As they are central to our core values, Legacy Wealth Management believes that investment strategies focused on social, environmental, and ethical values are worthy of consideration. We are committed to providing ESG investors with information, insights and investments that reflect ESG values.
The idea of sustainable investing is not new, and many investors relate the term to socially responsible investing (SRI), which is an investment strategy that excludes companies and industries on a basis of moral values (e.g. alcohol consumption, gambling). Today, greater emphasis is placed on which companies to include, rather than exclude, from a portfolio, giving rise to a range of complementary approaches that can be used to implement sustainable investment strategies. The strategies are ordered by the level of intensity of the ESG factor consideration in the overall investment process.
Avoiding investments in companies or industries on the basis of moral values and standards (i.e., tobacco), and social norms (i.e., human rights), historically referred to as SRI
Selecting securities based upon strong or improving ESG-factor issues relative to the company’s industry peers
Entering into a dialogue with the management teams of the portfolio holdings on ESG issues, and exercising ownership rights (i.e., voting proxies, submitting shareholding proposals) to promote change
Focusing investments on specific environmental or social themes, such as clean energy, water, education, or healthcare
Selecting securities to promote social and environmental benefits in addition to earning a financial return
Systematically integrating ESG considerations, where material, into investment due diligence and financial analysis
Sustainable investing takes a broader approach to evaluating risk and does so over a long-term horizon by evaluating a company's environmental, social, and governance risks, in addition to traditional financial risks.
There is increased awareness that ESG factors have a positive impact on performance and changing demographics, as millennials consistently express greater desire for some sort of sustainable investing solution. Also at work are changing social norms and the political polarization in the country, leading some investors to see their social views represented in their portfolios.
Socially Responsible Investing (SRI) / Environmental Social Governance (ESG) investing hascertain risks based on the fact that the criteria excludes securities of certain issuers for nonfinancial reasons and, therefore, investorsmay forgo some market opportunities and the universe of investments available will be smaller.