This is an exciting time for sustainable investing, partly because of all the “capacity building” that is taking place. Capacity building refers to the growing shared effort within financial services to increase the level of awareness and engagement regarding social and environmental issues. As a stakeholder within the global sustainable investing community, LNWM is doing our share of capacity building in a variety of ways.
Working with Clients
This year, we are devoting time and resources to exploring new ways (beyond actual portfolio investments) to help our clients and the broader community align portfolios with issue areas. In January, for example, we began researching a variety of analytical tools that can assess the “health “of a portfolio and how closely it aligns with an investor’s values/areas of concern, as well as ESG (Environmental, Social and Governance) principles.
After quite a bit of effort (demos, testing, actual application), we were able to narrow the universe down to a handful of tools we believe can benefit investors by providing greater insight into: (1) how portfolios perform on a sustainability “checkup”; and (2) what portfolio changes could allow for the attainment of both financial and non-financial objectives.
LNWM client advisors are testing these tools now with current and prospective clients. What we’re seeing is quite a bit of interest and excitement as people learn more about their portfolio’s ESG “hygiene,” leading to more focused conversations about next steps – what can be done to align existing portfolios with values and concerns.
Working with Asset Managers
The way we work with asset managers also leads to capacity building. Our approach is one of engagement and collaboration. For example, if we see a problem or contradiction between some of the portfolio investments and what we or our clients would want, we flag the issue and discuss with the manager what can be done.
Everyone learns something new in this back and forth – us, the asset manager, and our clients. And with that better understanding, we come up with a plan on how our concerns could be addressed. This level of engagement more closely aligns the work of asset managers and investors in the sustainable investing space and leads to better long-term outcomes.
We also have been working with asset managers to develop new options for clients who have well-defined views on specific issues. While we offer portfolios comprised of ESG-focused mutual funds, ETFs, and separately managed accounts that incorporate a broader range of criteria (from basic negative and positive screening to ESG integration), we also know that is not enough. Some clients want a more focused approach. For them, we are targeting pro-active exposures to environmental and social issues via a variety of investment structures. To that end, we are working closely with private equity and debt managers to offer thematic exposures to areas such as renewable energy projects worldwide or even affordable housing here in the Seattle area.
Working with LNWM Employees
Many people here at LNWM are passionate about sustainability and want to do more at the personal level. So we are developing a program that will allow employees to purchase or be awarded carbon offsets. A carbon offset reduces emissions of carbon dioxide or other greenhouse gases to compensate for emissions elsewhere. While buying and selling offsets is usually done by corporations, we are working to support these evolving marketplaces by enabling LNWM employees to participate individually if they choose.
Bottom line: As active participants in sustainable investing for nearly two decades, we are more than ever committed to capacity building: enabling all the stakeholders we work with – clients, asset managers, and LNWM employees – to work toward positive, significant impact at the local, national, and international level.