Roberts: When we were interviewing social partners, our focus was on impact and how we could measure that, not the ESG metrics of issuers. Sustainalytics does our annual report, which is an iterative process. We spend a lot of time talking about what’s important to measure and issuers are starting to see the value in being more transparent about things that are part of their mission and are bringing those to the forefront.

Farrington: With that said, however, in the municipal bond market today, the process of impact ratings disclosure is practiced primarily in municipalities that have the staff resources to do it. Our fund focuses on communities that need the capital, but may not have the resources to pursue the ratings.

For us the better story is to focus capital on under-served communities, and there are enough opportunities to scale that process in the market without sacrificing return to do so.

Ellis: Can you give our advisor readers an example of stakeholder engagement within the fund’s holdings?

Dearborn: The Social Impact Report written by Sustainalytics spotlights organizations whose bonds the fund is capitalizing and describes the services the organizations provide. This allows investors to identify what their money is doing in various communities.

We own Sustainable Neighborhood Bonds issued by the New York City Housing Development Corp., which manages Arbor House in the Bronx. It’s a LEED certified, multi-use building with a hydroponic garden on the roof that provides jobs for local people and sells to markets in the city. The superintendent lives on sight and there’s a health-care facility for residents in the building. There’s a waiting list to rent in the building, which makes it a good credit risk for the fund.

We visited the building and the best part of that for me was talking to the residents about how much they care for the place. It was a powerful experience to know that our fund is supporting that community.

Ellis: How are your conversations with investors and advisors about the fund going?

Dearborn: We’ve been overwhelmed by requests from advisors and investors who understand the social impact element of our story and want to learn about the fund. It’s been great for all of us to be part of this process.  

Paul Ellis founded Paul Ellis Consulting to work with financial advisors who want to integrate sustainable and impact investment strategies for their clients.

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