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Impact Investing for Individuals & Families

Aligning Your Investments with Your Social and Environmental Values

Impact investing solutions can help you pursue positive, societal change and competitive returns.

 

Our Approach

If you intend to align your values with your overall investment plan, we start by identifying opportunities that fit your goals from both a financial and societal perspective. Whether you’re focused on food scarcity, gender equality or other concerns, your portfolio manager can create a customized impact investment plan that reflects your goals. 

While impact investing focuses on sustainable companies and funds, the key word is investing—with the end goal of helping you build and retain your wealth. Impact investing opportunities and approaches have grown in both size and quality over the years. Businesses ultimately will be able to realize cost savings through innovations, resource efficiency, and revenue enhancements via sustainable products, which in turn should lead to better performance and profits.

How can you combine your desire to have a positive impact on the world with investing for your financial future? Watch our video, Market Decode: What is Impact Investing? The Benefits of ESG Sustainability, to learn more.

Market Decode: Is Impact Investing Right for You?

With Jackie VanderBrug

Head of Sustainable & Impact Investment Strategy Merrill and Bank of America Private Bank

Please see important information at the end of this program.  Recorded on July 12, 2018.

 

Jackie VanderBrug:  Hi, I’m Jackie VanderBrug with the Chief Investment Office at Bank of America.

Impact Investing is increasingly part of mainstream news headlines.  And lately, I’ve been getting more and more questions from people asking, “What is it?” and if it may be suitable for them. 

Here’s what I tell them:

Impact investing combines the desire to make the world a better place with the goal of earning a competitive return on your investments.  

So how exactly does that work? 

Well, let’s take the first part of that definition and apply it to you….

Think about the issues that, for you, would make the world a better place.  The issues you want to have an impact on.

Let’s say you’re concerned about the environment, like climate change and energy and water conservation …

Or social concerns, like workplace policies that support diversity and inclusion and gender pay equity.

Perhaps you value companies that have strong governance policies … for example, in promoting shareholder rights, or having a diverse board of directors. 

These issues, or others that reflect your personal values, can now be factored in when you make your investment decisions through a framework called E-S-G… for Environmental, Social and Governance.  

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Sustainable Practices

In recent years, this framework has become a way for investors of all kinds to measure a company’s progress in implementing sustainable practices.  And more and more companies are realizing its value—and providing information to investors on their progress. 

Think of this framework as a diagnostic tool for impact investing.  

Just like a doctor will use an X-ray to help make a clinical decision, ESG provides additional information that you … and investment firms can use … to gain deeper insights on the inner operations of companies.

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Investment Funds Incorporating ESG Factors 1995-2016
Source:  US SIF Foundation, as of 2016.

In the past 20 or so years, the number of investments funds that utilize ESG data has risen dramatically.

 

And they can cover all the major asset classes, including stocks and bonds, and different countries and regions too.

And here’s where the second part of our definition comes in: The goal of making a competitive return.

There is growing data showing that impact investing may potentially produce long-term returns that are as good as … or even better than “traditional” investing.

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Equity Strategy Focus Point

ESG: Good companies can make good stocks

We are only in the early innings of a US ESG boom

Not only do ESG attributes appear to be good signals of future performance and risk, but

growth in the US is just gathering momentum.

Source: ESG: Good companies can make good stocks, BofA Merrill Lynch Global

Research, Dec. 18, 2016.

 

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Equity Strategy Focus Point

ESG: Good companies can make good stocks

ESG could have helped investors avoid 90% of bankruptcies

Based on our analysis of companies with ESG scores that declared bankruptcy, an

investor who only held stocks with above average-ranks on both Environmental and

Social scores would have avoided 15 of the 17 bankruptcies we have seen since 2008.

Source: ESG: Good companies can make good stocks, BofA Merrill Lynch Global Research, Dec. 18, 2016.

 

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Equity Strategy Focus Point

ESG: Good companies can make good stocks

ESG has signaled future volatility & stock price declines…

Large companies within the highest quartile of the ESG framework tended to have consistently lower future price volatility than poorly ranked companies. Stocks with extreme price declines — over 90% — had average initial Environmental/Social scores in

the 40th or lower percentiles. And the better a stock’s score, the lesser the price decline.

