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Integrating Sustainable Investing: Strategies for Transitioning a Portfolio

Here are several approaches, with an eye toward optimizing ESG outcomes and minimizing tax consequences.

The following article is part four of a series of excerpts from the Morningstar research report, "Integrating ESG Into Your Client's Portfolio," available to Morningstar Office and Direct clients here.

In considering how to transition a client's portfolio toward an environmental, social, and governance orientation, an advisor must keep several different (and sometimes competing) factors in mind, including: the investor's ESG goals and level of intensity and engagement regarding those goals; the ESG profile of the existing portfolio; the opportunity set of ESG-focused strategies within the advisor's available universe; the overall risk and return objectives of the investor; and the tax consequences of any reallocation of capital.