posted on February 27th 2015 in Your Financial Advisor with 0 Comments /


In the old days, not so long ago, investors had to decide if it was worth it to them to sacrifice returns by supporting socially responsible companies instead of “sin” companies that produced a more robust bottom line. Looking at it simply from an investment perspective, some studies found that excluding sin companies resulted in a performance drop of more than 2%. In addition, that practice significantly reduced our ability to diversify portfolios.

Since our goal is to provide investors with the highest returns, and we believe diversification is a key to ensuring that occurs, we weren’t really comfortable recommending the socially responsible investment strategies available to us. They just didn’t support our investment philosophy.

Today, that has changed with the advent of new funds that basically allow investors who wish to be socially responsible to have their cake and eat it, too. We can now present these folks with globally diverse portfolios that are efficient, low-cost and effective at employing screens that weed out sin companies in favor of those that are more “saintly.”

These well-engineered funds use screens to identify companies with spotty social or behavioral records (e.g., unfair labor practices) and little interest in the environment (e.g., polluters), as well as those involved in business activities like gambling, tobacco, alcohol, pornography, producing landmines and other weapons, and conducting business with regimes such as the Republic of Sudan. It’s also possible to employ just a “green screen,” which eliminates companies that don’t use environmentally friendly practices.

We’re delighted that we can better respond to the needs of socially responsible investors—facilitating their ability to bypass sin companies without having to sacrifice as much in the areas of returns and portfolio design. These investors are willing to put their money where their mouth is, and that’s something worth celebrating.

about the author: WorthPointe Wealth Management

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