John Quealy, CPA is the Chief Investment Officer of Trillium Asset Management, LLC, and Portfolio Manager of the ESG Global Equity strategy. He oversees the management of all investment strategies and portfolio construction at Trillium. He joined the firm in 2018 and has extensive experience in sustainable investing.

Russ Alan Prince: Tell us about Trillium Asset Management. What sets your firm apart from other asset managers running ESG strategies?

John Quealy: Trillium Asset Management is an active, ESG-focused asset manager based out of Boston with offices in San Francisco, California, and Edinburgh, Scotland. We currently manage over $4 billion in assets across 9 core, growth, global, and thematic-centered equity strategies (as of 9/30/22).

One primary differentiator of Trillium is that we have been solely focused on ESG investing since our founding in 1982. So, long before ESG was even in the vernacular of asset managers, Trillium was paving the way to bring sustainable investing to the forefront of the industry. In that sense, Trillium truly is a pioneer with more than 40 years of experience in this space.

Trillium’s investment hypothesis centers around the belief that the best long-term investments are found in companies with above-average financial characteristics and growth potential that also excel at managing environmental risks and opportunities, societal impact, and corporate governance impact. We believe a company’s commitment to and implementation of these factors are instrumental in creating a competitive advantage and building long-term shareholder and stakeholder value. So, our investment process applies both rigorous fundamental analysis with ESG research and analysis to uncover these opportunities.

Another unique quality of Trillium is that we consider it fundamental to our mission to engage with the companies we hold in our portfolios. We employ an 8-person Shareholder Advocacy team to do that work. Ultimately, we want to partner with our portfolio holdings companies to help them improve their ESG policies, practices, and impact—not only because we believe it contributes positively to their long-term share price performance, but also because we believe it is the right thing to do. 

Prince: Critics of ESG investing have pointed out inconsistencies in the practices of ESG rating agencies and a lack of standardized corporate reporting. What role do outside ratings and corporate reporting play in Trillium’s investment process? 

Quealy: At Trillium, we view “ESG” as critical data meant to help inform all of our investment decisions, not an investment style. And like many managers who incorporate ESG into their investment process, we consider data from outside providers; however, we are not reliant on third-party ESG scores in our investment process. We apply our own diligence, intellectual capital, and judgments in analyzing this data to make investment decisions. 

It is also important to know that Trillium takes a holistic approach to analyze ESG data and fundamental financial data; our portfolio managers and analysts work collaboratively from the onset of the research process to develop a deep understanding of both the fundamentals of a company and its sustainability and ESG profile. ESG analysis isn’t a one-step screen or an add-on performed at the end of the research process. We believe this holistic approach leads to a more complete picture of the investment opportunity, which over business cycles, will help deliver stronger performance. 

Prince: What is Trillium’s economic expectations for 2023, and what would you say to a prospective investor who is on the fence about investing in an ESG strategy given recent controversies?

Quealy: Based on our current work, it is our firm expectation entering 2023 that the Fed will continue to raise interest rates until we see considerable softening in the employment numbers—not just in jobs being offered, but also in increased unemployment numbers. And right now, our labor market is very tight. 

We conclude there is a strong probability for a recession to emerge in 2023, with one indicator being the inverted yield curve, which we expect will become even more inverted. In addition, the Institute for Supply Management shows new orders trending down; regional Federal Reserve indices are trending down, and leading economic indicators on a year-over-year-basis are also trending down currently over down 2.7% versus a year ago, with anything down minus 0.6% being a strong indicator of recession.

With recession will come a decline in corporate earnings, and we do not assume that any meaningful negative revision has been fully priced into the market yet. Declines in earnings are inevitable with demand declines and increased unemployment. Through the end of 2022, we’ve seen market declines related to corporate valuations as interest rates went up; however, we have yet to see a considerable markdown in earnings expectations, and we anticipate that we will in 2023.

For example, how are we managing our core domestic portfolios in response to our expectations? One important way to produce alpha in a down market is to protect on the downside. We will continue to look at risk avoidance and what companies are doing to protect themselves: Are they conservatively positioned with respect to debt? What is their interest coverage? What is their earnings stream? Are their earnings diversified? We will focus on every company in the portfolio’s financial characteristics to make sure we see a clear path to continued earnings.  

For those considering investing in ESG strategies, Trillium’s in particular, I would say this…all markets have combinations of elements that are cyclical and secular, and one shouldn’t expect any investment style to outperform in all market environments. There will be periods, like 2022 for instance, when areas of the market we aren’t participating meaningfully in, such as commodities, because we don’t currently see positive fundamental or ESG characteristics that are aligned with our longer-term investment horizon and investment objectives, will outperform our core strategies. As long-term investors, we are looking to invest in companies for several years versus making shorter-term, more reactionary decisions. Especially as international economies adjust to post-pandemic supply and demand dynamics and the tragic impacts of the Ukrainian invasion by Russia.

In the US and Europe, we view the recent challenge and scrutiny toward ESG investing as a mix of expected, healthy rigor and review of innovative financial products by regulators, along with seemingly more headline-driven or obstructionist initiatives. As mentioned above, for long-time and ESG specialist asset managers like Trillium, we firmly believe in ESG integrated investing not only because of its capacity to contribute positively to long-term performance, but also because we believe it is the right thing to do. 

RUSS ALAN PRINCE is the Executive Director of Private Wealth magazine ( and Chief Content Officer for High-Net-Worth Genius ( He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals.