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| Feature |
Portfolios With Purpose
Catherine Curan
03/01/2008
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Kathy Jubitz has
no tolerance for polluters in her portfolio. A former environmental educator,
she used to wake up two hours early every morning to commute on public
transportation rather than foul the air with her car’s exhaust. In 2000, after
her father, Al, reaped a windfall from the sale of a division of his Portland,
Ore.–based shipping company, Jubitz Corp., she suddenly found herself grappling
with a thornier personal choice: translating her passionate environmentalism to
the management of substantial wealth.
In addition to overseeing their family
trust, Jubitz, her father and her two sisters were collaborating on investment
decisions for the nearly $15 million Jubitz family foundation that they set up
after the sale.
Their broker chased high returns by investing in companies such
as Exxon without first considering their environmental records, making Jubitz
and her husband apoplectic when they reviewed her monthly portfolio statements.
Jubitz’s work with her family’s foundation heightened her sense of
responsibility about the ramifications of her investments.
"Our goals for the foundation are to support environmental
causes, peace and children," Jubitz says. "It seemed contradictory to give money
to big companies that are harming the environment, and then we turn around and
just put a Band-Aid on it. Why not speak with our money?"
Jubitz knew her father felt the same way, so she encouraged him
to make a change. In 2006 he moved the family’s assets to CTC Consulting, an arm
of U.S. Trust, which is a subsidiary of Bank of America’s private wealth
division. Dan Gimble, an investment manager at CTC, introduced the Jubitz family
to a set of screening and scoring tools that would help them identify and invest
in an equity index fund customized to their values. Better still, the fund,
created by the Aperio Group—a Sausalito, Calif.–based custom indexer for
affluent individuals—would track the Russell 3000 Index with a minimal margin
for error. Best of all, the fund was designed to give market-rate returns with
low fees, thus undermining the bias widely held on Wall Street that socially
responsible investing means lower returns. "It’s very thorough and scientific,"
Al says of the fund. "You get your cake and eat it, too."
TOP VIEW
Once a concern
only for religious or politically
active investors, socially responsible investing (SRI) is now part of mainstream
thinking. As a result, the approach has gone way beyond just equities to include
all kinds of investment vehicles; and, thanks to new research, it can be
structured to yield market-rate returns against respected sector benchmarks. SRI
does mean taking time to find the right choices, and can still require
pressuring your advisor to take a different approach-but as returns improve,
many more wealthy investors are willing to do just that. |
The Aperio Group’s indexing fund is just one in a vast array of
new financial options specifically designed for high-net-worth individuals who,
like the Jubitzes, want to invest their wealth in ways that are consistent with
their values. Once perceived as a fringe, alternative strategy for devoted
acolytes willing to give up profits, social responsibility is fast becoming a
powerful financial-analysis tool for growing wealth in the long term.
Traditionally, equities have been the main arena for socially responsible investing (SRI). However, today there are opportunities for affluent
investors in microfinance, private equity, real estate and more. Individuals can
incorporate analysis of environmental, social and governance (ESG) factors into
investments in each of these areas, from the new exchange traded social index
fund from Barclays Global Investors to a private equity fund focused on the
environment. What’s more, as Aperio has done using the Russell 3000, investments
in other asset classes can be structured to yield market-rate returns against
respected sector benchmarks.
"Responsible investing is a discipline that gives people tools
to make a profit," explains David Wood, the director of Boston College’s
Institute for Responsible Investment. Wood is a coauthor of a new guide for
wealthy investors and their managers, the Handbook on Responsible Investment Across Asset Classes, which details the range of sophisticated SRI choices and the
potential benchmarks they can be measured against. (See "SRI Performance
Benchmarks," at the end)
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