BY GERI E. PELL
All around us, there”™s growing awareness and concern about the impact of business practices on our environment and society. Increasingly, civic-minded consumers are interested not just in the quality and cost of the goods and services they buy but the effect they have on our surroundings.
Many companies have embraced the call for increased transparency and stewardship. Here in Westchester County, nearly 300 businesses signed on to the Green Business Challenge, an award-winning local initiative designed to move companies down the path toward environmental sustainability while improving performance and saving money. (A full list of participants is available on the county”™s website.)
Beyond choosing where to do business locally, people often wonder how they can align their broader investment strategies with causes they support. As a private wealth adviser, I spend a significant amount of time working through this question with clients and helping them position their portfolios to have a positive impact on the world.
Social impact investing ”“ the practice of integrating environmental, social and governance, or ESG, factors into investment decision-making ”“ is rooted in many people”™s desire to offer financial support to causes they believe in.
In the past, individuals directed their charity dollars toward organizations they wished to support, often paying little attention to whether their investments harmonized with those causes. The belief was that socially responsible investing required a sacrifice of return.
Social impact investing takes a comprehensive approach, assessing not only how money invested will help specific causes but also how it might provide a return on investment. Under the ESG prism, I help clients identify the issues that are important to them. For example, when exploring investment decisions, we might discuss factors such as how companies manage their environmental footprint or how they foster a diverse workforce. Exploring these angles provides a sense of what”™s most important to clients and how we can align their portfolios with their passions.
The good news for anyone inclined to invest this way is there are more options available than ever. And, with more investment opportunities to choose from, investors can now expect to earn competitive returns on their investments. In fact, as one example, the MSCI KLD 400 Social Index, composed of companies with high environmental, social and governance ratings, has actually outperformed the broader MSCI USA Index since its inception in 1990.
Within the broad financial community, large organizations and civic leaders are throwing their weight behind the effort to standardize how ESG factors are integrated into financial analysis. Recently, former New York Mayor Michael Bloomberg and former U.S. Securities and Exchange Commission Chairwoman Mary Schapiro were appointed chairman and vice chairwoman of the Sustainability Accounting Standards Board, a nonprofit established to develop sustainability accounting standards for corporations. With big-name leaders lending their support to this effort, we can expect further development and expanded opportunities to invest in the ESG realm down the road.
Social impact investing can be an effective way to engage as a shareholder and to vote with your pocketbook. A financial adviser can help you identify quality companies and industries to invest in to effect global changes you believe in.
Geri Eisenman Pell is CEO of Pell Wealth Partners, a private wealth advisory practice of Ameriprise Financial Services Inc., with headquarters in Rye Brook and offices in Manhattan and Port Jervis. Contact her at geri.e.pell@ampf.com or 914-253-8800. This is the first in a series of articles she will write for the Business Journal focusing on different areas of investments.
