The idea of combining social good and financial investment may not at first seem like the most natural combination, but if it’s true that you vote with your wallet, what you choose to invest in can go a long way towards shaping the world for the better.
One company that is doing this is Mirador Capital Partners, who emphasize a personal approach to investing, and the idea that making good investments and supporting good causes are not mutually exclusive pursuits.
The way that Mirador achieves this is through a values-based approach to investing. This means they build a portfolio around whichever causes their clients value, whether it’s saving the environment or promoting good health. Using individual equities and bonds, they invest in companies with good environmental, social and governance attributes that align with their client’s specific values.
A socially responsible portfolio is not a new idea, but it is not always done in a way that best serves or captures the specific needs of a client. Where some advisors might instead use a mutual fund or ETF for their clients, Mirador carefully curates customized investment portfolios.
“You’re not just buying mutual funds or exchange-traded funds with a responsible investing label, you’re extending your specific values through your investments,” explains Adrian Jones, Executive Vice President of Mirador. “Our approach is to drill down on the portfolio, focusing on individual securities. So, if a client is anti-tobacco, we can put together a S&P 500 portfolio, but we will remove all tobacco supply-chain companies. If the client also values LGBTQ workplace equality, we can add that screen too.”
For example, some portfolios have emphasized green organizations, or investments that promote companies helping to improve health. “The concept of something like a heart-healthy portfolio didn’t exist in this platform before,” adds Dan Murray, Principal at Mirador. “It’s not just about climate change, or animal welfare – there are a multitude of values we can focus on.”
The company utilizes outside managers to provide algorithms and screening criteria that produce the most suitable combinations of investments from a universe of companies. The risk profile is unique for each investor and reflects their individual values. This is the direction Adrian sees the industry moving: “For example, this is a style of investing we see the Millennial generation demanding. By the time they hit adulthood, there was Bernie Madoff and the financial crisis, so an emphasis on good governance and conscientious practices are important to them. They need to know their dollars are invested toward doing good.”
The portfolios are constructed using the constituents of well-known indices such as the S&P 500. The index is selected based on the client’s risk appetite. Once the value screens are applied, the remaining companies from that index are re-weighted and optimized to seek the return of the underlying index. “Basically, we pick regular companies that fit the client’s values and each portfolio is very specific to the client,” says Dan. “Customized portfolios like this have historically been available only for institutions, but now the individual investor has access to them. This will hit critical mass – in 50 years, we believe everyone will be investing this way. We’re at a crossroads where the process is now democratized – from this standpoint, it’s a great time to be an investor.”
However you want to call it – ESG, socially responsible or sustainable investing – it has been around since the 1970s. Now, trillions of dollars are invested this way globally through institutions and it’s becoming increasingly available to Main Street. So, while socially responsible investing is not new, Mirador’s approach, using algorithms to optimize risk/returns combined with a personal approach for smaller investors is. The method is innovative, and extremely relevant to the Bay Area, positioning them well in the space.
“We like to call it Values-Based Investing,” Adrian says. “The portfolios are built around the client’s values. Not my values. Not Dan’s values. Not even the values of a mutual fund’s investment committee. The portfolios are uniquely built for the client and their specific values.”
For more information, visit miradorcp.com/vbi
