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Investment Approach to Core Issues

An Ethical Balance

While more and more institutions strive to be better corporate citizens and environmental stewards, none are perfect. There is always a balance between positive and negative attributes for any institution. Even those considered icons by many socially responsible investors have issues. Our role is to research, aggregate and weigh the evidence, so we can make the right decisions on your behalf.

For stock investments, our research typically takes us deep into companies’ Form 10-K filings with the SEC, as well as companies’ annual reports, CSR reports, Investor Day presentations or write-ups, quarterly earnings announcements and calls. We leverage a wide range of ESG data via our professional services contract with Bloomberg, but we also use sources like the Dow Jones Sustainability Index, MSCI’s ESG ratings, Barron’s 100 most sustainable companies, Seeking Alpha, and news articles from reputable sources like the Wall Street Journal, Reuters or the Financial Times.

Because we prefer to go deeper into many issue areas, we look for investments that rank well with sources like the Human Rights Campaign’s Corporate Equality Index, or State Street Global Advisors’ Gender Diversity Index. We review emissions reporting scores from one (and often multiple) entities, including CDP (formerly the Carbon Disclosure Project), the Global Reporting Initiative (GRI), and the Task Force on Climate-Related Financial Disclosures. When applicable, we may refer to more industry-specific sources like the Institute for Clinical and Economic Review (ICER), a drug pricing watchdog, or the Roundtable on Sustainable Palm Oil (RSPO), to evaluate an institution’s accountability on very specific issues. We research all legal filings in a company’s Form 10-K, and typically search Institutional Shareholder Services (ISS) and other sources to identify and understand any controversies that may indicate a lack of corporate responsibility.

When our research has been aggregated, we weigh the arguments for and against an investment. Sometimes an institution with demonstrable commitments to a diverse workforce and strong corporate giving is an imperfect environmental steward; another may source 100% renewable energy, but lag in its proportion of women in leadership roles. We seek that institution with strong financial prospects that is, on balance, a force for good. When we find it, we will typically make an investment while also pursuing improvement through shareholder engagement and action.

In our national political system we have the opportunity to vote every two years. In our economic system we vote with our money every day. Our decisions as investors influence corporate labor practices, wages, diversity and equality, climate change, waste and water management, deforestation, the growth of some institutions and the decline of others, the kinds of products that are produced, and much more. When you choose an investment manager, you are in a sense electing your economic representative.

For nearly 40 years, our clients have depended on us to evaluate the weight of the evidence on either side of the social impact scale and make a judgment as to the acceptability of including any given investment in their portfolio. When you make a different judgment, we can customize your portfolio by excluding certain companies or entire industries upon request. Our goal is that you feel proud of your portfolio.

For more information on how Prentiss Smith & Company pursues an ethical balance in our approach to socially responsible investment, please contact us.