Source: ESG: Good companies can make good stocks, BofA Merrill Lynch Global Research, Dec. 18, 2016.

Findings from BofA Merrill Lynch Global Research show that companies with high ESG ratings tend to be healthier financially, and less likely to go bankrupt, than those with lower scores.

It also found that ESG is a strong predictor of a company’s future earnings performance.

That means there’s a link between companies’ sustainable practices and their overall financial health.

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Impact Investing:

• Not short-term approach

• But good behavior can be good business

• With potential to earn competitive return

Keep in mind that impact investing is not a short-term approach.

Big changes don’t happen quickly … and companies understand it may take a while for the practices they implement today to see results.

But if the idea of investing in companies that are doing well while doing good with the potential to earn a competitive return is appealing to you, then impact investing may be worth exploring.

IMPORTANT INFORMATION

Bank of America, Merrill, their affiliates, and advisors do not provide legal, tax, or accounting advice. Clients should consult their legal and/or tax advisors before making any financial decisions.

Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.

All recommendations must be considered in the context of an individual investor’s goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be suitable for all investors. Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets.

Impact investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating.

The views and opinions expressed are those of the speakers, were current as of July 12, 2018 and are subject to change without notice at any time, and may differ from views expressed by Merrill, Bank of America Private Bank or any of their affiliates. These discussions are provided for informational purposes only and should not be used or construed as a recommendation of any service, security or sector.

The investments or strategies presented do not take into account the investment objectives or financial needs of particular investors. It is important that you consider this information in the context of your personal risk tolerance and investment goals.

This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. The investments discussed have varying degrees of risk. Some of the risks involved with equities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. All sector and asset allocation recommendations must be considered by each individual investor to determine if the sector is suitable for their own portfolio based upon their own goals, time horizon, and risk tolerances.

Global Wealth & Investment Management (GWIM) is a division of Bank of America Corporation. The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for GWIM clients, is part of the Investment Solutions Group (ISG) of GWIM.

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation (“BofA Corp.”). MLPF&S is a registered broker-dealer, Member SIPC, and a wholly-owned subsidiary of BofA Corp.

Merrill Private Wealth Management is a division of MLPF&S that offers a broad array of personalized wealth management products and services. Both brokerage and investment advisory services (including financial planning) are offered by the Private Wealth Advisors through MLPF&S. The nature and degree of advice and assistance provided, the fees charged, and client rights and Merrill’s obligations will differ among these services. Investments involve risk, including the possible loss of principal investment.

The banking, credit and trust services sold by the Private Wealth Advisors are offered by licensed banks and trust companies, including Bank of America, N.A., Member FDIC, and other affiliated banks.

Bank of America is a marketing name for the Retirement Services business of BofA Corp.

Bank of America Private Bank is a division of Bank of America, N.A., Member FDIC and a wholly owned subsidiary of BofA Corp.

BofA Merrill Lynch Global Research is research produced by BofA Securities, Inc. (“BofAS”) and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC, and wholly owned subsidiary of BofA Corp.

Investment products:

Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value

© 2019 Bank of America Corporation. All rights reserved.

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Services

A Dedicated Team

Your portfolio manager can utilize a wide variety of impact investing strategies with the potential to meet or exceed the risk and return profiles of traditional (non-impact focused) strategies.

ESG-Only Strategies

A suite of impact-investing focused strategies across asset classes, including equities, bonds, real estate investment trusts (REITs) and private equity (for qualified investors). In addition, a growing number of mutual funds and exchange-traded funds (ETFs) have a social or environmental focus such as the empowerment of women, sustainable energy and climate change.

Externally Managed Solutions

These mutual funds, exchange-traded funds and externally managed separate accounts include impact strategies for equity and fixed income, globally.

Socially Innovative Investing Strategies

These customized strategies focus on objectives and interests important to many clients, such as gender equality, environmental sustainability, religion or human rights.

 

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