OpenInvest uses a strategy called passive investing. Passive investors build diversified portfolios with the goal of replicating market performance in the long run. Thanks to our breakthrough technology, even as you divest-invest from companies and practices, our proprietary algorithms automatically re-balance your portfolio to keep you diversified. Translation: With OpenInvest, you do not need to make financial sacrifices to invest with your values and use your voice.
Traditionally, some money managers advised that SRI may theoretically hurt performance by reducing the size/diversity of your portfolio. However, we are fortunate to now have over 40 years of empirical data on the actual performance of SRI strategies. The findings show that in general, SRI typically meets or outperforms the market.
For example, Deutsche Bank and partners conducted major meta-studies in 2012 and 2015, analyzing 100 and 2,200 existing academic research studies. They found that ESG (environmental, social, and governance) factors are “correlated with superior risk-adjusted returns at a securities level.” Deutsche Bank also found that companies with high scores for environmental and social governance (ESG) corporate social responsibility (CSR) have a lower cost of capital in equity and also typically exhibit market- and accounting-based outperformance.
Some studies find that companies with strong ESG fare better in economic downturns. Other research says that, in the long-term, performance equals out. For example, David Kathman, mutual fund analyst with Morningstar, states: “There will be good times when a social screening will hurt you and bad times when it will help you, but over time it doesn’t make a difference.” Other studies reach similar conclusions, including research by TIAA-CREF Asset Management, Envestnet PMC, GMI Ratings, Mercer, the United National Environment Programme Finance Initiative, Morgan Stanley, and more. Of course, investing is inherently risky, and historical performance does not necessarily predict future returns.
Transcript
Many people wonder if they have to sacrifice financial returns in order to invest in their values. This is actually false for a couple of reasons. First green companies in themselves don't underperform it's quite the opposite there's actually a raft of research on this now including for example; a recent meta-study by Deutsche Bank of 2200 empirical analyses which found that typically more sustainable, outperform their peers. It's not too surprising right, but then what happens when you start to build funds around these companies, well here you start to get some problems. First of all the traditional approach was just to lop off entire sectors like tobacco or firearms and not adjust the remaining portfolio. Now, this starts to hurt your diversification but second, and more generally you're now engaged in stock picking or active management which brings in human bias, error, and all kinds of company risk factors that have nothing to do with sustainability. The result is that you are most likely going to underperform and in fact, 99% of active managers underperform after you take out their fees.
OpenInvest solves this dilemma. With our technology advances, you can easily create a diversified broad market portfolio that fully reflects your personal values. You can even make changes anytime such as adding new social or environmental themes or divesting from an individual company with just a swipe. It's no problem because your portfolio will actually automatically rebalance in real time that aims to keep you tracking the performance at the market. No trade-offs necessary, no compromises, it's just better investing!
