of all professionally managed investments in the United States by 2025. Investment managers will likely respond to client demand for ESG by launching new ESG funds.


The iShares ESG MSCI U.S.A. ETF (ESGU) launched in 2016 is the largest Socially Responsible ETF, with $7.8 billion in assets under management. ESGU tracks the MSCI USA Extended ESG Focus Index.

The index functions to maximize exposure to positive environmental, social and governance (ESG) factors. MSCI’s ESG rating framework determines these factors. Additionally, the index exhibits risk and return characteristics similar to those of the MSCI USA Index.

The MSCI USA Extended ESG Focus Index is sector-diversified and targets companies with high ESG ratings in each sector. It excludes tobacco and firearms manufacturers. iShares MSCI KLD 400 Social ETF (DSI) based on Domini’s groundbreaking work in socially responsible investing was the largest ETF prior to the launch of ESGU by BlackRock.

By February 2020, the number of ESG ETFs had skyrocketed to 293, with 805 listings globally. According to ETFGI, total assets invested globally in ESG ETFs reached a new record of $82 billion at the end of May 2020. There are currently 108 socially responsible ETFs traded in the U.S. markets, gathering total assets under management at a value of $37.2 billion and an average expense ratio of 0.39%.

Several brand-name U.S. mega-cap companies are seizing opportunities to incorporate ESG into their governance frameworks. As a result, they will demonstrate their commitment to sustainability to shareholders, stakeholders and customers.

This year, Microsoft pledged to be carbon negative by 2030. By 2050, they aim to remove all the carbon emitted either directly or from electrical consumption since their founding in 1975. This carbon negative goal will be achieved through a $1 billion climate innovation fund to accelerate the global development of carbon reduction, capture, and removal technologies.

By contrast, Starbucks has less ambitious (yet more attainable) sustainability goals. By 2030, the company will reduce carbon emissions by 50 percent. They will also reduce waste sent to landfills from stores and manufacturing by 50 percent. Finally, they will conserve or replenish 50 percent of the water currently used for direct operations and coffee production.

ESG Impact on Expected Returns

Many investors express concern that ESG investing will limit their investment options and potentially lead to lower returns. Studies and analyses express varying conclusions regarding whether ESG investing helps or hurts overall portfolio performance. There is a lively theoretical and practical debate.

In this video, Ben Felix from PWL Capital provides important insights to consider before committing to a sustainable portfolio, based on the assertion that sustainable portfolios provide lower expected returns.

Felix discusses the impact of socially responsible investing on expected returns according to a December 2019 study written. After analyzing a global sample of 5,972 firms between 2004-2018, the authors concluded that companies with higher ESG scores tended to deliver lower average returns than companies with lower ESG scores.

Investor tastes and preferences contribute to pricing effects on expected returns of sustainable and unsustainable companies. Investors with a strong preference for sustainable investments are less likely to invest in unsustainable companies that don’t reflect their core values and beliefs. They are more likely to invest in sustainable companies with lower returns for the tradeoff of aligning investment to their values.

Another implication of this tradeoff is that sustainably-minded investors will require higher expected returns to consider investing in an unsustainable company; the opportunity for financial gain would have to overshadow their desire to uphold a socially responsible portfolio.

At the other end of the spectrum, The Harvard Business School conducted a study in May 2019 that found companies adopting sustainability practices outperform their competitors. According to their analysis, a $1 investment over 20 years yielded $28 in return for companies focused on ESG factors versus a $14 yield for companies without focus on ESG factors. So rather than sustainable portfolios providing lower returns, Harvard concluded that ESG factors enhanced returns.

Research Affiliates, a global investment research firm, recently weighed in on whether ESG integration contributed to portfolio performance in their report, “Is ESG a Factor?” Factors are stock characteristics associated with a long-term risk-adjusted return premium.

In other words, an investor can systematically employ a factor to enhance portfolio returns. Factors must satisfy three critical requirements: they should be grounded in credible academic literature, consistent across definitions, and robust across geographies.

Research Affiliates concluded ESG was not a factor because there is little agreement in academic literature regarding its robustness in earning a return premium for investors, it lacks a common standard definition, and its performance results are not robust across geographies. They believe ESG is an important investing consideration despite dismissing it as a factor and lacking complete confidence in its ability to currently deliver as a theme.

One of our core investment beliefs is that investor preferences are broader than risk and return. Nevertheless, ESG can be a very powerful theme in the portfolio management process in the years ahead. However, as noted by Research Affiliates in their ESG factor analysis, one of the fundamental issues with ESG integration is that there is no common framework for evaluating companies’ ESG impacts.



Call to Action

In his upcoming book, “Impact: Reshaping Capitalism To Drive Real Change”, Sir Ronald Cohen boldly addresses the obstacle of a lack of a common ESG impact measurement and assessment framework. He proposes the international adoption of “generally accepted impact principles” to transparently and consistently reflect the measurement of ESG impacts in financial statements to display “impact weighted profits.”

Cohen argues that today’s technology and big data allow us to reliably measure and assess impacts. He recommends that if governments force companies to publish impact weighted accounts, companies and stakeholders will develop a sharper focus on improving their impact and find creative solutions to social and environmental problems. Cohen calls this novel approach impact capitalism.

Impact capitalism is the invisible heart of markets that drives the invisible hand of Adam Smith’s Wealth of Nations. Impact is the third essential dimension to consider alongside risk and return when considering possible investments. Connecting social initiatives to investment criteria in this manner will enable entrepreneurs to finance purpose-driven investment and charitable organizations.

Investments are deemed attractive when their risk-reward potential is favorable. However, some investments have hidden costs that negatively impact employees, surrounding communities, or the environment.

Many companies do not factor in the cost of mitigating social and environmental problems caused by their operations in their traditional investment analysis, such as a factory that emits air pollution and afflicts people in the area with respiratory problems. These unpaid costs are also known as externalities – costs that are often incurred by vulnerable populations that don’t have the means to fix the problem themselves.

Impact investing presents an opportunity to take the pain out of profit. Its framework fosters financial success that is both self-interested and societally beneficial. When positive impact and profit coexist, everyone wins.

We think impact capitalism has the potential to drive creative solutions for the many socioeconomic imbalances and environmental issues we face today. Watch for our upcoming digital series that will explore these critical matters in greater depth.