Embed The SDGs As Immutable
Holly Ruxin is the founder of Montcalm TCR LLC, a San Francisco-based wealth management and capital markets trading firm. She leads the firm as CEO and chief investment officer based on the values of integrity, collaboration, engagement and client sustainability. She began her investment career 20 years ago at Goldman Sachs in the fixed income derivatives arena and has led private client teams at Morgan Stanley, Montgomery Securities and Bank of America.
Her process for providing long-term benefits to investors across the 21st century sustainable economy is very clear. “First, vet the most scalable opportunities for performance and risk using the best tools of traditional finance, then integrate ESG and impact factor analysis.” Ruxin believes the next step is critical to the use of existing and the creation of new product strategies. “It involves embedding the UN Sustainable Development Goals (SDGs) as immutable to this process,” says Ruxin. “This global framework provides the opportunity for collaboration between the forces of economy and the social needs of civil society. It has also been adopted for this purpose by 150 nations worldwide.”
Both Svidler and Ruxin encourage financial advisors to carefully consider the risks to investors and their practices of not engaging their clients in conversation about sustainable and impact investing, regardless of the advisor’s comfort level in discussing ESG metrics and their application to portfolio diversification.
Risks To Investors
Some investment risks include not participating in the growth potential and low-cost scaling of new technologies and companies that are disruptive to vital sectors of the economy. These include renewable energy sources, low carbon battery, electric vehicle (EV) and driverless vehicle technologies, Blockchain and cryptocurrencies, artificial intelligence (AI) and more efficient management and use of scarce resources like clean water to name a few.
Stranded asset risk relates to the potential for surplus proven reserves of coal, oil and gas, and the valuation that these unburnable fossil fuels represent on the balance sheets of public and private firms in the energy sector.
Power purchase agreements (PPAs) issued to provide long-term supply from coal-fired power plants may also create balance sheet risk for energy suppliers and consumers during the transition to a low carbon economy.
Risks To Advisors
Many advisors offer holistic financial planning services that include long-term investment strategy guidance for clients while the demand for inclusion of sustainable and impact portfolio solutions continues to be investor driven. Relationship risk, as indicated in recent investor surveys, is that women and millennial investors are not offered the integration of ESG factor analysis for their investment portfolio strategies. Absent such integration this risk potentially reduces the value of a practice for the senior advisor preparing to transition it to the next generation, and could affect the senior advisor’s own retirement and succession planning.