Mar 9, 2023
Investing to do good and feel good
When we work with clients to build and invest their portfolios, we like to spend considerable time identifying and defining their financial goals. Planning for retirement, saving for education or establishing a legacy for loved ones are classic examples of why people save and invest. But it appears to us that an increasing number of investors are looking for ways to put their dollars to work in a manner that also aligns with their values or their view of the world. They may want to invest with a purpose that goes beyond meeting their financial objectives. And a growing array of investment options are available to help them do just that. Here are four common ways that a client’s investments may seek to accomplish this dual mandate:
1. Exclusions
Some clients come to us and ask if they can exclude specific companies or certain sectors from their portfolios. They may have been negatively impacted by these types of businesses, or they may just feel better knowing they’re not a shareholder. Investment funds exist, some of them very customizable, that will accommodate these exclusions and provide the investor with the satisfaction of knowing that they’re not affiliated with or profiting from things they’d prefer to avoid.
2. Tilts
The availability of more and better information about companies’ behaviors and practices has enabled investment managers to take nuanced approaches to shaping a portfolio beyond excluding certain sectors. For example, a manager may assign a score to all the companies they look at, based on their environmental practices. Then they can tilt the portfolio toward the ones that have a positive environmental impact and away from the ones that don’t. The result is a portfolio that may actually reward companies that are “doing good.”
3. Impact projects
Certain investment projects put their value proposition right alongside, or perhaps even in front of, their economic objective. Impact projects usually have a very specific goal that investors prize beyond just a financial return. Examples of this may include projects that promote renewable energy, clean water access or affordable housing availability. These projects still seek a positive financial outcome, but investors can balance those financial considerations with their desire to see the projects’ intended outcomes succeed.
4. Shareholder advocacy
Holding (or not holding) stock is one way to voice an opinion on the job that the company and its management team are doing. But shareholders can take it a step further and vote on resolutions that guide or govern decisions made by the company’s board of directors. Certain funds provide investors with the opportunity to become more engaged in proxy voting and, in turn, the direction a company is heading.
As more investors seek out these types of solutions, the investment industry has rapidly expanded its offerings to meet these demands. We believe thoughtful consideration is warranted in understanding what our clients are seeking to accomplish, and determining which is the most appropriate investment solution to do so.
With all of these options, there are many factors to consider. Any change made to a portfolio can affect its expected risk and return. Tax consequences also need to be examined. As well, account type and size may determine which of the above options are available. In short, we suggest that a conversation with your CI Wealth Advisor is a great place to start if you’d like to explore ways to do good with your portfolio, while also feeling good about the positive societal impact you’re making.
ABOUT THE AUTHOR
Drew Gibbons
Drew recognizes that financial well-being is multifaceted and each different area is important in its own way. Working with clients to define their goals and structure a comprehensive plan is the most important thing he can do for a client and is truly rewarding for him as a professional. He also leads BDF's Impact Investing initiative, helping clients align their investment portfolios with their values.
CONTENT DISCLOSURE
This information is for educational purposes and is not intended to provide, and should not be relied upon for, accounting, legal, tax, insurance, or investment advice. This does not constitute an offer to provide any services, nor a solicitation to purchase securities. The contents are not intended to be advice tailored to any particular person or situation. We believe the information provided is accurate and reliable, but do not warrant it as to completeness or accuracy. This information may include opinions or forecasts, including investment strategies and economic and market conditions; however, there is no guarantee that such opinions or forecasts will prove to be correct, and they also may change without notice. We encourage you to speak with a qualified professional regarding your scenario and the then-current applicable laws and rules.
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