Impact Portfolio

Definition

The Impact Portfolio is an optional component of the environmental strategy for investors who are interested in allocating a portion of their capital to renewable energy and other environmentally-focused businesses. Because the underlying companies are often growth-stage businesses that may exhibit more risk and volatility than the broad stock market, the Impact Portfolio generally represents 10% or less of a client's total allocation.

Approach

We begin by evaluating the universe of available exchange-traded funds (ETFs) that specifically target renewable energy and other environmentally-focused sectors of the market such as water resources.

We then compare the funds across several criteria, including cost, fund size, the degree of concentration int he fund's holdings, and the breadth of business types included in the fund. Our goal is to arrive at a subset of funds that provides the desired exposure at a reasonable price without subjecting investors to excessive risk from any single underlying company.

The portfolio is re-evaluated on an ongoing basis to ensure that the risk profile has not changed materially and to account for the ongoing expansion of available funds in this area of the market.

Because this area of the exchange-traded fund universe is newer and less developed, the average cost of the funds in the Impact Portfolio is expected to be somewhat higher than in the Core Environmental portfolio. Further, because the Impact Portfolio targets a fairly narrow slice of the overall market, it may be subject to greater price swings than a broadly diversified portfolio. Investors should be aware of these factors when evaluating whether to devote a portion of their assets to the Impact Portfolio.

Bottom Line

The Impact Portfolio is an optional allocation designed to supplement the Core Environmental Portfolio. It provides targeted investment exposure to renewable energy and other environmentally-focussed businesses for clients who are interested in proactively participating in the ongoing energy transition.


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