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Making Sense of Sustainable (ESG) Investing, an Introduction

Sustainable Investing, also known as socially responsible investing, is the process of incorporating environmental, social and governance (ESG) factors into investment decisions.  Individuals who invest in sustainability choose companies with the purpose of achieving their personal goals plus obtaining their desired financial return.


There is growing interest and work in the field of sustainable investing.  It is something that Curran has been evaluating for some time now.  Curran is taking sustainability seriously, leading me to return to my (MBA) alma mater, NYU Stern School of Business, to further my knowledge of the field.  I enrolled in a Sustainable Finance and ESG Investing course to learn more and begin evaluating how we can incorporate sustainability into our investment process, meeting the needs of investors without compromising the ability of future generations to meet their own needs.  

     This will be the first in a series of writings on the topic and will address how Curran can meet the needs of interested investors.  Many investors want to invest in a portfolio that ideally reflects their values, companies that serve a social purpose or at least do no harm.   It has long been the widely held view that to achieve this would sacrifice an investor’s total return.   Further, we had no means of measuring sustainability.                

     To begin let’s attempt to define the terms Sustainable (investing) and ESG.  The first thing that I learned is that the two terms are used interchangeably.  Sustainable investing is a broad term for an investment discipline that considers (E) environmental, (S) social and (G) governance factors and their impact.   These considerations are integrated in the investment decision process.  

  • Environmental (E): takes into consideration a company’s environmental and natural resource footprint.  
  • Social (S): considers how a company manages its relationship with employees, suppliers, customers and the communities in which it operates.         
  • Governance (G): evaluates management policies, transparency, earnings quality and capital structure (leverage).

     At Curran it does not come as a surprise that in many respects we have always been mindful of sustainability, particularly governance factors.  Our companies score well on earnings quality and capital structure.   We invest in the highest quality companies which generally possess high earnings quality and strong balance sheets, with low levels of leverage.  Further we have generally avoided controversial industries that are often excluded from consideration in a Sustainable portfolio.  Many but not all of these industries which have been excluded in our portfolios are as follows: adult entertainment, alcohol, defense, fossil fuel, gambling and for most of our history - tobacco.  I added the caveat for tobacco because many longtime clients will remember that at one time, many years ago, Philip Morris had been a significant holding.  

     Curran has worked with its clients over the years to avoid investment in companies that violate their ethics and principals.  We can effectively screen out companies in controversial businesses and have been doing this for our clients throughout our history.  We refer to it as socially responsible investing.   For instance if an investor wants to avoid defense companies, we can effectively avoid buying them in the portfolio by placing a restriction on the client’s account.       

     Sustainable investing offers clients and prospective clients the opportunity to invest in a portfolio that positively reflects their views and values.  Further it can be done earning a competitive total return over the long term.  We now have the ability to incorporate the analysis of environmental, social and governance factors into an investment portfolio of equities.  An investor is no longer limited to avoiding companies in contentious industries such as tobacco or defense manufacturers.  We now have the ability to take proactive measures constructing a portfolio of high quality and sustainable companies.  

At Curran we look forward to sharing our commitment to sustainability and offering clients the opportunity to invest in a portfolio that reflects their values.     

Feel free to contact your Curran Relationship Manager or a member of the Curran Investment Committee with any questions.   

Sincerely,

https://static.twentyoverten.com/5a4258bbacdea1742455dc1d/lcyhGyDmsIx/1554930607886.png

Kevin T. Curran, CFA
President & Chief Investment Officer

Curran Investment Management® is Defining Quality®

Please check with your Curran Wealth relationship manager,
 
or contact Curran Wealth Management if you have any questions.  
 518.391.4200
info@curranllc.com

The material contained in this article is for educational and informational purposes only.  The information herein is considered to be obtained from reference sources deemed reliable, but no representation or warranty is made as to its accuracy or completeness. It is not, and should not be regarded as “investment advice” or construed as a “recommendation” or an offer to buy or sell a security.  CIM, LLC does not provide tax or legal advice.  No one connected with CIM, LLC can ensure tax consequences of any transaction.  The information contained in this article may not apply to your personal circumstances.  Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation.