At BSW, we strive for transparency and clarity in the investment solutions we provide for our clients. As such, we want to inform you of a recent decision we made to transition from using the term Values-Aligned Investing to Sustainable Investing. This shift in language reflects our desire to more effectively communicate the nature of our investment solutions and the principles that guide them.
Why This Transition Matters
A key reason for the change in terminology is that we felt the term Values-Aligned fell short and did not do justice to the breadth of Sustainable Investments we offer. While our clients’ values remain important to us, we want to emphasize our goal is to recommend investments, whether traditional or sustainable, that stand on their own merit. Moving forward, we’ll use the term Sustainable Investing to encompass a broader framework that extends beyond personal values, focusing on long-term performance, risk management and a commitment to responsible corporate behavior.
BSW’s approach to Sustainable Investing begins with a due diligence process. As discussed in prior blog posts, we take our time in vetting investment products and investment managers because we hope to get it right for our clients. Examples of factors we consider during our vetting process: performance track record, fund expenses, manager experience, manager authenticity, and degrees of shareholder engagement.
At BSW, our clients’ success is at the heart of what we do, and we believe it often goes hand-in-hand with our own. While clients’ values and personal preferences are always an important factor, we also are focused on key investment metrics that drive long-term results. It is our hope that by adopting the term Sustainable Investing, we are better communicating to you that there is a compelling investment case as well as a values component that is achieved through Sustainable Investing.
Our Perspective on Sustainable Investing
Going forward, we will use Sustainable Investing as an umbrella term that attempts to capture a spectrum of underlying strategies; each strategy having its own unique focus and methodology. A common misconception is that the term Sustainable only refers to environmental considerations. To be clear, at BSW our definition encompasses strategies that prioritize ethical governance, environmental sustainability, social responsibility and the well-being of all stakeholders.
Below is an illustration of BSW’s Sustainable Investing Spectrum. From left to right we map out investment strategies with what we believe are increasing levels of sustainability. The first layer of Sustainable Investing is Exclusions. Applying exclusionary screens to your investment portfolio is a value-based decision, which may look like avoiding investing in certain industries, such as tobacco or fossil fuels. Moving along the spectrum, we then encounter Integration, where investors generally look to incorporate environmental, social and governance (ESG) factors or themes in their investment analysis and decision-making processes. Following integration, is Impact investing. In our minds, Impact Investing is characterized by intentionality and measurability. Typically, these investments are made in the private markets where the investment has the goal of generating social and environmental impact alongside financial returns. Finally, on the far right of our spectrum is Philanthropy. As you’re likely aware, philanthropy is purely giving with no financial return expectations.
Conclusion
It is our hope that by adjusting our language we will provide our clients with greater clarity and understanding of our investment offerings. BSW’s transition to the term Sustainable Investing reflects our commitment to responsible investment practices and our belief that Sustainable Investments can yield strong financial performance while also making a positive impact on society and the environment.
We encourage you to ask us questions and to explore our sustainable investing solutions. We look forward to discovering, alongside of you, how our solutions may align with your investment goals. Together, we can work towards a more sustainable future!
Lily Beitel-Horton, CFP®
-Lily
This blog is created and authored by BSW Wealth Partners, Inc., a Public Benefit Corporation (“BSW”) and is published and provided for informational purposes only. The opinions expressed in the blog are our opinions and should not be regarded as a description of services provided by BSW or considered investment, legal or accounting advice. Certain information cited is from third-party sources and while we believe the information to be accurate and true to the best of our knowledge, we cannot guarantee its accuracy as there may be certain unknown omissions, errors or mistakes. Use of third-party information, including links, is in no way an endorsement by BSW. The views reflected in the blog are subject to change at any time without notice. Nothing on this blog constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product or investment strategy is suitable for any specific person. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by BSW), or any non-investment related content, made reference to directly or indirectly in this blog post will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Not all BSW clients will have the same experience within their portfolio(s) and certain topics discussed in this blog may not apply to all clients or investors. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from BSW. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.
It is important to understand that utilizing Sustainable Investing, including ESG-specific investments and investments that BSW 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 BSW’s criteria for investment selection. Sustainable Investing and 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 Sustainable Investing and ESG factors may not reflect how another firm and/or manager does respective research.
Further, the underlying holdings of pooled Sustainable Investing and ESG investment vehicles may or may not offer the same level or scope of Sustainable and 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 Sustainable Investing and 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.
BSW is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of BSW’s current written disclosure statement discussing our advisory services and fees is available upon request.
