ESG Investing
ALIGNING VALUES WITH INVESTMENTS
An Environmental, Social and Governance “ESG” style of investing generally involves a focus on high standards of respect for the environment, society and corporate governance in conjunction with financial factors throughout the investment decision-making process.
ESG is as much about having high standards for conduct as it is about identifying industry leaders that are addressing specific challenges across these pillars. It is widely believed that integrating ESG screening can assist in risk management and potentially support a better determination of a company’s financial performance. As an investor, this means actively seeking out companies and investments that are not only acknowledging but also taking action on sustaining our environment, having respect for employees and communities, as well as being transparent in accountability and corporate governance. The concept here is that these principles are not just about “doing good” but equally being potentially rewarding to corporate success.
ENVIRONMENTAL
Relating to corporation and issuer efforts to drive sustainability through business operations and diminish climate-related risks.
SOCIAL
Concerning a commitment to employees and workplace standards, diversity and human rights, maintaining a high standard for consumer engagement and integrity in business.
GOVERNANCE
Relating to corporate accountability and transparency in business dealings, exhibiting responsible guidance and stewardship of capital, and identifying and developing boards with appropriate diversity and expertise to provide oversight and risk management.
ENVIRONMENTAL
Relating to corporation and issuer efforts to drive sustainability through business operations and diminish climate-related risks.
SOCIAL
Concerning a commitment to employees and workplace standards, diversity and human rights, maintaining a high standard for consumer engagement and integrity in business.
GOVERNANCE
Relating to accountability and transparency in business dealings, exhibiting responsible guidance and stewardship of capital, and identifying and developing boards with appropriate diversity and expertise to provide oversight and risk management.
At Vahanian & Associates, we believe in a culture of caring and have always strived to approach business in the same manner. In simple terms, we too believe in “doing good”. If you are a proponent of sustainable investing, we understand this is a personal journey and we can support your unique set of beliefs and values while adhering to the pursuit of your investment goals. As an advisory firm, we believe you should feel comfortable voicing what your investments mean to you and what you want from them. We understand every client is different and we strive to tailor our approach to the unique qualities inherent in your core beliefs and personal goals.
If you would like to learn more and speak with us directly about our sustainable investment approach and focus on “ESG” Investing, give us a call or schedule an appointment. You can also learn more about how we engage with our clients and the processes by which we get to know each other here.
Socially Responsible Investing Limitations. Socially Responsible Investing involves the incorporation of Environmental, Social and Governance considerations into the investment due diligence process (“ESG). There are potential limitations associated with allocating a portion of an investment portfolio in ESG securities (i.e., securities that have a mandate to avoid, when possible, investments in such products as alcohol, tobacco, firearms, oil drilling, gambling, etc.). The number of these securities may be limited when compared to those that do not maintain such a mandate. ESG securities could underperform broad market indices. Investors must accept these limitations, including potential for underperformance. Correspondingly, the number of ESG mutual funds and exchange-traded funds are few when compared to those that do not maintain such a mandate. As with any type of investment (including any investment and/or investment strategies recommended and/or undertaken by Vahanian), there can be no assurance that investment in ESG securities or funds will be profitable, or prove successful.
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It is important to understand that utilizing ESG-specific investments and investments that Vahanian & Associates perceives to have an intentional or measurable impact, does not guarantee that investment selections will align with specific sustainable values that you may have, but will instead be invested in accordance with Vahanian’s criteria for investment selection. ESG scores and ratings may differ from one investment to another. It is important to note that how a firm and/or portfolio manager analyzes and identifies ESG factors may not reflect how another firm and/or manager does respective research.
Further, the underlying holdings of pooled ESG investment vehicles may or may not offer the same level or scope of ESG information as other companies and, therefore, data may not be consistent across the board. As a result, some investments may not capture sustainable concepts with 100% accuracy. Therefore, we may rely on portfolio or fund managers to establish their own system of ranking and sustainable factors in coordination with their mandate.
Utilizing ESG-specific investments does not guarantee a certain level of performance. The investment universe of ESG-related investment vehicles is by nature narrower in scope and therefore your investment options may be limited. Further, by narrowing the scope of investment options you may or may not be missing out on an opportunity or sector that could contribute to overall performance. ESG-mandated investments may have a higher expense ratio than traditionally managed investment vehicles.
