When you consider your investment portfolio, you ultimately want to choose companies that, over the long term, are going to do well. But have you considered whether the companies you invest in might also do some good?
The concept of building wealth while making a positive social impact has grown significantly over the last decade. You may have heard this referred to as Socially Responsible Investment strategies (SRIs), values-based investing, or ESG (environmental, social, and governance) investing.
If you’re interested in aligning your investment strategy with causes you feel passionately about, here are a few considerations:
1. Choose companies based on what they do (or don’t do).
The concept of ESG investing involves buying into companies that exhibit and implement responsible policies in their business practices. In practice, this can mean a company that makes recycling a priority or improves or lowers its carbon emissions. It can also be a company that promotes fair labor practices, high standards for employee health and well-being, diversity, and inclusion – and much more.
ESG investing has been in practice for decades, but in its first form it was often accomplished by strictly exclusionary practices. Investors and advisors would screen out companies that didn’t match their values. Today, we can screen all assets with ESG in mind – looking not just for the negative practices investors want to avoid, but also at the positive practices companies are employing.
2. You don’t have to “settle” for less than optimal performance.
Confidence in ESG investing has increased markedly over the last five to six years. In 2012, less than $4 trillion of professionally managed assets considered ESG factors. Today, that number is approaching $10 trillion and we expect it to continue to grow rapidly.
3. Doing good usually leads to doing well over the long haul.
It’s estimated that 90% of investors care about many of these issues, but just a small percentage know what ESG investing means or how to include it in their overall investment strategies. When it comes to the bottom line, investors likely wonder if it’s prudent to include ESG investing in their overall strategy.
What we’ve found is that, in general, companies that excel in ESG standards often see better financial performance in the long run.
4. Look for a wealth management team with ESG investing expertise.
At Bartlett, we’re working hard to educate more people about the benefits of ESG investing. We have a strategy that is solely ESG-focused, where we invest in mutual funds and index funds in which every investment idea goes through the portfolio manager’s due diligence screening process.
Such in-depth strategy and personalized service results in a portfolio that incorporates your personal values while staying on track to help accomplish your long-term goals.