FA Magazine May 2023 | Page 53

dard market index .” Those who are willing to pay more , she explains , can get different exposure through actively managed ESG funds .
“ When it comes to ESG , you get what you pay for ,” says Rachel Robasciotti , CEO and founder of Adasina Social Capital in San Francisco , which prides itself on being not only Black-owned but mostly operated by women , people of color , and members of the LGBTQ + community . For ESG portfolios to truly make an impact on society , Robasciotti says investment managers must spend money on grassroots research , gain community input and gather nonfinancial data before translating that information into practical terms .
Robasciotti goes a step farther . True socially responsible investing , she says , cannot come from traditional investment structures . They are too far removed from the problems and issues people are facing .
“ We should all be looking first to the communities we intend to help , and the social justice organizations leading the work within those communities , for the best answers about how to help ,” she says . “ When companies tell investors that they can make a substantial impact with their investment in a cheap ESG product , that investor is probably being misled .”
Mixing Charity With Investing
If you don ’ t want to spend more for an actively managed ESG fund , Constrained Capital ’ s Neuman suggests investing for maximum returns and then “ use those profits or proceeds to get involved with your favorite ESG causes .”
Steven Schacter at Forest Hills Financial Group in Chappaqua , N . Y ., might concur . “ ESG funds are smoke and mirrors , just different packaging and more gift wrapping than ordinary funds ,” he says . “ I counsel my clients not to mix politics and investing . If you strongly believe in a cause , donate a tax-deductible contribution .”
Yet some see no better way of engaging in causes than putting your money where your mouth is . “ The old Wall
Street canard that you should just make as much money as you can and then give it to the cause of your choice ignores the world-shaping role of corporations and capital allocation today ,” says Mark Regier , vice president of stewardship investing at Praxis Mutual Funds in Goshen , Ind . “ What businesses do and how they behave affect all of us and the future of the planet itself . No amount of charitable giving — or even government action — can eclipse this level influence .”
Making Tough Choices
To be sure , if investors want to be better corporate citizens , they may have to make some tough choices . “ It ’ s important to do your due diligence or work with an advisor who has done that ,” says Matt Dmytryszyn , CIO at Telemus Capital in Chicago .
Investors must make sure an ESG fund is employing the values they want , he says , and in the way they want . So if , say , DEI is important to them , they could invest either in corporations with diverse boards or companies that are taking efforts to become more diverse .
“ Both are reasonable approaches ,” he says .
But it ’ s unavoidable that investors will become frustrated with some companies ’ behavior . Amazon , a mainstay of many ESG funds , has lately come under fire for fighting unionization and mistreating employees . “ But just because ESG isn ’ t perfect doesn ’ t mean you have to scrap the whole movement ,” says Patrick Dinan , founder of Impact Fiduciary in Glendale , Calif .
It takes time and effort to screen properly for companies that match an investor ’ s values , says Michael Finke , professor of wealth management at the American College of Financial Services in King of Prussia , Pa .
But if you believe in a cause , he says , why not put values ahead of profits ? “ After all , many investors are in a position of abundance that allows them to achieve charitable goals while they ’ re alive by supporting businesses they believe in ,” says Finke .


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