NY Times: 3 Steps to a Socially Conscious Portfolio

So you want your investment holdings to reflect your values and you’re confused by all the so-called E.S.G. funds. Here’s how to start.

By Ron Lieber, Feb. 14, 2020

When the Justice Department announced this week that it was charging several members of the Chinese Army over the Equifax hack, it was all too easy to forget that the company’s sloppy practices had left the door open to thieves seeking leverage over American citizens.

So how can it be, then, that Equifax can show up on the roster of companies that so-called E.S.G. funds purchase for investors?

The G, after all, stands for governance (E is for environmental and S for social). Companies with good governance embrace the kinds of controls that could have kept such a problem from happening in the first place. So what kind of governance filter could Equifax credibly pass through?

That’s the kind of question that investors need to ask if they’re looking to overhaul their portfolio to make it more … well, what exactly? There are lots of names for this — E.S.G., socially responsible investing, sustainable investing.

Whether you’re interested in trying to use your money to make the world a little better, or simply betting that climate change will be ruinous for some companies or entire industries, there are three main questions you ought to answer. Why are you doing this? How, exactly, do you want to invest? And what funds will you choose?

What matters most?
The home page of Horizons Sustainable Financial Services in Santa Fe, N.M., greets visitors with an imperative: Invest like you give a damn. But that raises an equally important and unwritten question: About what?

The investment advisory firm’s chief executive, Kimberly Griego-Kiel, has new clients fill out a financial values worksheet and a social policy questionnaire, both of which anyone can download from the firm’s website. The policy questionnaire lays out some of the basic screens the firm employs: alcohol, firearms and military weapons, fossil fuels.

But there are other possible screens that are more complex, like a social-issue exclusion for genocide. (That one tries to keep clients from owning shares in companies that do business with, say, Myanmar’s military leaders, given that the United Nations has taken action to prevent its alleged crimes against humanity.)

These exercises help the firm take clients’ temperature. But they may be even more helpful for investors themselves, especially a couple who may not realize that they don’t have the same priorities.

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