Quandary= “a state of perplexity or doubt”

That is the state we find the SRI/ESG theme currently embedded. In part, given the wide range of topics within this broad universe, it should not come as a surprise that many investors are wondering what exactly is this socially responsible investment type?

Even if it is able to be explained, there of course is a natural instinct toward doubt as some of the concepts may seem or actually be suspect. Despite this apprehension and lack of representation in the market, we feel that over time, the planning and investment discussion will include a determination of an investors ethos that will aid in shaping asset allocation decisions.

In our post about one year ago, we mentioned that there are already indexes based on SRI/ESG criteria such as the Dow Jones Sustainability Indexes and that there is also massive support from the non-profit sector such as CDP, an organization with one of the largest and most influential SRI screen data bases in the world.

The data and screens are utilized by hundreds of institutional investors globally and also by many open-ended mutual funds and to a lessor degree some Exchange Traded Funds. What screen is appropriate for your firm and for your client’s beliefs?

Some funds in this area of the markets do under-perform their benchmark but this does not need to be the case as we pointed out in our June 2014 piece that shows that investors do not have to sacrifice profit for ethos. We still believe that will hold true in the future and that it will be imperative to have a well vetted stable of funds for investors with nuanced beliefs.

As listed in that same piece, we displayed how nuanced these beliefs can be and even if admirable, they are not necessarily themes that necessarily overlap in their intent.

  • Environment and climate change
  • Governance and ethics
  • Diversity
  • Human right, labor and indigenous people’s rights

In addition to these screens that drive the open end space, there are additional channels for unique investments under the umbrella of “impact investing”. These include but are not limited to;

  • Micro Finance
  • Sustainable farming
  • Clean tech
  • Environmental damage mitigation

It is easy to see the magnitude that SRI/ESG encompasses and how this aspect within the investment world can truly present a quandary at the firm and individual investor level.

In order to help firms understand the potential and pitfalls inherent with this broad asset class, we will continue to vet this complex area within the capital markets and deliver concise opinions on funds utilizing our Zenith Score and to uncover interesting, potentially profitable but obscure opportunities for your portfolio.


Tom Koehler-CIO

“Socially Responsible Investments represent a complex asset class and while we covered a small amount, there is a lot more information needed prior to making an investment decision. Let us know if we can provide more information to help in that process.”