Earlier this year, we decided to update our investment philosophy to incorporate positive impact principles.
Our updated investment philosophy includes the following statement:
We believe that investments that have a positive impact on people and the planet offer the best opportunity for the future. We seek to select investments that avoid harm and mitigate environmental, social and corporate governance risks, for the benefit of all stakeholders.
At our latest investment committee meeting this morning, we confirmed a series of changes to our model portfolios, bringing these into line with the positive impact part of our investment philosophy.
The changes mean we apply a thematic overlay to our portfolios based on Environmental, Social and Corporate Governance (ESG) factors.
It is important to note that, in implementing these changes, we are striving for progress rather than perfection.
The ESG investment market continues to grow, and there is more choice available today than ever before.
That said, we are not prepared to sacrifice fundamental investment principles in search of investment funds that meet our positive impact criteria.
Therefore, our latest portfolios will still feature a series of investment funds that do not meet our positive impact criteria. We will, however, keep these funds under regular review and make changes in the future where appropriate.
Unchanged today is our approach emphasising the underlying asset allocation of portfolios as the most significant driver of risk and potential reward.
Also remaining unchanged is our long-standing fund selection process, considering a range of factors including consistency, risk-adjusted return and low cost.
Added to this fund selection process is a new overlay using the specialist research from Worthstone, where Informed Choice is a Partner Firm.
An element of this specialist research is measuring investment funds against the 17 United Nations Sustainable Development Goals, providing a valuable framework to drive change and measure progress.
A high and growing number of our clients at Informed Choice tell us that the ESG credentials of their portfolios are important or essential.
Since the onset of the pandemic last year, the global movement to net-zero has accelerated. We now view it as inevitable that all businesses will be required to adopt a positive impact strategy for the future.
While a positive impact overlay for selecting investment funds can limit the investment universe and therefore increase risk levels, our experience during this research process is that overall risk levels (measured by expected volatility) are maintained.
There is a marginal increase (less than 0.1%) in the Ongoing Charges Figure for investment funds in our portfolios. Our investment committee views this slight cost increase as tolerable for the benefit of access to a portfolio with a positive impact with the potential for better long-term returns.
Changes to our investment portfolios will be applied in line with our advisory approach, treating each client as an individual and aligning investment recommendations with their financial planning goals.
If you have any questions about this update to our recommended portfolios, please speak to your Informed Choice Financial Planner.
