LUTZ BUSINESS INSIGHTS
socially responsible and environmentally sustainable portfolios
jim boulay, lutz financial investment adviser & managing member
An increasing number of investors are looking for ways to align investment decisions with their own values and philosophies. As a citizen, you can express your political preferences around sustainability and other social issues through the ballot box. As an investor, you can express your preferences through participation in global capital markets. Socially Responsible Investing or “SRI,” is an investment strategy that allocates your dollars consistent with your beliefs and ideals.
SRI considers investors’ tastes and preferences about social issues in the design of an investment portfolio. There are a few different types of SRI investments, those that are environmentally conscious, those that are socially responsible and those that are may be consistent with religious beliefs. While some of these philosophies can be isolated, many are now combined into a general investment category called “ESG” investing. This combines social, environment and governance investing into one.
Who Practices SRI/ESG?
Several trends have driven SRI/ESG over the past decade. These include rising institutional and investor demand, legislative mandates for public funds, regulatory developments, the rise in environmentally themed offerings, increased shareholder advocacy, and the growth of community investing.
SRI/ESG is an investment approach available to anyone who wants to align their principles and beliefs with their financial future. If you seek a financial gain coupled with the opportunity to leave a positive mark on the environment or valued organizations, this strategy will suit your investing needs. With many financial institutions globally beginning to offer these services, it’s becoming a widely acceptable and even preferred way for investors to manage their money.
How Does Lutz Financial Offer SRI/ESG Services?
At Lutz Financial, we partner with Dimensional Fund Advisors to offer two types of portfolio styles to accommodate investor preference. The first are Social Core Equity portfolios, both domestically and internationally. These portfolios offer broadly diversified equity market portfolios that exclude companies that have a certain percentage of business in the following:
- Adult Entertainment
- Child Labor
- Stem Cell
- Companies with Businesses in Sudan
Even with the exclusions, these funds offer a broadly diversified portfolio amongst many different types and sizes of equities. As of June 2019, the US Social Core Equity 2 Portfolio (DFUEX) offered more than 2,300 domestic equities within its holdings. The DFA International Social Core Equity Portfolio (DSCLX) contained more than 4,500 globally diversified stocks within its portfolio. These social portfolios even extend into Emerging Markets via the DFA Emerging Markets Social Core Portfolio (DFESX). This fund contains more than 4,200 holdings as of June 2019. Lutz Financial combines these offerings to build clients’ global portfolios cost-effectively and diversified with more than 11,000 different companies.
Those investors looking for environmental impact investing are served using the DFA Sustainability portfolios. Lutz Financial’s use of the DFA sustainability strategies allows for systematic evaluation across industries on key issues, such as concerns of high greenhouse gas emissions or potential emissions from reserves of fossil fuels such as coal, oil, and natural gas. In addition, the portfolios consider other factors important to those investors seeking to invest in sustainable companies such as:
- Land use
- Involvement in Toxic Spills or Releases
- Operational Waste
- Water Management
- Factory Farming
- Cluster Munitions
- Child Labor
Lutz Financial does not regard SRI or ESG portfolios as separate asset classes, but as an alternative framework for investing in conventional asset classes. With this framework in mind, our approach centers on structuring portfolios to capture dimensions of higher expected returns. This is done in a cost-efficient, diversified way, all while applying a meaningful screening methodology that reflects a broad set of investors’ social and/or environmental concerns.
In short, bringing a positive change the organizations important to you through investments is becoming an increasingly popular way for people to support their values without having to sacrifice diversification or adequate returns. If you would like to learn more about the SRI or ESG offerings through Lutz Financial, please contact us or learn more here.
Important Disclosure Information
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Lutz Financial), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Lutz Financial. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Lutz Financial is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Lutz Financial’s current written disclosure statement discussing our advisory services and fees is available upon request.
ABOUT THE AUTHOR
JIM BOULAY, CPA/PFS, CFP®, CAP® + INVESTMENT ADVISER, MANAGING MEMBER
Jim Boulay is an Investment Advisor and Managing Member at Lutz Financial. With 30+ years of experience, Jim specializes in financial planning and investment advisory services for high-net-worth individuals, families, and business owners. He lives in Omaha, NE, with his wife Regina, and four sons.
AREAS OF FOCUS
- Comprehensive Financial Planning
- Business Owners & Families in Transition
- Family Office Services
AFFILIATIONS AND CREDENTIALS
- American Institute of Certified Public Accountants, Member
- Financial Planning Association, Member
- National Association of Personal Financial Advisors, Member
- Omaha Estate Planning Council, Member
- Certified Public Accountant
- Personal Financial Specialist
- CERTIFIED FINANCIAL PLANNER™
- Chartered Advisor in Philanthropy
- BSBA in Accounting, University of St. Thomas, St. Paul, MN
- Catholic Charities Endowment, Committee Chair
- Crohn's & Colitis Foundation, Chapter President
- Christ Child Society, Past President
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