METAverse 101

The world and internet continue to change as we transition into Web 3 and the Metaverse. We have written up a quick cheat code to help give knowledge and navigate thru the Metaverse, virtual worlds and how to possibly earn extra money online thru investing and designing.

Metaverse: a virtual-reality space in which users can interact with a computer-generated environment and other users.

Virtual Society

ESG Investing

Design Thinking

Web 3.0

Decentralized Autonomous Organizations

Virtual Society

What is a Virtual Society?

Social networking services are the most prominent type of virtual community. They are either a website or software platform that focuses on creating and maintaining relationships. Facebook, Twitter, Snapchat and Myspace are all virtual communities. Virtual communities are characterized by anonymity, addictive behavior, and voluntary behavior. Sense of belonging is treated as a crucial feature for participation in virtual communities. Virtual communities are social aggregations that emerge from the Net when enough people carry on those public discussions long enough, with sufficient human feeling, to form webs of personal relationships in cyberspace. … They will be communities not of common location, but of common interest. A virtual world (also called a virtual space) is a computer-simulated environment which may be populated by many users who can create a personal avatar, and simultaneously and independently explore the virtual world, participate in its activities and communicate with others.

ESG Investing (Environmental, Social and Governance)

What is ESG Investing?

ESG investing is a form of sustainable investing that considers environmental, social and governance factors to judge an investment’s financial returns and its overall impact. An investment’s ESG score measures the sustainability of an investment in those specific categories.

Benefits of ESG Investing

High returns. A 2019 white paper produced by the Morgan Stanley Institute for Sustainable Investing compared the performance of sustainable funds with traditional funds and found that from 2004 to 2018, the total returns of sustainable mutual and exchange-traded funds were similar to those of traditional funds. Other studies have found that ESG investments can outperform conventional ones.

JUST Capital ranks companies based on factors such as whether they pay fair wages or take steps to protect the environment. It created the JUST U.S. Large Cap Diversified Index (JULCD), which includes the top 50% of companies in the Russell 1000 (a large-cap stock index) based on those rankings. Since its inception, the index has returned 15.94% on an annualized basis compared with the Russell 1000’s 14.76% return.

Lower risk. The same Morgan Stanley study found that sustainable funds consistently showed a lower downside risk than traditional funds, regardless of asset class. The study found that during turbulent markets, such as in 2008, 2009, 2015 and 2018, traditional funds had significantly larger downside deviation than sustainable funds, meaning traditional funds had a higher potential for loss.

ESG funds have even managed to post strong performance during 2020. Of 26 sustainable index funds analyzed by investment research company Morningstar in April, 24 outperformed comparable traditional funds in the first quarter of 2020 (and the beginning of the COVID-19 pandemic).

According to the US SIF Foundation’s 2020 trends report, U.S. assets under management using ESG strategies grew to $17.1 trillion at the beginning of 2020. That’s a 42% increase from $12 trillion at the beginning of 2018.

ESG vs. socially responsible investing vs. CSR

Another common term for the process of creating a sustainable investment portfolio is socially responsible investing, or SRI. While SRI and ESG both seek to build more responsible portfolios, there are a few differences between the two terms.

ESG is a system for how to measure the sustainability of a company or investment in three specific categories: environmental, social and governance. Socially responsible investing, ethical investing, sustainable investing and impact investing are more general terms. Often, “socially responsible investments” are measured using an ESG-based grading system.

Historically, certain forms of sustainable investing varied in how they created their portfolios. For example, SRI used an exclusionary-only approach to filter out investments some considered immoral, like tobacco or alcohol. ESG investing excluded those same investments, but also included companies deemed to be creating a positive impact.

The larger the world of sustainable investing has grown, the more those terms (among others) have been used interchangeably. You’ll see providers who offer a “socially responsible” portfolio that includes ESG funds (as opposed to just excluding certain investments), and ones with the same title that use a solely exclusionary approach. That is why it’s important to look into the methodology used to create a portfolio — no matter what it’s called.

CSR, or corporate social responsibility, is a business practice taken on by a company to improve a local community, the environment or society at large. Beyond helping their cause, CSR initiatives can improve a company’s public opinion. CSR initiative planners may take ESG factors into consideration when mapping out their CSR strategy.

ESG investing examples

Investing in ESG can come in many forms: You can invest in an ESG fund or a stock that has a high ESG score. Here are a few ESG investment examples from our list of the best ESG funds:

  • 1919 Socially Responsive Balanced A (SSIAX)
  • Pax Large Cap Fund Institutional (PXLIX)
  • Thornburg Better World International I (TBWIX)
  • Parnassus Core Equity Investor (PRBLX)
  • iShares MSCI USA ESG Select ETF (SUSA)

ESG investing: How to get started

Starting a portfolio and filling it with environmentally, socially and governance-minded investments doesn’t need to be difficult. And since there are more ESG investments than ever, you’ll have lots of options to choose from. Here’s how to build an ESG portfolio.

1. Choose to DIY or get some help

If you want to create an ESG-style investment portfolio, you’ll have to decide whether you want to do it yourself by picking specific ESG investments or find a robo-advisor that will do the work for you.

I want to find my own ESG investments. If you like the idea of reading up on a company’s sustainability initiatives or ensuring a fund’s companies are in alignment with your moral compass, you may want to build your own ESG portfolio. If you need a brokerage account, here’s how to open one. Keep in mind, some brokerages have screening tools that can help you sift through various ESG (or sustainable/socially responsible/ethical) investments. Once you have a brokerage account, you can head to the next step.

