February 15, 2022

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TOGETHER WITH

Happy Tuesday. Can you guess how many companies are the source of more than half of single-use plastic items thrown away globally? a. 20, b. 200, c. 2000. Follow the wave 🌊 below for the answer.

Is investing in sustainable companies a good idea?
What the heck are gas fees?
File your taxes for free

INVESTING

Is investing in sustainable companies a good idea?

The popularity of sustainable investing has grown alongside other young, but not new, ideologies in recent years. These are ideas lending themselves towards a more environmentally and ethically conscious worldview that many investors have embraced, hoping to pitch in a little toward progress and make some capital gains along the way.

It’s a valiant resolution to have for sure, we’d never question those intentions, but what we should question is the profitability of this venture. Is investing in sustainable companies truly a good idea, from an investor’s perspective?

Social proof

As of September 2021, there were over 7,400 ESG funds established globally, compared to just 4,153 at the end of 2020, a 31% move in less than a year. That’s globally, but in the US alone we saw a 59% jump in the total number of funds in 2020 alone.

In 2018, the AUM held by those nominally dubbed “ESG funds” was still just under $100 billion, but before 2021 was over that number had topped $330 billion, more than a three-fold increase within a few years' time.

So great, it’s a trend, cool. But what about the profitability of such investments?

Performance proof

When we zero in on the performance aspect of sustainable investments, we find that there seems to be some support for them here too.

This data comes from Market Sentiment, which analyzed 56 different US companies from Corporate Knight’s most sustainable rankings, filtering for businesses with revenues of $1 billion or higher. The outcomes are shown below.

Source—Market Sentiment

Sustainable companies outperformed the S&P 500 (SPY) on various time periods analyzed, with a whopping 38% overperformance if held through the decade mark.

If we look at a more detailed overview that provides an annual breakdown, the results indicate much of the same. Over the last ten years, there was only one year where you’d have lagged the S&P by investing in these select companies.

Source—Market Sentiment

The verdict?

Sustainable investing can be a good strategy for both your wallet and the world, as cliché as it sounds. Every investor has their own criteria, so there’s no guarantee you’d have made similar gains by handpicking your own stocks or funds based on your own parameters. Nevertheless, it does seem that investing in more sustainable businesses over long time periods can be a healthy strategy to add to your investing repertoire.

What is ESG Investing?

Investing Basics

7 mins

CRYPTOCURRENCY

What the heck are gas fees?

Unless you’re buying something in cold hard cash, almost all transactions come with a fee. Both credit and debit transactions get tagged with a processing fee and ATMs come with transaction fees too.

But see, these amounts are usually either nominal, refunded or paid by the recipient, so we often overlook them.

In the world of crypto though, things are much different. And that's where gas fees come in. You’ve likely heard of them, but what the heck are they exactly?

Starting with the basics

Gas is a term used to describe the amount of Ether (the Ethereum blockchain’s native currency or ETH) needed in order for someone to execute specific actions on the Ethereum network. Simply put, gas is the fee needed to conduct an Ethereum transaction.

These fees are used to compensate miners for the energy expended to verify transactions and the added security they provide to the Ethereum network.

Why doesn’t Bitcoin have these fees? Unlike Bitcoin, Ethereum is much more than just a digital ledger, but a smart contract chain. Because of that, there’s potential for security breaches when it comes to malicious spam. Gas fees provide a barrier to entry by making it expensive for malicious users and attackers from spamming the network.

That sounds great and all, but gas fees are a huge pain point for users because they can be ridiculously expensive, especially when the network is congested.

What determines the cost?

The gas price on Ethereum has a market price determined by the demand for resources on the network. Calculating the cost of a gas fee is, as you might expect, a bit complex. But if you have two minutes to read this over, you’ll grasp the idea of it.

