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Helping yourself and others – the Socially Responsible Investing (SRI) momentum

Looking out for yourself and your future doesn’t mean that you can’t participate in helping others–putting your money where your passion lies and investing responsibly. Instead of jumping on a fad, let’s delve into socially responsible investing. Here’s an example…International Women’s Day was celebrated around the world on March 8th. The company that launched the first Gender Diversity Index ETF who’s trading symbol is SHE, placed a statue called “fearless girl” facing directly at the 7,000 pound statue of a Bull near Wall Street that week. SHE, is designed to measure the performance of U.S. large capitalization companies that are “gender diverse,” which are defined as companies that exhibit gender diversity in their senior leadership positions. This ETF is one of a growing variety of socially responsible investments.

Socially responsible investing used to simply mean not buying into such things as tobacco, firearms, alcohol or even gambling. Today, socially responsible investing is much broader: what many call the ESG factors—environment, social and (corporate) governance.

Environmental, social and governance (ESG) refers to the three central factors in measuring the sustainability and ethical impact of an investment in a company or business. It includes sustainable and responsible investment strategies (SRI) and socially responsible investing. ESG investing has been adopted more slowly in the U.S. than in other developed markets in part due to differences in regulatory and political environments. However, in the last several years, ESG has gained momentum in the U.S.

Often, watching what institutions do can provide insight into what’s coming or where the “puck” is going in investing. If you ask Callan (a consultant to institutional investors for more than 40 years) about the status of environ­mental, social, and governance (ESGinvesting, they’ll tell you–according to their quarterly report just out–that for the fourth straight year the Callan Survey shows increased traction among U.S. Investors.

A newly published report from US SIF (The Forum for Sustainable and Responsible Investment), shows the dollars invested in sustainable, responsible and impact (SRI) assets – $8.72 trillion as of 2016 – is 33% higher than in 2014. This means that $1 of every $4.6 under professional management in the U.S. is now invested in SRI strategies.

So, what about returns? According to data from Morningstar, Inc., as of 12/31/15, SRI Funds offer competitive returns vs. non-SRI funds with SRI funds having a slight lead over non-SRI funds over a recent 10 year period. Of course, recall that past performance is no guarantee for future results.

The name of our firm is “Lenity,” which means kindness—to yourself and others. There are now many opportunities where socially responsible investing can do both at once. When we look at the data, it’s clear that socially responsible investing continues to attract investors both institutional and retail. Investing in companies who take the time to “think” and “act” in a socially responsible manner, with a conscience, should continue to grow in importance for the investor with a conscience in a well-diversified portfolio.

Important Note: The views expressed in this post are as of the date of the posting and are subject to change based on market and other conditions. This post contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Please note that nothing in this post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and should not be taken to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Lenity Financial, Inc. unless a client service agreement is in place.

Sources: State Street Global Advisors (diversity ETF, SHE), Callan Associates Survey, US SIF, Morningstar, Inc.

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