How to incorporate sustainable investment in your portfolio
3 Key Takeaways Sustainable Investing – WealthiHer Network Series Featuring Brown Advisory
What are the growth opportunities and challenges of different market sectors? How can we all take steps to be investing sustainably? Elizabeth Hiss and Louisa Cottress from the Brown Advisory were joined by Karina Jaya-Ratnam from WealthiHer to discuss.
What is sustainable investing from a company’s perspective?
Investing sustainably is a discipline that considers environmental, social, and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact.
It’s a framework for understanding the kind of non-financial information that exists around a company to make better investment decisions and to understand them more holistically.
In fact, last year alone, on the order of 40% of all fund flows went into funds that were managed sustainably both in the UK and the UK.
Also, around a third of the assets managed globally fall under some banner of ESG or sustainable investment.
Is there an asset class that is particularly suited to sustainable investing?
Public equity investment, typically the most common to make up the bulk of someone’s portfolio, is an enormous area of sustainable investment opportunity.
However, an area that is often untapped in the ESG space is fixed income. The debt markets significantly dwarf the equity markets overall, providing companies with a means of raising enormous amounts of capital. This will be critical in order for companies to fund and implement the large-scale, capital-intensive transition towards a sustainable future.
Green bonds* are a particularly interesting fixed-income instrument for sustainable investing. They are a designated type of debt issuance that must satisfy a sustainability-driven end-use, such as financing energy-efficient projects, pollution prevention, and climate change mitigation. In the last year, green bond insurance passed $2trillion, with 56% of the green bond market issued in the UK and the EU.
3 steps to incorporate sustainable investment in your portfolio
Step 1) Discovery Phase
It is important to be clear on the core values or issues that are significant for you and that you would like to include in your investment goals or exclude from your portfolio. Identify areas of the market you would like to support with your investments as well as those areas which may be objectionable to you.
Step 2) Screening your portfolio
Know what you own.
Conduct a full examination of your portfolio in order to know and understand all the holdings you have. Make a full list of all the companies in your portfolio and identify any objections you may have with where and how your money is being allocated. Does the current state of your portfolio align with your values today?
Step 3) Fixed Income Allocation
Fixed Income Allocation can be a simple and effective way of putting your sustainable investment goals into practice, without compromising returns.
Green bonds, fixed income allocation, and other sustainability-orientated bonds are an accessible way of getting into sustainable investment and can be low-cost and seamless to integrate into your portfolio.
Meet the speakers
The WealthiHer Network featured Louisa Cottrell from Brown Advisory’s UK office and their US Expert Elizabeth Hiss for a fireside chat with Home Growns Jessica Barlow.
Louisa and Elizabeth both gave an outlook on sustainable investing – highlighting the growth opportunities and challenges of different market sectors—and just how we can all make steps to be investing sustainably.
You can catch up here (Zoom recording)
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