Historically, ESG—environmental, social and governance—strategies have focused on excluding shares of firms that don’t meet their standards, such as companies involved in tobacco, firearms or alcohol. Yet, an exclusionary strategy doesn’t always mean portfolios contain the best ESG options. To counter this issue, CLS Investments developed an ESG strategy that prioritizes the selection of strong ESG investments rather than focusing on avoiding non-ESG ones.
“What we’re saying is let’s go and look for the good things—the companies that are environmentally conscious, socially responsible and exhibit sound governance,” says Ryan Beach, CEO of CLS Investments, an investment management company based in Omaha, Neb. “We believe that these high quality companies typically provide increased stability and have the potential to outperform over time.”