Do Good, Feel Good – Investing with (Another) Purpose

September 20, 2022

“Investing with (Another) Purpose” is the third in a series of Do Good, Feel Good blog posts highlighting ways individuals and families can impact their community and the world.

When we work with BDF clients to build and invest portfolios, we spend considerable time identifying and defining their financial goals. Planning for retirement, saving for education, or establishing a legacy for loved ones are classic examples of why we save and invest. But an increasing number of investors are looking for ways to put their dollars to work in a manner that aligns with their values or their view of the world. And a growing array of investment options are available to help them do that.

Here are some of the ways that these investments accomplish this dual-mandate:

1. Exclusions

Some clients come to us and ask if they can exclude specific companies or certain sectors from their portfolios. They may have been negatively impacted by these types of businesses, or they may just feel better knowing they’re not a shareholder. Investment funds exist, some very customizable, that will accommodate these exclusions and provide the investor with the satisfaction of knowing that they’re not affiliated with or profiting from things they’d prefer to avoid.

2. Tilts

The availability of more and better information about companies’ behaviors and practices has enabled investment managers to take nuanced approaches to shaping a portfolio beyond excluding certain sectors. For example, a manager can give all the companies they look at a score on their environmental practices and then tilt the portfolio towards the ones that have a positive environmental impact and away from the ones that don’t. The result is a portfolio that rewards companies that are “doing good.”

3. Impact Projects

Certain investment projects put their value proposition right alongside, or perhaps even in front of, their economic objective. Impact projects usually have a very specific goal that investors prize beyond just a financial return. Examples of this may include projects that promote renewable energy, clean water access, or affordable housing availability. These projects still seek a positive financial outcome, but investors balance those financial considerations with their desire to see the projects’ intended outcomes succeed.

4. Shareholder Advocacy

Holding (or not holding) stock is one way to voice an opinion on the job the company and its management team are doing. But shareholders can go a step further and vote on resolutions that guide or govern decisions made by the company’s board of directors. Certain funds provide investors the opportunity to become more engaged in proxy voting and, in turn, the direction a company is heading.

As more investors seek out these types of solutions, the investment industry has rapidly expanded its offerings to meet these demands. At BDF, we believe thoughtful consideration is warranted in understanding what our clients are seeking to accomplish and what is the most appropriate investment solution to do so.

And with all these options, there are many factors to consider. Any change made to a portfolio can affect its expected risk and return. Tax consequences need to be examined. And the account type and size can determine which of the above options are available. In short, a conversation with your Wealth Manager is a great place to start if you’d like to explore ways to “do good” with your portfolio.