--- title: Responsive Investing - Implementation considerations description: Responsive investment implementation considerations including performance, level of intentionality, your organization's starting point, and measuring impact --- [![FEG Investment Advisors](https://www.feg.com/hubfs/New_FEG%20Logo%20(Diamonds)_with%20trademark-5.png "FEG Investment Advisors")](https://www.feg.com?hsLang=en) ![Skyline-dreamstime_xl_83151081-img](https://www.feg.com/hubfs/Skyline-dreamstime_xl_83151081-img.png "Skyline-dreamstime_xl_83151081-img") # YOUR PARTNER IN RI IMPLEMENTATION *Every organization will have different approaches, goals, and interpretations of Responsive Investing. At FEG, we start with a discovery process and then help you build the RI portfolio right for your organization. If you would like to partner with us to develop a custom questionnaire, [click here](https://info.feg.com/contact?hsLang=en). * Read on to discover implementation considerations including performance, the spectrum of RI investing, levels of implementation and intentionality, discovering your organization's starting point, and measuring RI's impact.   #### Performance: Should We Invest? While many investors express concern that RI strategies generate lower returns, several studies indicate otherwise.   |   ![xt8wi2ef](https://www.feg.com/hs-fs/hubfs/xt8wi2ef.png?width=942&height=602&name=xt8wi2ef.png) | | --- | | Note: Only includes individual academic studies looking at securities and funds (i.e. no literature reviews or meta studies are included). Source: Fulton, Mark and Kahn, Bruce M, and Sharples, Camilla, *Sustainable Investing: Establishing Long-term, Value, and performance (June 12, 2012).* |   In comparing standard indices with their ESG indices counterparts, competitive performance is possible.    Incorporating Responsive Investing In Your Portfolio - There are many different ways to invest. The types of RI available can be placed on a spectrum of intentionality. SRI is typically selecting what not to invest in. As you move across the spectrum, the investments become more specific and directed.     | ![pujjp2hp](https://www.feg.com/hs-fs/hubfs/pujjp2hp.png?width=586&height=369&name=pujjp2hp.png) | | --- | | **Source: FEG.** |   - For many investors matching mission with investing takes one or a combination of the following five primary methods: | **Negative Screening ***(Exclusionary)* | Avoidance from companies or industries *(ex. tobacco, gambling, pornography, abortifacients*). | | --- | --- | | **Positive Screening ***(Best-in-class)* | Investing in specific sectors, companies, or projects with clear positive impact *(ex. Identifying environment friendly company, clean technology, renewable energy, urban revitalization).* | | **Impact Investing** | Targeted investment aimed at solving  social or environmental problems *(ex. Bridge financing to local **non profit** organization, lending capital for revitalization).* | | **Thematic Investing** | Targeting specific strategies that mirror the values of the investor *(ex. human rights, political contributions, economic development, etc.).* | | **Full ESG Integration** | Systematic and explicit inclusion of ESG criteria in the decision-making process to identify externalities and generate a better representative value of a company. | | Data Source: USSIF. |   |    - There are many levels to investing. Determine what level of intention you are willing to take with responsive investments. Importantly, the level of intention can change over time.   | ![hzko069b](https://www.feg.com/hs-fs/hubfs/hzko069b.png?width=454&height=479&name=hzko069b.png) | ![cv9uyx7d](https://www.feg.com/hs-fs/hubfs/cv9uyx7d.png?width=405&height=484&name=cv9uyx7d.png) | | --- | --- | | **Data Source: FEG.** | **Data Source: FEG. This is a hypothetical implementation based on intention and alignment to mission.** |   #### Integration Framework ESG portfolio construction needs are viewed the same as any traditional portfolio.  