The CHERISH Model Portfolio: A Guide to Sustainable and Impactful Investing

Introduction

As investors become increasingly aware of the social and environmental challenges facing the world, there has been a growing demand for investment strategies that align with their values and contribute to positive change. The CHERISH model portfolio is a framework that provides a systematic approach to sustainable and impactful investing, considering the full spectrum of environmental, social, and governance (ESG) factors.

What is the CHERISH Model Portfolio?

The CHERISH model portfolio is a multi-asset portfolio that seeks to maximize both financial returns and positive societal and environmental impact. The acronym CHERISH stands for:

• Climate: Investments that address climate change mitigation and adaptation.
• Health: Investments that promote health and well-being.
• Education: Investments that support access to quality education.
• Responsible Investing: Investments that promote responsible business practices.
• Inclusion and Diversity: Investments that advance equity and inclusion.
• Sustainability: Investments that support long-term environmental and social sustainability.

Benefits of the CHERISH Model Portfolio

• Financial Returns: Studies have shown that sustainable and impact investments can generate competitive financial returns. For example, a 2020 report by the Global Sustainable Investment Alliance found that sustainable equity funds outperformed traditional equity funds by an average of 3.4% per year over the past decade.
• Positive Impact: The CHERISH model portfolio aligns investments with important social and environmental goals. Investors can use their capital to support causes they care about, such as climate change mitigation, healthcare access, and social justice.
• Reduced Risk: ESG considerations can help investors identify and mitigate potential risks, such as climate-related financial risks or reputational risks associated with irresponsible business practices.
• Alignment with Values: Investing through the CHERISH model portfolio allows investors to express their values and contribute to a more sustainable and equitable society.

Asset Allocation

The CHERISH model portfolio allocates assets across a range of traditional and sustainable investment categories. The specific allocation will vary depending on the investor's risk tolerance and financial goals. However, the portfolio typically includes:

• Stocks: Companies with strong ESG performance and positive social and environmental impact.
• Bonds: Bonds issued by governments or corporations that are committed to sustainability.
• Real Estate: Investments in green buildings or affordable housing.
• Private Market Investments: Investments in private equity or venture capital funds that support sustainable businesses.
• Cash: A small allocation to provide liquidity and reduce volatility.

Impact Measurement and Reporting

A crucial aspect of the CHERISH model portfolio is the measurement and reporting of its societal and environmental impact. This involves:

• Setting Impact Goals: Defining specific social and environmental objectives that the portfolio aims to achieve.
• Tracking Progress: Regularly monitoring the portfolio's progress towards these goals.
• Reporting Results: Providing investors with clear and transparent information about the portfolio's impact.

Case Studies

• Health Sector: A healthcare-focused CHERISH portfolio invested in companies developing innovative medical technologies, providing access to affordable care in underserved communities, and promoting healthy lifestyles. The portfolio generated competitive returns while contributing to improved health outcomes.
• Education Sector: An education-focused CHERISH portfolio invested in companies providing access to early childhood education, supporting teacher training, and developing new educational technologies. The portfolio supported educational equity and improved learning outcomes for students.
• Environmental Sector: An environmental-focused CHERISH portfolio invested in renewable energy companies, clean water technologies, and sustainable agriculture. The portfolio contributed to climate change mitigation, reduced pollution, and protected natural resources.

Common Mistakes to Avoid

• Greenwashing: Investing in companies that only superficially adhere to ESG principles.
• Ignoring Financial Performance: Sacrificing financial returns in the pursuit of impact.
• Overlooking Social and Environmental Factors: Focusing solely on financial performance without considering the full range of ESG risks and opportunities.
• Lack of Transparency: Failing to provide clear information about the portfolio's impact and how it aligns with stated goals.

Call to Action

The CHERISH model portfolio offers a powerful tool for investors who want to make a positive impact while achieving their financial goals. By aligning investments with their values and supporting sustainable businesses, investors can contribute to a more just, equitable, and sustainable world.

Tables

Figure 1: Asset Allocation of the CHERISH Model Portfolio

Figure 2: Impact Measurement and Reporting Framework

Figure 3: Common Mistakes to Avoid in Sustainable Investing