The total fee you’ll pay is calculated as Gas limit (unit) x (base fee + tip)
Gas limit (expressed in units) refers to the maximum amount you are willing to pay in gas fees to get your transaction completed. While you can lower it, it might not help much considering you have to include enough to cover the computational cost of the transaction, and any unused gas would be returned to your wallet anyway. If you set your limit too low, the transaction may not be completed and you won’t receive that gas fee back.
The base fee is dependent on demand, and often how busy the network is at the time of your request. The base fee is determined by the block before it and acts as a "reserve price." Your offered price must be at least equal to the base fee.
Tips or priority tips are exactly what they sound like. Ethereum miners receive the tip when they validate your transaction. Because miners have transparency into what transactions include tips, the higher your tip, the faster your transaction will be completed by them.
Gas fees are expressed in what's called "Gwei" which basically means a very small amount of ETH. One Gwei is the same as 0.000000001 ETH.

Worth noting

The Ethereum network is also anticipating an upgrade over the next couple of years. Ethereum 2.0 is already here, launched in December 2020, but this upgrade still has two more stages to deliver, which will be called “the merge” and “shard chains.”

These changes that are expected between now and 2023 will shift Ethereum from a Proof-of-work to a Proof-of-stake model, which many expect will help to significantly reduce gas fees.

How Ethereum Works

9 mins

TAXES

File your US taxes for free

Let’s face it, the way we do taxes in America is, shall we say, lackluster in some ways and complex in all of them. Tax season is dreadful enough for many of us, and it’s often made much worse by the fact that we’re left to our own devices to file them and hope we end up with the right numbers in the end.

In dealing with all this tax mayhem, it doesn’t help that paying to file costs us an average of $220 every single year, and that’s just for basic returns. Luckily though, there are a few pockets of relief to be found in the form of free filings for those who qualify. You just gotta know where to look.

Here are a few resources to look into to see if you can file for 🆓 this year:

IRS Free file: Taxpayers making less than $73k annually are eligible to use the IRS’s free file tool online, which enables you to file federal and some state returns. Thanks IRS, it’s the least you could do for asking us for money.
IRS VITA: For filers making $58k or less, disabled, or with limited English speaking skills, they’re eligible to use the Volunteer Income Tax Assistance programs, which are generally community-run and help filers do it online or in person. You can go to this link to find a location near you.
Use a free program offered by popular services: Like them or lump them, big names like TurboTax, H&R Block, Cash App Taxes usually offer some form of free filing for those with the most basic type tax returns. Unfortunately though, if you invested at all or made any self-employment income, you’re usually disqualified.

🔥 TODAY'S MOVERS & SHAKERS

[Movers Shakers Template]

Tower Semiconductor (+41.8%) after Intel announced a deal to buy the Israeli chipmaker
American Airlines (+7.5%) is up after a bullish report by Wolfe Research upgrading the stock from "underperform" to "peer perform;" Delta (+6.3%) and United Airlines (+7.3%) are also up
Arista Networks (+7.4%), a cloud software company, as earnings and future outlook topped the street's views
Restaurant Brands (+3.7%) beat the street’s estimates on revenues and profits mainly because of Burger King’s performance; Tim Hortons and Popeyes underwhelmed
Marriott (+4.8%) saw it's revenues double and its occupancy rates increase 23% YoY (but it's still 12% below pre-pandemic levels) despite omicron

This commentary is as of 9:00 am PDT.

🌊 BY THE WAY

Answer: Just 20 companies are the source of more than half of single-use plastic items thrown away globally, according to Minderoo Foundation (CNBC)
📈 Time in the market, not timing, is what matters (Bites)
🏦 JPMorgan is the first bank into the metaverse, looks at business opportunities (Coindesk)
Finny lesson of the day: With tax season coming up, let's quiz you on a few case studies—what's taxable, what's not?

Taxable or Not? (Part 1)

Taxes

5 mins

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The Gist is Finny's twice a week (Tues & Thurs) newsletter covering personal finance & investing insights and money trends. Finny does not offer investment and stock advice. The editorial team: Chihee Kim, Austin Payne. Today's Movers & Shakers is brought to you by Ashu Singh.

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