This is a lot to keep track of. Help me! Building an investment portfolio takes time, especially when you are trying to find investments that align with a particular framework, such as ESG. Robo-advisors can make this easier. Robo-advisors are digital advisors that build and manage investment portfolios based on your risk tolerance and goals. They’re usually much less expensive than in-person advisors. And now more than ever, robo-advisors are jumping on the ESG bandwagon — often letting investors opt into a sustainable portfolio for no extra charge.

Just remember to investigate a potential robo-advisor’s methodology to make sure they use both inclusionary and exclusionary filters if you decide that’s important to you. If you choose to work with a robo-advisor, you won’t need to follow the rest of the steps.

2. Know your own ESG policies

ESG has some pretty clear boundaries, especially in comparison to “ethical investing” or “socially responsible investing,” but that doesn’t mean it fits perfectly with your beliefs. Values differ from person to person, so take a little time to identify some of the values most important to you, and see if any fall outside of what “ESG” entails. If they do, make sure you’re looking for investments that also incorporate those ideals. For example, Muslim investors may want to ensure that their investments comply with Islamic law.

3. Find your ESG investments

Once you have a brokerage account and you know what industries you want to support with your investment dollars, you can start creating your portfolio.

Reading reviews from independent research firms such as Morningstar can show you how a company or fund scores in terms of ESG investing factors, and whether you’d like to invest in them.

When you’re creating your own ESG portfolio, you’ll likely include the following two kinds of investments.

Individual stocks. It’s usually a good idea to limit the portion of your portfolio that’s in individual stocks, but if you really like a particular company (and you think it will perform well over time) you may want to buy its stock. Some companies offer an impact report, which will highlight any sustainable or cultural initiatives they’ve implemented and how they handle issues such as carbon emissions. If you want to know how a company scores in terms of its work environment, check out a third-party site such as Glassdoor. You’ll also want to look at more typical factors such as revenue and net income.

Mutual funds. Funds can fill out your portfolio quickly, and can diversify your holdings instantly. The number of ESG funds has surged in recent years. According to Morningstar data, there were 303 open-end and exchange-traded funds in 2019, up from 270 in 2018. Some of these funds focus on a particular issue, such as green energy, making it easy to personalize your portfolio’s area of impact. If your broker offers a mutual fund screening tool, you can compare different funds to see how their ESG ratings stack up.

To learn about the specific details of a particular fund, such as what companies the fund invests in, you’ll want to look through its prospectus. This document should be available on your online broker’s website, and will include other helpful information like the fund’s expense ratio. Expense ratios are annual fees taken as a percentage of an investment. To figure out how much you’d pay to own a specific fund, you can use a mutual fund calculator.

Design Thinking

What is design thinking?

Design thinking is a process for solving problems by prioritizing the consumer’s needs above all else. It relies on observing, with empathy, how people interact with their environments, and employs an iterative, hands-on approach to creating innovative solutions.

Design thinking is a non-linear, iterative process that teams use to understand users, challenge assumptions, redefine problems and create innovative solutions to prototype and test. Involving five phases—Empathize, Define, Ideate, Prototype and Test—it is most useful to tackle problems that are ill-defined or unknown.

The design thinking process has 3 phases i.e. Inspiration, Ideation, and Implementation. Inspiration includes research and understanding of the problem. Ideation involves coming up with ideas and solutions based on the research in the inspiration stage.

  • Empathy – Try to connect with the user’s needs
  • Define – Use your findings to generate a human-centric problem statement
  • Ideate – Gather as many ideas as you can
  • Prototype – Stay focused on user needs. Even if you like a feature, if it doesn’t help the user it’s not necessary
  • Test – Going backwards really can mean you are going forwards

Web 3.0

Web 3.0 is the third generation of internet services for websites and applications that will focus on using a machine-based understanding of data to provide a data-driven and Semantic Web. The ultimate goal of Web 3.0 is to create more intelligent, connected and open websites.

Web3 is an iteration of the internet where new social networks, search engines and marketplaces crop up that have no company overlords. 

Instead, they are decentralized, built upon a system known as the blockchain, which is a digital ledger of transactions. Imagine it as a kind of bookkeeping where many computers at once host data that’s searchable by anyone. It’s operated by users collectively, rather than a corporation. People are given “tokens” for participating. The tokens can be used to vote on decisions, and even accrue real value.

In a Web3 world, people control their own data and bounce around from social media to email to shopping using a single personalized account, creating a public record on the blockchain of all of that activity.

The Web3 movement has been helped along by the rise of NFTs, or non-fungible tokens, which are digital collectibles and other online files that can be bought and sold with cryptocurrency. Then there are the publicity stunts. Recently, a group of crypto enthusiasts banded together to attempt to purchase a copy of the U.S. Constitution with digital currency. They organized under the name ConstitutionDAO. (A DAO stands for a decentralized autonomous organization, the name for an online collective of crypto supporters who assemble together collectively in a group governed by blockchains and tokens.

Decentralized Autonomous Organizations

What is the role of a decentralized autonomous organization?

Background. Decentralized autonomous organizations are typified by the use of blockchain technology to provide a secure digital ledger to track digital interactions across the internet, hardened against forgery by trusted timestamping and dissemination of a distributed database.

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