How to Create A Socially Responsible Portfolio

As it happens, the answer is equally straightforward:  We begin with our standard asset allocation model.   We discuss a client’s goals, risk tolerances, and investment objectives.  We then select the investment model that best fits the client’s personal situation, whether that be conservative, aggressive, or somewhere in between. 

A full range of options is available to implement the plan, including mutual funds, closed-end funds, exchange-traded funds, managed future funds, and more.  However, we then overlay the ESG (environmental, social and governance) screens on the model and invest through money managers who embrace those screens.

We let our clients know which screens we are using to be certain these align with their sustainable objectives.  For instance, we may be screening out companies with poor environmental practices or those that sell tobacco or alcoholic products.

Once the model and screens are in place, we use the same discipline as with all investment portfolios in terms of monitoring performance and making necessary changes and tweaks along the way.  In the case of an investment that is under performing, however, we will only replace it with one that is compatible with the ESG screens.

It’s important to emphasize that the universe of socially responsible options is growing – and growing rapidly.  More and more investment managers, including those with large resources, have adopted ESG guidelines, making it easier to build effective, socially responsible portfolios.

Investing in the stock market involves gains and losses and may not be suitable for all investors. The investment’s socially responsible focus may limit the investment options available to the investment and may result in returns lower than those from investments not subject to such investment considerations.