At the highest level, ESG refers to ‘environmental’ (how companies support efforts to conserve natural resources and protect the environment), ‘social’ (how they manage relationships with their employees, suppliers, clients, and the community), and ‘governance’ (how their corporate standards support conscious leadership, risk controls, and shareholder rights). ESG investment vehicles support the desire to invest in companies that adhere to these ideals.
The Leisure Capital ESG portfolio is designed to make targeted investments in companies with strong ESG ratings, while simultaneously helping to reduce the risk of these investments and support long-term growth. Our carefully-constructed ESG portfolio allows you to align your values with your investment strategy so you can do well while doing good.
There are many methods for investing in ESG. We committed to our approach only after considerable research in the ESG space, including studying the ‘why, what, and how’ of ESG investing, comparing various methodologies, and investigating a vast menu of available ESG-specific funds. Based on this due diligence, we carefully honed our approach and identified areas where we believe we can add unique value. Here is the basic structure of the Leisure Capital Management ESG portfolio:
Our ESG portfolio is composed of carefully selected ESG mutual funds. To reduce risk and ensure consistent rebalancing of assets, we do not invest in individual stocks or other vehicles for our ESG offering. While this does restrict our ability to fine tune the portfolio to address specific ESG concerns of one client, we feel strongly that investing in mutual funds is the most suitable approach for the majority of our clients who seek to balance risk and reward without compromising their ESG ideals.
We research ESG investment funds by casting a wide net to identify relevant ESG-labeled investment vehicles from a variety of sources. We then investigate this pool of funds, evaluating each candidate in a pass/fail fashion, with a ‘pass’ indicating that ESG is probably included in the fund’s investment approach. Next, we perform the same quantitative process and rigor that is applied to investment selections in each of our other portfolios. Funds that make it to the last round of evaluation are researched deeply and individually engaged to ensure the investment approach and the ESG approach are highly credible and philosophically sound. Finally, the funds that are considered best-in-class are chosen for inclusion in our ESG portfolio.
While we lean toward funds that focus on best-in-class ESG companies when appropriate, we strive to add value by including investments that we believe are likely to continue to deliver solid financial returns for clients, as well as investments that are more focused on benefitting society and the planet with less regard for financial return. By avoiding funds that may produce amazing financial returns but include companies that damage the planet or society in the process, as well as funds with the highest ESG ratings that deliver lackluster returns, we have created a portfolio that balances investment risk and long-term rewards.