You and your investment counsellor can work together to ensure consistency between the mission and beliefs of your organization and its investments by developing and implementing portfolio-specific environmental, social and governance (ESG) constraints.

ESG investment philosophies can generally be organized into three broad categories, each of which typically features a unique portfolio implementation strategy:


Values may dictate the exclusion of certain companies from your portfolio

You may seek to exclude companies that derive revenue from certain products (such as tobacco) or that engage in controversial practices. This type of exclusion is called a "negative screen."


You may actively seek out companies that take ESG issues seriously

How well a company manages ESG issues may be a useful indicator of a company's long-term potential, especially when viewed alongside traditional fundamental indicators, such as earnings or cash flow.


You may combine elements of both strategies

For example, you might purposefully exclude alcohol and tobacco stocks, while also over-weighting strong ESG performers within given sectors.

“The 2014 NACUBO-Commonfund Study of Endowments found that 25% of respondents screen out investments that are inconsistent with the institution's mission.”
Integrating ESG criteria into your planned giving program is a three-step process:
Create a detailed policy on ESG

Identify the criteria you want your organization to align with, translate your beliefs into actionable constraints and evaluate how this might impact returns.

Consider how best to implement this policy

More unique constraints may require separately managed accounts. A custom benchmark may also be necessary to properly evaluate portfolio performance.

Review and reassess regularly

Work with your investment counsellor to ensure that the portfolio remains in compliance, and be sure they report on how the ESG constraints have impacted returns.

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