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Aligning Your Portfolio With Your Values

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“Doing Good” for Your Investment Returns and Your Values

The two main objectives of investing are typically capital appreciation and income generation. However, a third objective is commonly becoming a priority among investors — investing for impact. Often referred to as values-based investors, this term refers to those who strive for impact by ensuring their investments are in line with their moral values.

At Creative Planning, we support values-based investors with specific strategies to meet their needs. Our value-based strategies focus primarily on environmental, social and governance (ESG) investments and faith-based investments. Following is a general overview of these strategies.

ESG Investing

ESG investing typically focuses on issues such as the use of fossil fuels, human rights and equitable corporate governance, as noted below.

  • Environmental: The environmental screen seeks to identify and support companies that are good stewards of the environment and natural resources while avoiding those companies that have a negative impact.

Criteria may include the use of reclaimed products/packaging, safe disposal of hazardous materials, water consumption and management, energy consumption and use of renewable energy sources, impact on habitats and species, compliance with environmental laws and regulations, emissions of ozone-depleting substances, etc.

  • Social: The social component of ESG investing considers people and relationships within these corporations. These are companies that behave as good corporate citizens and act in an ethical manner when dealing with suppliers, with customers and in their communities.

Criteria screening may seek to identify companies that strive to donate a percentage of profits to local communities, have safe working conditions, take into account shareholders’ interests, work with suppliers that share its values, consider diversity and equal employment opportunities in hiring, maintain a commitment to customer service and high labor standards, etc.

  • Governance: Corporate governance refers to the methods by which a company is managed.

Governance screens are intended to determine whether a company employs a diverse board of directors and whether corporate incentives align with the business’ success. Other factors include fair pay, executive compensation, anti-corruption policies, strong internal controls and rights for shareholders.

Faith-Based Investing

Faith-based investing is guided by the values of the church. For example, the Catholic Church has strict investment guidelines for its members to follow, including ESG concerns as well as specific human life and dignity guidelines. For 2023, the United States Conference of Catholic Bishops (USCCB) issued policy guidelines for Catholic investors that include the following priorities:

  • Protecting human life
  • Reducing arms production
  • Pursuing economic justice
  • Protecting the environment
  • Encouraging corporate responsibility

Other religions offer their own sets of investment guidelines in line with the core beliefs of their respective faiths.

At Creative Planning, we support our clients’ values-based investment initiatives and help them make decisions that align with their beliefs. We begin by getting to know you and establishing appropriate investment screening criteria. We then present a custom portfolio allocation specifically designed to meet your needs while also aligning with your values.

If you’re interested in learning more, please schedule a call with a member of our team. We look forward to getting to know you.

Fund managers consider ESG factors to varying degrees. Not every fund incorporates ESG factors in the same manner or degree. Issuer’s determination of materiality and the definition of material ESG matters vary as do their ESG disclosures, which can cause difficulty in comparing different funds. As such, there is no particular standard matrix or benchmark upon which ESG factors affecting performance can be compared. ESG funds may include or exclude securities based on ESG practices versus other investment methodologies, which can impact performance, fund expenses and investment risk.
The firm bases our ESG recommendations on the information provided to us by the issuers. It is important to consider if the fund’s stated ESG approach is in line with your goals, objects, risk tolerance and personal preferences.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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