Tactics for Transforming a Portfolio
Four ways to gradually optimize ESG opportunities with tax consequences in mind.
Who?
How?
Direct New Flows
Target Highest Cost-Basis Funds and Harvest Losses
Target Highest-Impact ESG Areas
Target Retirement Accounts First
Investors who want to prioritize minimizing tax impact.
Investors willing to accept some taxable gains to potentially accelerate the transition.
Investors who want to prioritize transitioning assets out of the poorest-ESG investments.
Investors who own a significant retirement portfolio and view taxable and tax-deferred accounts from a holistic allocation perspective.
Investors direct new investment money toward sustainable options and redirect capital gains and dividend payouts from existing funds to the new portfolio.
Investors target the highest-cost-basis funds in their portfolio for initial sales and take advantage of losses to counteract gains.
Investors modulate between sustainability objectives, current portfolio composition, and options in the ESG landscape. This approach can help reduce tax consequences.
Investors focus first (or even solely) on transitioning their retirement portfolio.
Source: Morningstar, Inc.
How?
Who?
Investors target the highest-cost-basis funds in their portfolio for initial sales and take advantage of losses to counteract gains.
Investors willing to accept some taxable gains to potentially accelerate the transition.
Target Highest Cost-Basis Funds and Harvest Losses
How?
Who?
Investors modulate between sustainability objectives, current portfolio composition, and options in the ESG landscape. This approach can help reduce tax consequences.
Investors who want to prioritize transitioning assets out of the poorest-ESG investments.
Target Highest-Impact ESG Areas
How?
Who?
How?
Who?
Investors focus first (or even solely) on transitioning their retirement portfolio.
Investors who own a significant retirement portfolio and view taxable and tax-deferred accounts from a holistic allocation perspective.
Target Retirement Accounts First
Investors target the highest-cost-basis funds in their portfolio for initial sales and take advantage of losses to counteract gains.
Investors willing to accept some taxable gains to potentially accelerate the transition.
Target Highest Cost-Basis Funds and Harvest Losses
How?
Who?
Investors modulate between sustainability objectives, current portfolio composition, and options in the ESG landscape. This approach can help reduce tax consequences.
Investors who want to prioritize transitioning assets out of the poorest-ESG investments.
Target Highest-Impact ESG Areas
How?
Who?
Investors focus first (or even solely) on transitioning their retirement portfolio.
Investors who own a significant retirement portfolio and view taxable and tax-deferred accounts from a holistic allocation perspective.
Target Retirement Accounts First
How?
Who?
Source: Morningstar, Inc.
Source: Morningstar, Inc.
Source: Morningstar, Inc.