How you can align your portfolio with your values

When you are building your portfolio, there are a number of financial considerations that go into your investment selection process. These considerations include the goal you are planning for, how long until you reach this goal, and your comfortability with risk, among many others. Financial considerations are imperative to constructing your portfolio; but how can you consider non-financial considerations, such as your personal values, into your portfolio construction?

You can align your personal values with your portfolio by investing sustainably. ESG investing is the most popular style of sustainable investing; and it includes utilizing additional, non-financial, considerations in investment decision. ESG stands for Environmental, Social, and Governance. institutions are utilizing these lenses to grade how sustainable a company’s operations are. Here’s a breakdown of what ESG Investing means for your portfolio.

E: Environmental Considerations

This lens evaluates how a company’s operation affects the environment where they conduct business. This includes evaluating how a company’s business affects carbon emissions, pollution, waste management, and water usage. This lens is important to evaluate the sustainability risk that comes with a businesses’ operation.

S: Social Considerations

The social lens evaluates how a business’ operations affect society as a whole. This lens takes a look at both the internal and external social impact that a business has on society. The internal social impact evaluates employee diversity, fair labor practices, and internal corporate polices. The external social impact evaluates customer satisfaction, and date security measures. This lens is relevant to evaluate because a company whose business negatively affects society will not likely produce sustainable, long-term returns.

G: Corporate Governance

The governance lens of ESG investing takes a deeper look at how a company’s corporate management is structured. The governance lens evaluates the diversity of board members, executive pay, internal corruption, and what issues a company lobby for. It is essential to evaluate a company’s corporate structure, because unethical behaviors by upper management create a risk of litigation; which can drastically effect investment returns.  

ESG investing can provide you with a more ethical portfolio, while simultaneously mitigating risk. If you would like to discuss how you can apply ESG principles in your portfolio, please schedule a meeting with one of our Financial Advisors.