Socially responsible investing (SRI), and environmental, social and corporate governance investing (ESG), continue to be of significant and growing importance to many clients. Our portfolios are developed to adhere to important ESG-SRI factors in the investment process while also following our low-fee, diversified, index-driven portfolio construction.
We utilize well-established fund providers that we believe have a procedure to assess and measure a variety of ESG-SRI factors for companies that make up the stock and bond indexes used in our portfolio structuring. For example, one of our fund providers constructs its ESG-SRI funds based on a quantitative process that is designed to determine optimal weights for securities while maximizing exposure to securities of companies with high ESG-SRI ratings and minimizing or eliminating exposure to securities of companies with low ESG-SRI ratings. These ESG-SRI exposures are furthermore subject to a process that is intended to maintain index risk and return characteristics similar to the standard benchmark indexes.
A sample of the ESG-SRI factors that our portfolios take into consideration include, amongst others:
- Carbon and greenhouse emissions (such as thermal coal, oil sands extraction),
- UN Global Compact Violators (see the ten UN principles),
- Controversial weapons (i.e. nuclear weapons, cluster munitions, landmines, biological/chemical weapons, civilian firearms), and
- Tobacco (i.e. producers and companies involved in the distribution, retail and supply of tobacco-related products).