For example, focus on asset allocation, risk, manager selection, and security analysis. - Portfolio Construction Considerations - Asset allocation based on capital market assumptions and economic outlook - Are there material ESG factors that can impact the asset allocation? - Risk Analysis - Downside return assumptions and does ESG help or hurt? - Diversify by security, style, region, sector, and ESG focus - Asset Allocation Considerations - Strategic vs. Tactical - Values vs. Value - Manager Selection - Holistic approach to ESG or exclusionary only? - Specialist ESG firm or traditional firm? - Active vs. Passive - Security Analysis - ESG factors that will drive performance - Relative or absolute ESG criteria - Engagement opportunities with corporate management   #### Discover Your Starting Point When the discussion arises about RI, there are several considerations. To help set your investment goals and expectations, FEG will take a deep dive into the discovery process.     **SAMPLE CONSIDERATIONS** | Objectives | Why are we considering RI? | | --- | --- | | IPS | Amend current IPS vs. develop separate ESG IPS | | Portfolio | What level of intention? Slice of endowment v. other option | | Enterprise | Governance – Board Approval Process Fundraising – new donor opportunity Risks – loss of some supporters |   The sample survey below is one way we help ensure committee, board, and staff members are on the same page for your organization's needs and objectives. We develop a report that shares the results and helps to identify potential areas for discussion, or implementation.    | ![yf2m2mqr](https://www.feg.com/hs-fs/hubfs/yf2m2mqr.png?width=612&height=262&name=yf2m2mqr.png) | | --- | | **Source: FEG.** |   #### Portfolio Examples  | **FAITH BASED ORGANIZATION** ![faith based](https://www.feg.com/hs-fs/hubfs/Responsive%20Investing/faith%20based.jpg?width=250&name=faith%20based.jpg) | - Exclusionary screening only - Low cost index options - No sin stock exposure - Monitoring manager alignment with governing body guidelines (ex. USCCB) - Values driven decisions at the front of the process | | --- | --- | | **HOLISTIC ORGANIZATION** **![holistic org](https://www.feg.com/hs-fs/hubfs/Responsive%20Investing/holistic%20org.jpg?width=250&name=holistic%20org.jpg)** | - Belief ESG criteria can drive shareholder value - General exclusions (partial sin stock) - ESG integrated into the decision making - ESG specialists considered in manager selection but not exclusively - General approach to improve overall portfolio health - Financial return first w/ social benefit included | | **ENVIRONMENTAL ORGANIZATION** **![envir org](https://www.feg.com/hs-fs/hubfs/Responsive%20Investing/envir%20org.jpg?width=250&name=envir%20org.jpg)** | - Divestment from fossil fuels - Partial divestment from sin stocks - Complete ESG integration - Active allocation toward positively aligned environmental solutions - Effort to increase gender and racial diversity - Direct impact investments with complete alignment with mission |   #### Measuring Impact - There are a number of ways to measure the impact of responsive investments. Responsive investments are not a separate asset class, and you can approach implementation by either selecting an impact within a given asset class or selecting a specific issue and look across the asset classes to achieve that outcome.  - Below is  one example of measurement using the United Nations Sustainable Development Goals. This can be tailored to the specific metrics your organization utilizes to measure impact.   | ![meii5ogu](https://www.feg.com/hs-fs/hubfs/meii5ogu.png?width=500&height=271&name=meii5ogu.png) | | --- | | Source: UN SDG. https://www.un.org/sustainabledevelopment/sustainable-development-goals/ |   | ![6y0k83yg](https://www.feg.com/hs-fs/hubfs/6y0k83yg.png?width=527&height=291&name=6y0k83yg.png) | | --- | | **Source: FEG. This is a hypothetical report card that an organization can utilize while selecting Responsive Investments.** |   ---   ### [**Responsive Investing HOME **](https://www.feg.com/responsive-investing-0?hs_preview=ChsNCUbq-35272602244&hsLang=en)   ![New_FEG Logo (Diamonds)_with trademark-5](https://www.feg.com/hubfs/New_FEG%20Logo%20(Diamonds)_with%20trademark-5.png "New_FEG Logo (Diamonds)_with trademark-5") © 2024 Fund Evaluation Group, LLC  |  201 East Fifth Street Suite 1600  |  Cincinnati, OH 45202  |  [513-977-4400](tel:513-977-4400)  |  [information@feg.com](mailto:information@feg.com) Material is accurate as of this label date and no obligation nor intention to make updates or corrections exists. Page Last Updated: February 27, 2024 ![](https://px.ads.linkedin.com/collect/?pid=5052844&fmt=gif)