When the New York State Common Retirement Fund asks for due diligence on Marathon Oil’s treatment of indigenous populations in South Dakota related to pipeline construction, they get a seat at the table because they own a lot of shares.
In smaller markets and with smaller companies you can use divest more effectively, but these decisions are client driven. We can meet a client’s needs either way through proxy access and other engagement strategies. Right now we need both approaches to be most effective.
Ellis: What you’re talking about is knowing your client and having a values-focused relationship with them that allows for discussion on these kinds of issues.
What about thematic ESG issues like gender equality, access to clean water and using recyclable materials for built infrastructure. Do your portfolios focus on thematic investment issues in support of client priorities?
Gitterman: Definitely, and we believe thematic investing will grow as a segment of ESG investing. There are major issues at global scale that can be engaged by investing in companies that are providing solutions. This is an area where individual and institutional investors are asking for strategies when it’s clear that government response at the federal, state or local level is inadequate.
Ellis: Anything else you would like to say to advisors about the opportunities in ESG investing?
Gitterman: The Global Sustainable Investment Alliance (GSIA) recently reported that at the start of 2016, global sustainable investment reached $22.89 trillion, a 25 percent increase since 2014. If investors can do well by doing good, who would say no to that kind of opportunity?
Paul Ellis founded Paul Ellis Consulting to work with financial advisors who want to integrate sustainable and impact investment strategies for their clients.