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Investors often face the decision of choosing between different types of portfolios to align with their financial goals and values. The below description of the portfolios and explanation of sustainability preferences aims to provide you with a comprehensive understanding of the distinctions between Robo-Advisor portfolios with and without sustainability features.

Core portfolios

Core portfolios, often referred to as conventional or mainstream portfolios, primarily focus on financial performance metrics. Investors in core portfolios assess investment opportunities based on factors such as historical returns, risk levels, and financial indicators of companies.

While financial gains are paramount in these portfolios, other considerations such as a company's impact on the environment, its social practices, or the effectiveness of its governance structures might not be explicitly factored into investment decisions.

The main objective of core portfolios is to maximise financial returns within acceptable risk parameters. Although it is possible that financial success can positively contribute to a company's overall sustainability impact, as profitability may enable allocation of resources towards corporate social responsibility (CSR) initiatives, investment in sustainable technologies, or other energy-efficient or environmentally friendly innovations, commitment to sustainability is not a given alongside financial success and will vary per investee company. Environmental, social, and governance (ESG) factors do not form a part of investment objectives of core portfolios. 

ESG portfolios

ESG portfolios, on the other hand, introduce a more comprehensive set of criteria into the investment decision-making process. ESG stands for environmental, social, and governance, reflecting the three pillars that guide the evaluation of potential investments.

Companies included in ESG portfolios are assessed not only on their financial performance, but also on their environmental impact, social responsibility, and governance practices:

• Environmental criteria: This includes evaluating a company's impact on the environment, such as its carbon footprint, resource usage, and commitment to sustainable practices
• Social criteria: Social considerations involve assessing a company's relationships with its employees, customers, and communities. This may include diversity and inclusion, labour practices, and community engagement
• Governance criteria: Governance evaluates the effectiveness and transparency of a company's leadership and decision-making processes. It includes factors like board structure, executive compensation, and anti-corruption measures

ESG portfolios aim to align investments with ethical and sustainability goals, recognising that companies with strong ESG practices may be better positioned for long-term success. Investors in ESG portfolios often seek not only financial returns but also to positive contributions to societal and environmental challenges.

To learn more about key concepts regarding sustainability preferences, read this FAQ and our Explanation of Sustainability Preferences website section. For more information on data limitations, read this FAQ and the available sustainability -related disclosures on our Trading website.