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Portfolio > Portfolio Construction

Is That Portfolio ESG-Friendly? New Service Helps Advisors Find Out

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In yet another example of the growing interest in sustainable investing, OpenInvest, a financial services company specializing in the field and backed by Andreessen Horowitz, Y Combinator  and Kevin Durant’s Thirty Five Ventures, has introduced a new product to help financial advisors review client portfolios for their social impact.

The subscription-based service, called Portfolio Diagnosis, is part of the company’s environmental, social and governance solutions and uses algorithms to analyze different assets in client portfolios, whether they be stocks, mutual funds or ETFs, or a combination thereof. The proprietary algorithms, in turn, are based on an ESG data aggregation system that currently draws from more than 15 providers and 200 indicators. 

“It’s finally easy for any advisor to give their clients an initiative, meaningful and accurate snapshot of how their investments are impacting the world around them,” said Josh Levin, co-founder of the firm, in a statement.

The product can, for example, analyze a portfolio for its impact on reducing greenhouse gases, fighting deforestation, supporting LGBTQ rights and supporting refugees. Those are just four of the 16 “causes” that OpenInvest tracks in portfolios — split almost equally between investments to hold and those to divest.

Categories for divestment include fossil fuel companies, weapon manufacturers and big tobacco. The information is more granular than an overall ESG rating for a portfolio. 

Advisors can then deliver to clients quantitative reports that visualize current ESG holdings, their impact and backtest them against historical data. Investors, along with advisors, can then decide whether to maintain current holdings or to divest.

Costs for the new product were not disclosed and will vary by firm, according to a spokeswoman. 

OpenInvest also offers custom separately managed accounts and passive values-based models, all focusing on ESG factors.

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