We are all familiar with the medical credo “do no harm.”

For health care systems that already operate under this premise, incorporating the credo into their investment portfolios can be the next step.

Here we define how responsible investing (RI) is helping to change the dynamics between institutional investors, such as health care systems, and the ways they achieve their goals in alignment with their values. We also speak to the growth of the industry and explore how health care systems can incorporate RI into their investment portfolios.

What is Responsible Investing?

What words immediately come to mind when you hear the term “responsible investing”—gimmick, fad, fringe, trade-off, expensive, sin stocks? Or does the term evoke words with a more positive connotation such as green, environmentally conscious, open-minded, shareholder activism, or social conscience? Some investors might think of environmental, social, and governance (ESG) factors, while others might envision impact investing, which seeks to direct capital toward positive impact investments.

PNC Bank has chosen the term responsible investing as the ubiquitous description for such an investment strategy. While an all-encompassing definition appears nearly futile, for our purposes we define RI as a goals-based investment strategy that:

  • proactively supports certain values or causes;
  • excludes or restricts certain portfolio exposures that may conflict with those views; and/or
  • defines a specific, targeted impact and allocates capital toward that objective.

We do not view RI as an investment philosophy per se but rather as an implementation strategy.

We believe aligning your portfolio with your values can help your organization further its mission.

Regardless of how it is implemented, RI requires a keen understanding of values coupled with portfolio knowledge and the ability to customize. Not every issue or concern is always best addressed within an investment portfolio. Where it does make sense, RI can help an organization align its portfolio with its values.

Growth of an Industry

Both institutional and individual investors are driving growth in RI. The U.S. Sustainable Investment Forum’s 2018 Report on Sustainable and Responsible Investing Trends in the United States showed more than $12 trillion (as of the start of 2018) allocated to responsible investment strategies. According to the report, that represents more than one of every four dollars being professionally managed in the United States.[1]

The trend is linked not only to investable dollars but also to demographic trends. In a late-2017 survey from FactSet Research Systems Inc., high-net-worth investors were asked to what extent they want their investment manager to consider strategies seeking both financial and social good.

Interest in Responsible Investing

Source: FactSet Research Systems Inc., PNC


Nearly 80% of respondents expressed some interest in RI. Among millennial investors in the survey, more than 60% expected their wealth management firm to screen investments on the basis of ESG factors. Looking at both the 35-54 and Under 35 categories, one can see that more than 50% of individuals under the age of 55 are significantly interested in RI in their portfolios. From this, we would infer that RI as an industry will likely continue to experience significant growth.

For healthcare organizations looking to align their portfolios with the medical mission of “do no harm,” RI can be the tool to accomplish this.

We will discuss implementation options in a later section, but would point out that, in our experience, even a portion of the portfolio being invested in this manner can be attractive: it does not have to be an all-or-nothing type of decision. We have seen institutions allocating as little as 2% to institutions allocating the whole portfolio to responsible investing practices, and everything in between.

Healthcare Systems: Industry Adoption of RI Principles

Over the past 20 years, an increasing number of healthcare system industry leaders have adopted RI principles. The first example we point to would be Ascension Health, which tasked its Ascension Investment Management, LLC and chief investment officer with redefining “its socially responsible investment guidelines.”[2] The Ascension Health portfolio, with roughly $26 billion in assets, represents a significant commitment to responsibly invested assets.

A second example would be Catholic Health Initiatives (CHI), which was featured in Catholic Health World for its socially responsible investing. The focus in the article was on how “Catholic healthcare providers work together to influence corporations to become better citizens.”[3] This would imply responsible action through shareholder advocacy, which we will discuss in the next section.

The final example we offer is Kaiser Permanente’s Environmental Stewardship Program, which states, “Our environmental stewardship efforts help us advance our mission and our vision for total health—an approach that emphasizes the social, environmental, behavioral, and clinical aspects that shape one’s wellbeing.” As part of this effort, Kaiser Permanente has committed to a number of long-term environmental stewardship goals centered around responsibly managing its energy, food, and water consumption, in addition to a focus on waste reduction, product sourcing, management accountability, and collaboration with communities.[4]


Before implementing RI in a portfolio, it is important to understand where each category falls in terms of the spectrum of responsible investing.

Spectrum of Responsible Investing

Source: Sonen Capital, PNC


In the chart above, we outline the spectrum or continuum of responsible investing, beginning with traditional investing at the far left and moving through the various phases of responsible investing by increasing intensity and, ultimately, impact, culminating with philanthropy at the right-hand side. In the arrows under each investment category, the typical investor objective or goal associated with each approach to RI is highlighted.

A closer examination might reveal that the arrows overlap across the various categories of investment, meaning we believe it is possible to achieve multiple goals/objectives depending on the RI path. Whereas traditional investing at one extreme of the spectrum tends to focus solely on generating competitive total returns, philanthropy at the opposite extreme tends to disregard returns/performance, focusing instead on maximizing social and environmental solutions/impacts.

For healthcare systems seeking to balance competitive returns with their missions, we would generally recommend certain RI strategies more strongly relative to the broader opportunity set: screening, shareholder advocacy or proxy voting, and dedicated strategies.

Negative and Positive Screening

  • Negative screening refers to excluding companies that violate the targeted filters, for example, companies involved in the production of alcohol, tobacco, or firearms. Investors can apply these types of screens as an overlay to (passive) indexes and to active managers in separately managed accounts (SMAs), typically through an outsourced investment manager with RI capabilities.
  • Positive screening refers to purposefully targeting or including companies that exhibit exemplary scores in specific RI metrics. One example of this is screening for companies with high ESG factor scores. Another example is screening for companies that have (relative to peers) high scores in Catholic values adherence. Similar to negative screening, institutional investors are applying these screens as an overlay to (passive) indexes and, to a significantly lesser extent, as an overlay to active managers in SMAs.

Shareholder Advocacy

Shareholders of publicly traded companies are often asked to vote on matters of corporate governance. Conscientious proxy voting can be an effective way to give voice to your values. Whether it is through initiating corporate actions or proposals itself or proxy voting through an outsourced investment manager, healthcare systems can use their equity ownership as a means to sharing the values on which they are formed with the organizations they own in their portfolio. Examples of this might include voting for more women on the board of directors, voting against entering a certain industry, or even for the company to take proactive steps to reduce its carbon emissions.

Dedicated Strategies

The third category, dedicated or impact-specific products, refers to investment products that exist solely to invest in a RI manner. In contrast to the screens, which add RI as an overlay, dedicated or impact-specific products integrate RI as a fundamental building block of their investment portfolio construction process. Examples might be a mutual fund that targets poverty alleviation in sub-Saharan Africa or a mutual fund or investment manager that targets only companies with high scores on specific RI themes.


Responsible investing is a growing opportunity set, from both an investment and mission alignment perspective. Investment wise, new strategies are becoming available, with both individual and institutional assets flowing into these strategies.

Serving Healthcare Organizations: The PNC Approach

PNC Institutional Asset Management’s Healthcare Solutions Group builds on our organization’s long-standing commitment to healthcare organizations. Our team has the experience to understand each client’s unique needs as a healthcare provider and the role that the various asset pools play in contributing to its financial health. In addition to providing investment management services, our group works with our partners across PNC to look at a client’s total picture and deliver a comprehensive, customized suite of financial services products and solutions.