RI Video Series [9]: RI Portfolio Measurement

It is a common misconception that responsive investments underperform other investment strategies. FEG often sees responsive investments performing in line with—and even exceeding—traditional benchmarks, suggesting that organizations can still meet that double bottom line of securing both financial and social return. But how can an organization effectively measure the social return of a portfolio? FEG Research Analyst Lily Ambrosius explains some of the resources you can use to measure and report on social performance—in addition to financial performance—for organizations looking to maximize their positive impact.

There's a commonly held belief that investing in a socially responsible manner means sacrificing financial return. But over the long term, we expect managers, whether they manage holistic ESG, thematic, or impact strategies to perform in line with, or even outperform traditional peers.

Responsive investments measure performance, both financially and socially, which is often called a double bottom line return. Social measurement may be a newer concept. We're simply trying to measure positive change in society as a function of total return. A challenge we face in social investing is whether or not we're having the intended impact we thought we would. There are several databases available that provide ESG data and ratings, and MSCI and Sustainalytics are the two major players. We realize not all data is perfect and a single data source won't tell us everything we need to know, so we try to pull insights from as many sources as possible.

We also see a growing number of ESG managers map their strategies to the United Nation's Sustainable Development Goals, also called the SDGs. These are 17 goals that were laid out by the UN in 2015 to achieve a more sustainable future by 2030. Each goal has underlying targets that are deemed as investible by managers and are a good way to measure and monitor impact and mission alignment.

The next step for us is to take individual manager data and aggregate it up to the portfolio level. Just as we'd take a client's underlying strategies and provide a snapshot of what the allocation is to U.S. stocks or to the tech sector, we do the same attribution analysis for areas of a client's mission that are important. For example, we can show the portfolio's exposure to investments that address global hunger, or climate change, or diversity.

Whether a client's portfolio is intentionally ESG or not, we recommend assessing portfolio exposures as a starting point, because you can't design a roadmap of where you want to be without knowing where you currently stand. Measuring the portfolio and reporting on social performance will hold you accountable to your goals. Are there positive changes made over time? Are we maximizing the positive impact on society? This is all done, not in replacement of, but with financial return. We've measured social performance for a variety of client types, such as faith-based organizations, socially and environmentally related foundations and university endowments. We've generated reports for our clients to understand the impact of their investments. We'd be happy to discuss this with your organization as well.


This report was prepared by Fund Evaluation Group, LLC (FEG), a federally registered investment adviser under the Investment Advisers Act of 1940, as amended, providing non-discretionary and discretionary investment advice to its clients on an individual basis. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser.

The information herein was obtained from various sources. FEG does not guarantee the accuracy or completeness of such information provided by third parties. The information in this report is given as of the date indicated and believed to be reliable. FEG assumes no obligation to update this information, or to advise on further developments relating to it.

Neither the information nor any opinion expressed in this report constitutes an offer, or an invitation to make an offer, to buy or sell any securities.

Any return expectations provided are not intended as, and must not be regarded as, a representation, warranty or predication that the investment will achieve any particular rate of return over any particular time period or that investors will not incur losses.

Past performance is not indicative of future results.

This report is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may receive this report.

Fund Evaluation Group, LLC, Form ADV Part 2A & 2B can be obtained by written request directed to: Fund Evaluation Group, LLC, 201 East Fifth Street, Suite 1600, Cincinnati, OH 45202 Attention: Compliance Department.