Paul: Greg, in your interface with portfolio companies, are you dealing with investor relations or corporate sustainability people?
Greg: It really depends on the company’s size. Intel, for example, has a pretty robust team of sustainability professionals that work with their investor relations team. As you move down the market cap spectrum, you tend to get more responses from investors relations or even communications people.
Paul: Chris, based on your longer tenure in the industry, what can you add to what Greg has said?
Chris: I have a somewhat different take. I see companies embracing this dialogue more seriously over the years. The proliferation of ESG research coming out of mainstream financial firms like UBS, Goldman Sachs and Morgan Stanley is sending a strong message to companies that Wall Street is taking sustainable investing seriously.
This validates what we’re doing at Pax World and demonstrates to companies that Main Street is incorporating ESG analysis into the investment process. Quite frankly, I use ESG research as a risk management tool. It’s just as important as looking at a company’s return on equity or return on assets.
Paul: Chris, what’s your perspective on how the sustainable and impact-investing field will develop over the next three to five years?
Chris: I see more mainstream firms getting into sustainable research. The mutual fund industry is a maturing industry, but ESG analytics is growing. I also see consolidation within sustainable and impact investment firms down the road and more standardization of the ESG analysis process.
Paul: Greg, what about you?
Greg: A recent U.S. Trust study [the 2013 Insights on Wealth and Worth survey] found 69 percent of millennials see their investments as a way to express their “political, social and environmental values” vs. 36 percent of baby boomers. I think what we’re doing at Pax World is what millennial investors are looking for.
Paul: Greg, when you speak with other millennials in the workplace, what are they saying about sustainability issues?