Sustainable Investing Resources

Resources for the Values-Based Investor

OpenInvest is dedicated to helping investors make a difference where it matters most. Values-based investing is one method that helps achieve this goal. Read on to learn more.
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Getting familiar

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What is Sustainable Investing?

“Sustainable investing” is an umbrella term used to describe investment approaches that incorporate financial as well as social and environmental objectives. At OpenInvest, values-based investing reflects your preferences by avoiding or leaning into specific companies, sectors or business practices to align with your values. Our technology provides metrics on various Causes that matter to most investors – such as Reducing Greenhouse Gas Emissions, Investing in Racial Justice, Supporting Women Leaders, Fighting Deforestation, and many more. Each OpenInvest Cause is powered by industry-leading data.
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Index Fund
An index fund is a portfolio of stocks and bonds designed to mimic the risk and return of a particular market index, for instance the S&P 500. Though convenient and stable, index funds are rigid and unable to be customized, often containing companies that do not align with the investor’s values.
Separately Managed Account (SMA)
An SMA is a highly-customizable portfolio constructed of individual securities and powered by direct indexing technology. With SMAs, investors benefit from direct ownership of stocks and can participate in proxy voting.
Direct Indexing
Direct indexing is the direct purchasing of underlying stocks in an index, rather than through a fund. Learn more here.
Divestment is a key part of ESG investing. OpenInvest’s technology automatically divests your portfolio from companies that don't align with your selected Causes. Outside of each Cause, you have the freedom to remove any security from the portfolio you desire.
ESG Scoring Methodology
Each OpenInvest Cause is built from a set of indicators that result in an overall positive, neutral, or negative score for the portfolio. These indicators are constantly updated and backed by data from a variety of sources, ranging from market data aggregators to highly specific academic or industry research. OpenInvest scores companies with significantly below average metrics as negative, around average as neutral, and significantly above average as positive.
Tracking Error (TE)
Tracking error (TE) is the difference in returns between a portfolio and its benchmark. Tracking error is commonly used to determine how well a portfolio is performing, and is calculated as the standard deviation of the difference in returns of the portfolio and the benchmark over time.
Sustainability Reporting
For each Cause, OpenInvest generates sustainability reports that demonstrate the proportion of positively- and negatively-scored holdings for the portfolio and converts performance into relatable insights – such as trees planted or miles avoided.

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Debunking common myths

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Myth #1: Sustainable investing equates to lower performance

Sustainable investing does not require a performance tradeoff. Research shows that incorporating ESG (environmental, social, governance) factors can enhance a portfolio’s returns by reducing volatility and providing protection in bear markets (Exhibit 1). Think of it this way: Embedding ESG analysis leads to more complete and robust data to analyze companies, and more data can lead to better-informed investment decisions and, potentially, stronger risk-adjusted returns. In that sense, sustainable investing can help lead to value creation.
Chart showing above-average investment performance and lower than average volatility for ESG leaders
Portfolios composed of companies with high ESG scores have systematically outperformed portfolios of companies without disclosure practices and sustainability reporting. Additionally, in the first quarter of 2020, Morningstar reported that 24 out of the 26 ESG index funds the firm tracks outperformed their closest conventional counterparts.
Source: Morningstar 5/1/10 - 4/30/20. ESG Equity Leaders = MSCI ACWI ESG Leaders NR USD Index, which invests in the top 50% of MSCI ESG rated companies, Broad Equity Index = MSCI ACWI NR USD Index.

Past performance is never a guarantee of future results. Some sustainable investing strategies may prioritize sustainable objectives over investment returns.
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Myth #2: Sustainable investing is solely focused on climate and the environment

Climate change and other environmental concerns are a focus for many sustainable investors and also integral in several of the investment solutions at J.P. Morgan Private Bank. However, social and governance issues—the S and G in ESG—are top of mind for clients as well, and they merit consideration in the analysis of companies and funds (Exhibit 3). Arguably, every investment should focus on the G—sound governance practices are critical to the long-term success of businesses. And social issues such as data security, employee health and safety, and diversity practices are increasingly seen as important in company analysis.
Sustainable investing myth
We also find that E, S, and G issues are often interrelated. For example, water stress is not only a risk to ecosystems but it also affects human health and well-being. It can intensify social and political fragilities in emerging economies, such as the Middle East and North Africa (MENA), the most water-scarce region in the world.¹ Greater societal stresses can also lead to forced migration across borders. Further, many of these types of environmental risks have been found to disproportionally affect lower income communities, women, and girls. Given the interconnectedness of ESG issues, our sustainable investing solutions consider a wide range of sectors and themes, including the environment, health and wellness, poverty and diversity.
Source: Morningstar 5/1/10 - 4/30/20. ESG Equity Leaders = MSCI ACWI ESG Leaders NR USD Index, which invests in the top 50% of MSCI ESG rated companies, Broad Equity Index = MSCI ACWI NR USD Index.

Past performance is never a guarantee of future results. Some sustainable investing strategies may prioritize sustainable objectives over investment returns.
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Myth #3: Sustainable investing is just a passing fad

We don’t think so. In a recent survey, 87% of millennial respondents noted the importance of ESG factors when they make investment decisions.² However, that shouldn’t overshadow the wide range of investors contributing to the growth of ESG assets. According to Schroeder’s 2019 Global Investor Study, which surveyed 25,000 investors worldwide, more than 60% of respondents under age 71 said that all investment funds should consider sustainability factors when making investment decisions.  

At the end of 2014, there were just 111 sustainable investing mutual funds and ETFs in the public markets. By year-end 2019, that number had grown to 303 funds, including 106 passive options and 77 exchange-traded funds (ETFs).³ Flows into U.S. sustainable funds increased four-fold from 2018 to 2019, growing by $21.4 billion in dollar terms (Exhibit 4). In Europe, flows into sustainable strategies were EUR 120 billion in 2019, and AUM stood at EUR 668 billion across 2,405 funds.
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Source: Morningstar Research, “Sustainable Funds U.S. Landscape Report,” February 2020.  2 U.S. Trust, “2018 Insights on Wealth and Worth.” 3 Morningstar Research, “Sustainable Funds U.S. Landscape Report.” February 2020.  4 Morningstar Research, “European Sustainable Fund Flows: A Record-Shattering Year.” January 2020.
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Personalizing the experience

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Relatable Sustainability Reporting

Sustainable investing requires a comprehensive, engaging, and simple way to see how investments are performing.

OpenInvest simplifies a historically laborious process and takes it a step further by converting portfolio performance into relatable metrics such as trees planted, dollars invested in women leaders, or miles avoided.
Graphic showing three examples of sustainable investing metrics including carbon reduction, miles avoided, and trees planted