- CRS Form
Below is a link to an article posted on Marketwatch’s website discussing the performance of ESG screened investments strategies vs. comparable indices.
The article highlights a common misconception around ESG investment screened strategies: The perception has been that committing effort, resources and/or capital to ESG screened investments (funds and/or individual securities) comes at the expense of long term returns. The report claims this is simply not factually accurate. There has been a plethora of data supporting the commitment to ESG screened investments strategies over the long term.
Every mutual fund measures its performance against a benchmark index; a fund that invests in large cap American companies may use the DJIA or S&P 500 index as benchmarks or fund that invests in large cap international companies may use the MSCI EAFE as a benchmark for return. A mutual fund aimsto outperform their peers and respective index on a consistent basis over the long term, thisaxiom holds true with ESG Screened mutual funds as well.
Amy Domini, Domini Social Investments’ founder(Thesocially responsible investment focused management firm quoted in the linked article)states when shestarted the Domini 400 in 1989 to track socially responsible companies, performance lagged behind the S&P500index. But since 1990, the social index (MSCI KLD 400) returned an average annual total return of 10.46% compared with the S&P 500’s 9.93%.AJF Financial Services, Inc. *studied the returns of one of Domini’s mutual fund that invests in large/mid-sized companies throughout Europe and Asia-Pacific region applying Environmental, Social and Governance screening; this specific fund outperforms the MSCI EAFE Index(one of the common benchmarks for international companies)in the latest quarter, YTD, one/three/five year periods.
While no two investment strategies are identical, out performance of comparable indices can be attributed to two factors as it pertains to ESG screened investment strategies: Exclusion of investments that aren’t socially responsible and Inclusion of investments that actively impact the lives/well beings of others. Avoiding investments in companies that are not socially irresponsible limits negative impact on shareholder value due to bad decision making, while including companies that actively impact the lives/well beings of others should provide long term value.The additional level of due-diligence inherent to the ESG screening process creates value/opportunities missed by others.
The information contained herein is not complete, may not be current, is subject to change, and is subject to, and qualified in its entirety. Certain information herein has been obtained from third party sources and, although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be guaranteed.
This document is not a recommendation oran offer to sell (or solicit of an offer to buy) securities in the United States or in any other jurisdiction.
There can be no assurance that current investments will be profitable. Actual realized returns will depend on, among other factors, the value of assets and market conditions at the time of disposition, any related transaction costs, and the timing of the purchase.
This presentation contains certain “forward” looking statements”, which may be identified by the use of such words as “believe”, “expect”, “anticipate”, “should”, “planned”, “estimated”, “potential”, and other similar terms. Examples of forward looking statements include, but are not limited to estimates with respect to financial conditions, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including but not limited to, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic conditions, operations, and success of any particular strategy. All are subject to governmental, regulatory and technical factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results.
Past performance is no guarantee of future results.
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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by Advisor Launchpad to provide information on a topic that may be of interest. Advisor Launchpad is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
*Securities offered through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services offered through AJF Financial Services Inc. an SEC Registered Investment Advisor which is not affiliated with APFS.