Terry Hartigan, CFP®  |  Principal

Sustainable and Socially Aware Investing: Pursuing a Successful Investment Experience

Investors have increasing awareness that pursuing their financial goals does not have to come at the expense of their values. Central to Capital Directions’ planning philosophy is understanding the values and goals of our clients and integrating them into their wealth management plan – not our values, but your values.

In particular, many investors wish to incorporate their environmental sustainability values or their social values into the portfolio strategies. As with any portfolio strategy, implementation is critical to success. Our clients can have a successful investment experience while integrating their sustainability or social values.

This integration does not require an entirely new investment process. Consistent with our investment philosophy, our sustainability and socially responsible strategies are broadly diversified and pursue higher expected returns from smaller company stocks, lower relative price stocks and higher-profitability companies when compared to the overall market. How a client’s portfolio is allocated among different asset classes is still determined by their financials goals and capacity to assume risk.

In addition to broad diversification and pursuit of the drivers of higher expected returns, the Sustainability portfolio strategy emphasizes companies acting in more environmentally friendly ways compared to their industry peers. For example, a primary consideration is a company’s Greenhouse Gas Emissions Intensity. The US Equity Fund we use to implement this strategy has a significant reduction in the exposure to Emissions when compared to the US Equity market as a whole.

(As of 12/31/2018)

The Socially Aware integration uses screens that take into account the United States Conference of Catholic Bishops (USCCB) Socially Responsible Investment Guidelines. A sample of social screens for security exclusion include child labor, landmines, tobacco and weapons.

Environmentally sustainable and socially aware investment strategies are a rapidly growing segment. Some of the largest pension fund in the world have implemented these criteria. The evidence shows that investors can apply environmental or social criteria to the portfolio strategy without sacrificing economic returns. You can do well, while doing good. We look forward to discussing these strategies with you in more detail if they are of interest to you.