Advice and Resources for Getting Started with ESG/SRI Investing

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives

Q3 2019 hedge fund letters, conferences and more


rawpixel / Pixabay

Every investment has an impact, whether intended or not. That’s the exciting reality.

There’s a paradigm shift in the world of business and the investment community. People aren’t just thinking about profits. They’re thinking about place, planet, product, processes and profits. Whereas the double-bottom line was once viewed as forward thinking, today’s conversations revolve around the triple-bottom line, which includes environmental impact alongside companies’ financial and social considerations.

Impact investing is a relatively new concept, but it’s gaining momentum.

And it’s time to get involved.

For those new to impact investing, it’s not philanthropy. Although there is overlap between socially desirable outcomes and philanthropic efforts (think eradicating poverty, empowering underrepresented communities, lowering greenhouse gas emissions, etc.), impact investing channels dollars toward “doing good” with the expectation of financial returns.

Yes, there’s a certain level of subjectivity sewn into its definition, but at its core, impact investing involves deploying capital with the aim of creating some measurable positive social outcomes and getting strong financial returns. Fortunately, as impact investing continues to evolve and seek standardization, it’s becoming easier for investors and advisors to get involved and to identify the companies that best align with their goals and values.

For advisors who are new to this space, impact investing is a highly disciplined and analytical addition or overlay to existing investment classes and styles, and the goal – as well as opportunity and challenge – is to uncover and invest in the most responsible and profitable companies. Those advisors willing to undertake the due diligence required to be able to speak with clients comfortably about impact investing stand to not only grow and deepen those relationships, but have the opportunity to make a difference in the world simply by showing up and doing their job day in and day out.

If you’re an advisor looking to differentiate your practice from others, consider this article to be your first step toward a better understanding of impact investing.

But first, some acronyms

When talking about impact investing, two acronyms often come up: SRI and ESG.

Socially responsible investing (SRI) focuses on deploying investment dollars away from certain areas a fund manager may deem undesirable, such as companies that produce weapons, tobacco products or oil. One way to think about it is like this: whereas impact investing channels funds into doing good, SRI uses screens and filters to steer money away from doing harm. Again, just like with any investment, strong financial performance and risk management are prioritized.

That’s also the case with environmental, social and governance (ESG) investing. Like SRI, ESG investing generally serves as a screen to identify and weed out companies with unacceptable environmental, social, and governance practices while prioritizing financial returns.

ESG screening typically happens while conducting due diligence on a potential investment, and it’s most commonly used in the context of public market investing, where an entity is evaluated on whether or not it’s taking sufficient steps to meet or exceed specific areas of corporate responsibility. Because of ESG investing’s ability to identify things like unethical supply chains and harmfully sourced materials, research suggests that ESG-focused investments can lower the riskiness of an investment, which should reassure many advisors and investors who are new to impact investing.

Read the full article here by Danielle Burns, Advisor Perspectives

Saved Articles

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted & limited time offer for being a sophisticated and loyal reader.

ValueWalkPremium is a website and newsletter on the latest industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today and get our exclusive content for 40% off. This is our second biggest discount ever!!

Use coupon code VIP20 or click on the button below

Limited time offer only ENDS 2/29/2019 or after next 25 subscribers take advantage whichever comes first – please do not share this discount with others