As certain federal grants for climate research and infrastructure resilience are put at risk, many state and local governments are expected to step up and bear more of the costs associated with climate change.
There is an undeniable momentum driving sustainable and impact investing. Once viewed as “niche” and “nascent,” the ecosystem of sustainable and impact investments has become one of the most dynamic areas in finance and investing today. But behind the buzz and enthusiasm, there is a vibrant community of discerning investors and hard-working thought leaders, practitioners and field-builders who are pressing ahead to move the entire space forward.
Our work here at Breckinridge offers us a unique opportunity and privilege to partner with individuals like these in a continuing dialogue that stimulates learning and innovation. Whether through meetings with thought leaders and impact experts, in-depth discussions with investment consultants or brainstorming sessions with foundations and endowments, we are intently listening to the signals across the space.
Indeed, we believe that sustainable and impact investing are reaching the mainstream at a brisk pace, primarily in response to growing interest from clients who are beginning to embrace the investment case for sustainability and impact. As the space continues to evolve in 2017, we see five key areas of focus that will shape the conversation and determine how assets will be allocated.
First, we believe that clients are becoming increasingly advanced in their understanding of the investible universe. As such, they are looking for sophisticated investment opportunities in which thorough investment research and analysis is coupled with clear prioritization of sustainability and impact. As part of this “flight to quality,” clients increasingly opt for customized strategies that reflect their individual impact goals.
Second, investors are starting to seek managers that pursue active shareholder/bondholder engagement. While the integration of environmental, social and governance (ESG) factors is an essential building block toward driving impact, some investors believe it is important to go one step further. By reaching out to investees to discuss sustainability-related issues, investment managers serve as critical change agents on behalf of their clients.
Third, as the conversation about impact becomes ever more granular and sophisticated, investors are eager to evaluate the impact of their investments through innovative reporting frameworks. Indeed, impact reporting is arguably one of the most frequently discussed topics among field-builders and practitioners within the sustainable and impact investing space. There is a real sense of camaraderie, with a belief that everyone is learning together.
Fourth, investors of all stripes are expressing real hunger for tools and resources that help evaluate sustainable and impact investments. To be clear, the space is rich in data and insights, but new resources continue to be needed as the space grows and evolves. For example, the Sustainability Accounting Standards Board (SASB) has catalyzed significant interest in sustainable investing by offering a steady stream of tools that facilitate investment analysis.
Lastly, and perhaps most importantly, investors continue to pay close attention to the authenticity of intent in sustainable and impact investing. True authenticity of targeted impact increasingly matters just as much to them as the quality and sophistication of investments. We continue to see a clear generational trend toward investments in which the impact story is clear and compelling – investments that “walk the talk.”
At Breckinridge, we work tirelessly to serve our clients, and we continue to be inspired by the depth and breadth of their interest in sustainability and impact. This has empowered us to be bold, to push our thinking and evolve our analysis. We strive for excellence in all that we do, engage with issuers across sectors, continue to innovate on impact reporting, eagerly participate in industry efforts to develop tools and frameworks, and we truly and authentically “walk the talk” by fully embracing corporate sustainability.
As we discussed in our recent writings, we believe that addressing important social and environmental issues through market-based solutions has never been more urgent, and that investors play a critical role in this process. It is heartening to see the extent to which investors have taken on this responsibility.
But we believe that investors have influence in more tactical ways that matter just as much. By demanding investment excellence and authentic commitment toward sustainability and impact, investors are continuing to challenge managers and advisors to innovate, therefore catalyzing change and driving the entire ecosystem forward.
DISCLAIMER: The material in this document is prepared for our clients and other interested parties and contains the opinions of Breckinridge Capital Advisors. Nothing in this document should be construed or relied upon as legal or financial advice. Any specific securities or portfolio characteristics listed above are for illustrative purposes and example only. They may not reflect actual investments in a client portfolio. All investments involve risk – including loss of principal. An investor should consult with an investment professional before making any investment decisions. Companies mentioned are provided as illustrative examples and do not necessarily represent past, current or future portfolio holdings. This document may contain material directly taken from unaffiliated third party sources, including but not limited to federal and various state & local government documents, official financial reports, academic articles, and other public materials. If third party material is included, it is believed to be accurate, and reliable. However, none of the third party information should be relied upon without independent verification. All information contained in this document is current as of the date(s) indicated, and is subject to change without notice. No assurance can be given that any forward looking statements or estimates will prove accurate or profitable.