Additional ESG Articles

Introduce New Investment Key Terms: • Mutual Fund • ETF

Introduce the two new investment key terms to students.

Read through the definitions out loud and discuss the Napkin Finance graphics.

Talk through the concept of ETFs being passively managed vs. mutual funds being actively managed.

Indexed vs. actively managed (Napkin Finance)

Most ETFs are “indexed,” which means they try to match the performance of a specific index (such as the Dow Jones, S&P 500, or Nasdaq) as closely as possible. The fund does this by buying all of the index’s stocks and bonds (or at least a good sample of them) and holding them in the same proportions as the index. Indexed ETFs are passively managed.

Other ETFs are actively managed. Their investment managers try to beat the performance of a market index by picking specific investments that they think will have above average returns. While that might sound like a great way to make more money, these sometimes come with a few downsides, including:

• Higher expenses

• Greater risk of poor performance

• More tax bills along the way

Share with students that some of the most popular ETFs are based off of the S&P 500. During the next session, we will take a closer look at the S&P 500 and how the stocks within it are chosen.

Project Time: (15 minutes)

Share out loud: Several companies analyze firms across the globe and assign ESG Scores or ratings based on the company’s actions that may create significant risks or opportunities for the company.

Discuss the key issues at left that apply to a company’s SOCIAL profile - or the S in ESG.

As a group, talk through the different key issues and what impacts companies might have on each. These social impacts can be both positive and negative.