Socially Conscious Investing

By Nicole Young on April 19, 2022

In our household, we’ve spent the last few years focusing on the various foods we put in our bodies. Whenever possible, we opt for the organic option, even though this option tends to cost 47% more than the non-organic option¹. We make this choice as a conscious investment in our diet, then make other sacrifices in order to focus on a healthier lifestyle.

Over this same time frame, we’ve seen investors take the same approach when it comes to their portfolios. They’re interested to know which companies are included in their various mutual funds and ETFs, then look for ways to avoid investing in companies whose mission doesn’t align with their own values. We define this as “Exclusionary Investing”, where investors look to avoid investing in companies that produce products such as weapons, tobacco, alcohol, and in some cases – oil.

On the other hand, some investors prefer “Impact Investing” or “Inclusionary Investing”, where they look to invest in mutual funds and/or ETFs that specifically look to buy companies that have the intention to generate a measurable, beneficial social or environmental impact alongside a financial return. These companies may have a focus on sustainable agriculture, renewable energy, and/or affordable and accessible basic services like housing, healthcare, and education.

At Private Vista, we’ve developed “Socially Conscious” investment models including both Exclusionary and Inclusionary investments for our clients. Before investing, we discuss some of the pros and cons of this type of investing:

Pros

You’re letting your money back up your beliefs and values.
You’re rewarding companies whose mission statements and values are aligned with your own.
You’re doing your part to build a sustainable future for your children and future generations.

Cons

By definition, you’re limiting the number of investments to choose from, which could hurt performance due to a lack of diversification.
The definition of a Socially Conscious Investment is subjective. For example, you may see a Socially Conscious investment with a portion of their portfolio allocated towards nuclear energy. Some may argue that the risk of nuclear accidents is too great to support, while others see nuclear energy as a great substitute for fossil fuels.

Not too long ago, investors did not command much attention from the upper management of companies because they were fewer in number. Today’s increased investor interest and the growing amount of assets within these strategies force more attention. As a result, it is possible that socially conscious investing may be more effective going forward than it has been in the past. In fact, there may have never been a better time than there is now, to build a diversified socially conscious portfolio and achieve real societal change.

If you’re interested in additional information on Socially Conscious Investing and how Private Vista has incorporated this into our investment models, please contact us for a complimentary consultation.

Article By: Randy Porzel, CFP®, RICP®: Randy is a Partner and Lead Advisor at Private Vista LLC. He began his financial planning career as an intern and worked his way up through every job at the firm. Randy finds joy in taking clients through Private Vista’s planning process, using tools that answer questions and clear uncertainty so that clients can look forward to their idea of an enriched life. In his free time, Randy enjoys serving on the boards for the Chicago Lighthouse for the Blind and The Darien Lions Club, whose mission is to serve those in the community with visual impairments.

¹https://www.consumerreports.org/cro/news/2015/03/cost-of-organic-food/index.htm

Private Vista, LLC is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC (member FINRA and SIPC). Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

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