This is a Huge Market!
1 of every 5 dollars of professionally managed assets in the U.S. is now invested with some consideration for environmental, social, and governance factors (ESG), representing growth of 33% between 2014 and 2016.*
$11.2 trillion in assets are controlled by women investors in the U.S. and 76% of women investors are interested in sustainable investing.**
84% of millennial investors are interested in sustainable investing.***
2016 Report on Sustainable and Responsible Investing Trends by US SIF The Forum for Sustainable and Responsible Investment
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Investing in What You Believe In
“Investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments. This is on both an absolute and a risk-adjusted basis, across asset classes and over time.”
- Morgan Stanley
Source: MSCI ACWI ex Fossil Fuels fact sheet: MSCI ACWI EX FOSSIL FUELS INDEX (USD)
Past performance is not a guarantee of future results and the performance quoted does not represent the performance for any investments recommended by our firm
Research suggests that business efficiency and long-term performance increases when Environmental, Social, and Governance (ESG) factors are integrated into investment analysis and portfolio construction.
It makes sense that a large amount of money is flowing into ESG accounts as indicated in the chart below.
Tobacco-related restrictions saw the greatest growth of any ESG criteria, increasing 432 percent from 2016 to $2.9 trillion
However, climate change was the most important specific ESG issue considered by money managers in asset-weighted terms; the assets to which this criterion applies more than doubled from 2016 to 2018 to $3.0 trillion.
Conflict risk was the leading social criterion at $2.3 trillion assets under management, but assets managed with human rights criteria were next at $2.2 trillion and experienced much larger growth from 2016.
Sustainable Investing = ESG Screening + Shareholder Advocacy + Impact Investing
Examples of ESG: Environmental, Social,
and Governance Factors
Value-Based Screening - Excluding or including industries or sectors based on values or ethics determined by the investor
Sample exclusions: Gambling, tobacco, alcohol, nuclear power, weapons, fossil fuels
Sample inclusions: Renewables, sustainable agriculture systems, companies making environmental stewardship efforts, and/or companies valuing human capital
Shareholder Advocacy
The process through which shareholders use their access or clout to press companies to change their practices.
Step #1 – Company Engagement
Action
•Dialogue
•Inquiry Letter
•File shareholder resolutions
Impact
•Increased transparency for shareholders
•New or improved policies reducing potential risks
Step #2 – Meetings
Cons
•Dependent on others for issue generation
Votes are non-binding
Action
•Private meetings
Impact
•Share concerns with company
•Learn company’s understanding of issues and any plans to address them
Cons
•Any specific information gained is only known by one shareholder
•Brand reputation damage & other potential risks may still exist for shareholders
Step #3 - Proxy Vote or Withdrawal of Resolution
Action
•Voting proxies with ESG criteria, or
•Resolution is withdrawn
Impact
•May become binding
•Company agrees to do more to satisfy shareholder concerns
Cons
•Resource intensive and used by very few shareholders
COMBATING CLIMATE CHANGE THROUGH FOREST PROTECTION
Forest Protection Campaign Results
•Kellogg’s becomes one of first to protect Southeast Asian rainforests and by 2016 implements its policy across 94% of supply.
•Asia’s largest agribusiness Wilmar announces groundbreaking no-deforestation policy with Unilever, publicly thanking Green Century Funds.
•Green Century Funds organizes investor support for Indonesian moratorium on new plantations.
1.5 Gigatons of carbon pollution saved annually from the planet by use of sustainable farming
850 Hectares saved from Slash & Burn
Perhaps you wonder why it is so important to
Protect our planet's Forests
The answer is:
Plants intake carbon dioxide and respire oxygen.
The scientific community has established that excess carbon dioxide from burning fossil fuels is the chief cause of global warming.
Companies that don't take this to heart have increased supply chain risk as well as a risk to their reputation.
Shareholder Advocacy Highlights – as reported in the June 30, 2018 Trillium Report
J.B. Hunt received 21.4% shareholder votes supporting an initiative to set
science-based greenhouse gas reduction targets (sending the message that
meeting the objectives of the Paris Climate Control agreement is a sign of
corporate responsibility that investors want).
Other Shareholder Advocacy Highlights Reported on
In August, 2018, the following resolution was submitted to Tyson Foods, Inc
by As You Sow and American Baptist Home Mission Society:
BE IT RESOLVED: Shareholders request the Board of Directors prepare a
report, at reasonable cost and omitting proprietary information, on Tyson’s
human rights due diligence process to assess, identify, prevent and mitigate
actual and potential human rights impacts.
Status: Pending
Active Shareholder Advocacy 3rd Party Money Managers Available Through Our Investment Firm
The Process of Building Portfolios Using Environmental, Social, and Governance Factors (ESG)
Identify companies that rate the highest on ESG issues as compared to others in their industry
Assess management quality, risk exposure, and exposure to long-term systematic risks
Use best in class determinations of companies' approaches on issues of concern to investors
How we Compare Investments using Environmental, Social, and Governance Factors
Natural Investments Ratings
Evaluates ESG strategies and management of the 165 funds who have a stated SRI or ESG mandate
Began evaluating in 1992
Features sector exclusions, shareholder advocacy openness, and participation in community investing
Scores based on absolute terms of breadth and depth – not a bell curve
Morningstar Sustainability Rating
Based on data provided by Sustainalytics
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Assesses ESG criteria > 6500 companies
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Adds a scoring of controversies for these companies
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Distributes fund scores across a bell curve in each sector within Morningstar categories
Intentional commitment to SRI and ESG values have no bearing on scores. Nor are additional SRI practices considered
Why might investors avoid fossil fuel companies?
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A desire to align investments with climate change needs by avoiding oil, coal, and gas companies.
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To take away the “social license” and diminish the clout the industry has on public policy.
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To re-invest in clean and sustainable solutions now competitive with oil, coal, and gas companies.
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To diminish financial risk associated with oil price volatility and stranded assets such as plants under construction never reaching completion. Expensive offshore or Arctic drilling drains capital that otherwise may be returned to shareholders as dividends.
Your Next Steps
If you like the idea of investing in what you believe in and excluding
sectors and companies that you don't want to support, work with a
financial advisor (me) familiar with socially responsible investing who
can help you determine what’s important to YOU.
These United Nations' Goals are Attainable!
I am an\ Investment Advisor Representative with an Arkansas Registered Investment Advisor firm, Advanced Retirement Solutions, Inc. Our firm boasts investment advisors with many years of experience. My particular expertise is in the Socially Responsible field of investing.
My insurance agencies, TalkMedicare and TalkRetirement are not registered entities and are not subsidiaries or affiliates of Advanced Retirement Solutions, Inc.
I help my clients direct their investment capital to (a) make
money and (b) make a difference with their money to reflect their
priorities for society at large!
My Education & Certifications
1989 -- Bachelor of Science in Agricultural Economics (BSA) with a Minor in Environmental Science –
University of Arkansas
1992 – Master of Science (MS) in
Agronomy – University of Arkansas
1998 – Doctorate of Adult Learning (Ed.D) – University of Arkansas
2012 – Financial Planning Certificate – University of Georgia
2016 – CASL® Chartered Advisor for Senior Living – The American College
2018 - AIF® Professional, Accredited Investment Fiduciary™ - Fi-360
