Socially Responsible and Impact Investing

Posted on Dec 14, 2015

The investment world is sometimes hard to understand and often leads to decisions either made for the wrong reason, or not made at all. Sometimes even if you have a clearly outlined investment philosophy, it’s difficult to actually implement it in a manner that makes sense. This is particularly true when it comes to investing for the greater good.  Using industry terminology this is sometimes called, ‘Socially Responsible Investing’, ‘Impact Investing’, ‘Sustainable Investing’, or ‘Environmental, Social, and Governance (ESG) Investing’. All these terms have slightly different meanings, but they revolve around the same concept of investing in ideas and companies that not only are good corporate citizens, but hopefully also make the world a better place. Given the chance, many of us would like to adopt this investment philosophy but there are questions regarding the challenges involved, what investments to use, and the practical side of how a company like Elmwood can execute such a strategy. 

In the past there have been a few challenges to investing in a more socially responsible manner. First was a lack of suitable investments that went beyond the traditional ‘sin stocks’, which meant that diversification within the stock market was more difficult to obtain. To further complicate things, many of these early funds were highly concentrated in clean energy investments which tend to be more volatile than your typical stock. Noting that there weren’t many choices to invest in this area years ago, management fees on some of these mutual funds were quite costly. The final obstacle was that it once was widely considered that if you invest in a sustainable strategy you will, in fact, be penalizing yourself when it comes to investment returns.  In today’s world all the above obstacles have wholly gone away, where investment diversification is easy to find, risk management is there to implement, management fees have fallen considerably, and investment returns are in-line with the rest of your choices available.

Elmwood can implement a responsibly themed investment portfolio for clients who choose our ‘Core’ service offering. As always, we begin by assessing your goals and investment needs through financial planning, which then identifies a suitable investment allocation among several different asset classes. Then to achieve your desire to invest toward the greater good, we use a combination of diversified investment ideas to match that goal, while still being a responsible investor on your behalf managing fees, risk, and returns. At this point in time we cannot invest in specific client directed ideas or concerns, instead take a broad approach to responsible investing. As time passes we fully expect this area to evolve, and thus look forward to having the ability to using more specific investment ideas with measurable results.

Posted by on 12/14/2015

Bob Gillooly, CFA is a portfolio manager and enjoys working directly with clients to help plan and implement investment strategies based on a client’s own needs. To contact Bob directly, please call 510-858-2723 or email bob@elmwoodwealth.com