Bank of the West, fintech OpenInvest partner on socially conscious investing

Bank of the West is using technology from the fintech OpenInvest to help clients make socially conscious investments.

OpenInvest, which announced its agreement with the San Francisco bank on Tuesday, automates the creation of accounts that align with clients' values. The software replicates investment strategies devised by humans and automatically buys up appropriate securities. This makes the software substantially different from robo advisers, which typically place investors in a basket of exchange-traded funds.

A client might, for instance, care about climate change and refugees, and not want to buy any gun manufacturer stocks. An adviser at the bank can click on those options to personalize the client's portfolio.

“It's giving advisers the ability to deeply customize around the client's personal values and then integrate that seamlessly onto their strategies in their current business process for launching client accounts,” said Josh Levin, OpenInvest's chief strategy officer.

Bank of the West has made responsible investing a mission for some time under president and CEO Nandita Bakhshi. Last October, the BNP Paribas unit committed $1 billion to clean energy financing over the next five years. It also pledged not to finance Arctic oil and gas exploration, and it has stopped providing financing for fracking, shale and tar sands mining.

OpenInvest's software has proprietary features that draw on multiple sources to evaluate companies' environmental, social and corporate governance practices in real time and incorporate that data into investment decisions, Levin said.

The software also provides performance reports and quarterly “impact reports” that state, for instance, how many cigarettes or how much carbon a client may have avoided financing.

Moreover, it can accommodate multiple, possibly conflicting, priorities. “The two most popular issues are the environment and gender,” Levin said. “If you buy a green fund and a gender fund like the SHE ETF, you're going to end up being so overweight on health care and technology that the portfolio becomes financially incoherent. And you also have ethical contradictions. For example, in North America, the utility sector, which includes a lot of energy companies, is the sector with the most female CEOs.”

Taxes owed on the accounts can be managed, too; for instance, the software can sell off stocks that are falling in value to offset capital gains. Bankers can see which stocks are in the portfolio — another difference from an ETF or a mutual fund.

The OpenInvest team collaborated with 270 private bankers at Bank of the West to integrate the software into the bank’s operations and client onboarding.

The program also integrates with Envestnet to access the custodians on its platform.