How much do you know about responsible investing?

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Responsible investing is related to the acronym ESG, which stands for economic and societal good.

Clear up your questions about how conscious investors can align their portfolios with their principles.

ESG is certainly a common and relevant acronym, but it stands for environmental, social, and governance—the three pillars of responsible investing.

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This information has been provided for discussion purposes only. It does not purport to address all the financial, tax, and legal considerations relevant to investors. No representation or warranty can be given with respect to the accuracy or completeness of the information contained herein. Parametric does not provide legal, tax, or accounting advice or services. Investors should consult with their own tax or legal advisor prior to entering into any transaction or strategy described herein. The views and strategies described may not be suitable for all investors.

Your responsible investing knowledge: None

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This may be the first day you’ve ever seen the words responsible investing. But there’s much more to it than two words.

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Responsible investing is mainly for left-wing investors.

Investors across the ideological spectrum can use responsible investing tools and strategies to build portfolios they believe in. The investor decides what they are and aren’t willing to hold, and the advisor shows them ways to express those decisions.

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Responsible investors can still hold companies with business practices they oppose.

Active ownership can be a good way for responsible investors to pressure companies to change their practices. Clients can consider giving proxy-voting authority to their asset managers, allowing them to vote on their behalf, or engaging with companies to encourage best practices.

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Responsible investing products and strategies are based on universal ESG criteria.

At this time there’s no universal ESG standard in the markets, although some regulators and industry groups have made efforts to standardize ESG data. But whether or not standards do arrive, responsible investors can align their investments with their principles using a custom separately managed account (SMA).

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Responsible investors can apply ESG guidelines to both their equity and fixed income allocations.

Whether a company issues stocks, bonds, or both, responsible investors can incorporate ESG into their investments, and they can engage with company management or government entities to encourage best practices.

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The best way to build a responsible investing portfolio is to look for products with ESG, responsible, or other related terms in their names.

These words only tell us that the provider has created a responsible investing product according to its internal ESG guidelines—which may not line up with those of the investor. It’s better for investors to determine their own guidelines and rely on their advisor to provide the data they need to make holding decisions.

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ESG is certainly a common and relevant acronym, but it stands for environmental, social, and governance—the three pillars of responsible investing.

You’ve got a long way to go. Don’t get left behind.

Your responsible investing knowledge: Limited

You know what responsible investing is—at least, you think you do. Learning is the only way to be sure.

Your responsible investing knowledge: Familiar

You’re meeting responsible investing halfway. We’re sure you can do better.

Your responsible investing knowledge: Moderate

You have a pretty good grasp of the basics—but you have more to learn.

Your responsible investing knowledge: Proficient

You’ve been paying careful attention to industry buzz. Don’t miss out on any details.

Your responsible investing knowledge: Advanced

You definitely know your stuff—which means you’re ready to share it with your clients.

Your responsible investing knowledge: Expert

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