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Integrated Approach to Sustainable Investments: Balancing ESG and Financial Performance

This report explores the intersection of sustainability and investment, providing a comprehensive framework for investors on Sustainable Investment strategies. It defines sustainability and highlights the importance of Environmental, Social, and Governance (ESG) factors in investment decisions. Notably, it underscores that there are no trade-offs between financial returns and strong ESG performance. The report also evaluates various funds, demonstrating how sustainable practices lead to enhanced social responsibility and good governance, supporting the idea that ethical investments can also yield financial gains.

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Integrated Approach to Sustainable Investments: Balancing ESG and Financial Performance

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  1. Sustainableinvestments Sustainability Framework for Investors Lysis Bourget-Vennin Suday Jain Vanessa Caron Jimmy Huang

  2. Agenda • Definingsustainability – Market angle • Our definition • SustainableInvestmentstrategy • Evaluation of the Funds • Conclusion

  3. DefiningSustainability – Market angle sustainabilitymeansmakingeverydaybetterfor people and the planetthrough how weinnovate and how weact. – P&G principleof a triple-bottom-line. This meansmanagingouroperations and growth plans in a waythatenhances social and economicbenefits, whilestriving to minimize the environmentalimpact associatedwithdevelopment. - Suncor committed to developing the most efficient power systems in the world. This helps the environment and ourcustomers by enablingthemto do more, usingless. –Rolls Royce • sustainableinvestmentmeanstakingaccount of environmental, social and governancefactors - known as ESG - across all ourday-to-dayinvestment business. - CalPERS Weviewsustainabilityfromtwo perspectives: one, as a valuabletooland skill set weofferour clients, from life cycle analysis to reducingenvironmental impact to communityengagement; and two, as the mostcompellingway to conductourselvesprofessionallyand live up to ouremployees’ expectations –SNC Lanvlin Manifacturingsustainability - beyondgreen - GE

  4. Sustainability - revisited • Input and outputs are not beingdepleted over time • 3 factors or equalimportance: Environmental, social, and governance. • Long-term vision for innovation and growth, consideration for the future

  5. Environment, social and governance, or ‘ESG,’ performance, iswheresustainability and capital markets converge.

  6. SustainableInvestmentStrategy

  7. Investmentstrategy- Criterias • Interdependence of ESG factors • No tradeoffsbetweenfinancialreturns and ESG performance • Morallyconscientiousinvesting • Financial critieria: Benchmark, expense ratio, turnover ratio, asset class, total rate of return, confidence intervals

  8. Environmentalsustainability, social responsibility, and good governance are interdependent • Environmental • sustainability Social Responsibility Good Governance

  9. No tradeoffsbetweenfinancial performance and esg • Sustainabilityis the root of innovation • Correlationbetweenfinancial performance, not causation • Equalweights for bothfinancial data and ESG

  10. MorallyConscientiousInvesting • Consulting a moral stance on the question of humanfreedom and autonomy, webelieve: • Weshould focus efforts towardsinvesting in companiesthatpromotes the prevention of negativeexternalities • Weshould not bedivesting in companiesthatoffersociallyirreesponsiblegoods and services

  11. Morallyconscientiousinvesting • No judgement on whatactivities free agents should or should not engage in because: • There is no quantitative method to measureharm • Undermineshumanagency and autonomy • Sustainable efforts should not bebased on arbitrary values whichinvestors impose onto others • Focus on preventingharmoriginatingfrom • an external source

  12. Financial Criteria • Benchmark • Expense Ratio • Turnover Ratio • Asset Class

  13. Abbe sri fund

  14. 3-year rate of return: -10.04% • 3-year benchmark (Russell 2000 index): -9.35% • Expense Ratio: 1.25% • Turnover Ratio: 252% • Asset Class: Small Growth

  15. Winslow green growthfund

  16. 3-year rate of return: -26.69% • 3-year benchmark (Morningstar Small Cap Core): -12.28% • Expense Ratio: 1.20% • Turnover Ratio: 113% • Asset Class: Mid-Cap Growth

  17. Calvert social investmentequityfund

  18. 3-year rate of return: -3.68% • 3-year benchmark (S&P 500): -15.43% • Expense Ratio: 0.67% • Turnover Ratio: 51% • Asset Class: Large Growth

  19. Confidence INTERVAL testing

  20. Our recommendation • Calvert Social InvestmentEquityFund

  21. Key points • Sustainableinvestmentsincorportate ESG performance withfinancialreturns, withouttradeoffs. • Environmental and social leadership is compatible with profit. Calvert shows commitment to ESG and strongfinancial performance. • High performingfundwithlowriskensuresfinancialstability and thussustainability.

  22. Thankyou. • Questions?

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