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ESG & SRI Investing
In recent years, many companies in the United States and around the world have shifted their priorities to include parties outside of just shareholders. Stakeholder theory and corporate social responsibility have encouraged firms to integrate their employees, customers, suppliers, communities, the environment, and more into their business strategies. As such, your investment dollars can increasingly be used to promote positive shareholder responsivity beyond pure financial returns.
Furthermore, there has been a growing number of investors who want to invest in firms which are positively affecting all stakeholders. Different sustainability-focused strategies have emerged as ways for people to accumulate wealth by investing in companies that are aligned with their ethics.
Sustainable Investing Growth in the United States ($B)
Source: US SIF; Moving Forward With Sustainable Investing A Roadmap for Asset Owners (2020)
We take a long-term approach to investing which can be at odds with our culture's increasing fixation on instant gratification. Stocks of publicly traded companies grow in value as the companies increase revenues and grow earnings. All growth and development takes time; discipline is required to avoid the pitfalls of short term thinking. This is not only true of the rigor required for successful investing, but also with positive societal change. Whether it is protecting the environment or improving the quality of lives, a long term perspective is a necessity. Our focus on investing in high quality stocks for extended periods of time goes hand in hand with corporate shareholder responsibility, as societal change is inherently long term in nature.
Using peer analysis, we proactively consider ESG factors and opportunities in the portfolio construction process. This allows us to construct a fully Diversification Targets portfolio where relevant financial criteria is used alongside ESG factors to measure a company's exposure to ESG risks, and their plans to manage these risks.
Sound fundamental analysis is the foundation of all investment strategies. Quantitative approaches can be a highly impersonal "black box" that eschews what is important to you. Thematic or negative screens can result in an unDiversification Targets portfolio that is vulnerable to excessive volatility.
Matt Lagan, CFA
Chair of the Impact Investing Committee
Our impact investing legacy
In addition, for investors or institutions seeking to align their investments with their values or mission, we have offered a more traditional exclusion-based responsible approach for over twenty years. We categorize this approach as Socially Responsible Investing (SRI). SRI clients consult with our investment management team to impose restrictions to exclude specific companies or industries from portfolios as their respective business practices conflict with our client's social, ethical, or moral mission statement.
Through integration of ESG factors and screening tools into Congress’ research process, a holistic view of corporate conduct is created. While subjective in nature, names in the portfolio are those that we believe are industry leaders with regards to disclosure, resource efficiency, and positive societal impact.
In gauging a company's preparedness to handle ESG risks, we look for best practices across a range of issues including, but not limited to:
We offer customized equity portfolios that avoid exposures to companies or sectors that conflict with your social objectives. Common examples of exclusions include manufacturers of fossil fuels, weapons/firearms, alcohol, and gambling. In addition, we have a long history of working with faith-based organizations to meet their requirements. In particular, we offer screening based upon the United States Conference of Catholic Bishops directives.