AEGIS Financial

Become more appealing to socially responsible consumers and investors

You want to grow your business and are looking for ideas. One opportunity you may want to look at is sustainable investing – where investors (and consumers) aim to make a positive impact on society and the environment by factoring environmental, social and governance (ESG) criteria into their investment and purchasing decisions.

How can you get involved in this trend? Yes, one option is to invest in it, but another is take those best practices and incorpo­rate them into your business. Venture capital firms are investing more and more in companies that maintain socially responsible principles, while a growing number of consumers – particularly millennials – are shopping with their conscience.

PLANNING AND PURPOSE

While there is a common theme of pursuing a greater purpose, there is much variety within sustainable investment strategies, particularly in how they are implemented. Implementation gener­ally takes the form of one or more of the following approaches.

Exclusionary screening

Also known as socially responsible investing or negative screening, this is viewed as the original approach to “respon­sible” investing. Basically, it excludes individual companies or entire industries from portfolios if their activities conflict with an investor’s values, such as fossil fuels, gambling or alcohol. This, of course, limits the investable universe, which could impact diversi­fication of your portfolio.

You could also apply this exclusionary approach to your busi­ness by, for example, dialing back any dealings with companies, industries or even vendors whose values don’t align with yours; encouraging your employees and clients to go paperless; recy­cling production materials when possible; making your workplace and office machinery more energy efficient; and engaging with the community for sustainable cause events.

Integration

This approach combines environmental, social and governance criteria with traditional financial considerations. It is sometimes implemented as a best-in-class approach by identifying and investing in companies that are the best ESG performers within a sector or industry group.

Impact investing

This approach aims to have a social or environmental impact alongside financial return, with a focus on the intentionality and measurement of the impact. The most common products are funds invested in private equity and venture capital, and accred­ited investors and funds are the leaders in impact investing by asset level1. With this approach, the liquidity risk and return target can vary dramatically.

Thematic investing

Thematic investing focuses on a specific ESG theme, and structures portfolios around companies or industries that support that theme. Examples of such themes include clean energy, environmental protection, sustainable infrastructure, health and social equity.

NEXT STEPS

• Consider whether environmental, social and governance issues are important to you
• Capitalize on opportunities both as an investor and as a business owner
• Discuss sustainable investing with your financial advisor

Global Impact Investing Network, “What You Need to Know about Impact Investing.”

There is no assurance that any investment strategy will be successful. Investing involves risk and investors may incur a profit or a loss.