In this article, the authors explore six quantitative environmental (E), social (S), and governance (G) strategies to provide insights into best practices for ESG portfolio construction. These strategies offer different approaches to the trade-off between desired ESG attributes and investment performance. They conclude that fully understanding the dynamics of these trade-offs will allow investors to select the strategy that best matches their ethical and financial views.
Free Is a Dangerous Word (Especially during a Pandemic)
by Patrick Geddes & Dan SpierIn the past 18 months, we’ve witnessed some extraordinary changes in how retail stock investors trade, from the broad shift for many brokerage firms toward zero commissions to the jump in trading by individuals in 2020, presumably a result of the pandemic...
Addressing Diversity, Equity, and Inclusion in Public Equity Portfolios
by Mark BatemanUntil January 20, 2021, Condoleezza Rice will have been the highest-ranking African American woman to serve in the executive branch of the US government, having served as secretary of state from 2005 to 2009. With Kamala Harris’ assumption of the vice presidency...
Social and environmental activists have a long history of proposing shareholder resolutions at company meetings. Increasingly, investors are identifying issues toward which they want to take an "activist stance" in their proxy voting.
Recently, major mutual fund managers have spoken publicly of the responsibility of companies and investors, and in many cases implied a new era in their approaches to voting proxies. Larry Fink, CEO at BlackRock, wrote in late 2017: "Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate. Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders."1
While some may be skeptical of the commitment shown in such a letter, the fact that Fink felt compelled to speak publicly on these issues, and used phrases often found among the true believers in the responsible/sustainable investment community ("license to operate"), is evidence of the marketplace’s higher level of interest in these concepts.
Certainly, many people have seen the Fearless Girl statue facing down Wall Street’s bull statue. What most observers may have missed was the announcement State Street made at the time it unveiled the statue—that it was changing its proxy voting policy: specifically, if necessary, it would withhold its proxy votes from the chair of nominating or governance committees where no women serve on the board of directors.2
Whether these changes by big firms are statements of the converted or attempts to greenwash, they indicate a sea change. The new emphasis on the importance of proxy voting provides a significant prompt to any firm not taking its voting rights seriously. When big firms like Vanguard and BlackRock vote in favor of climate change disclosure resolutions at ExxonMobil, it becomes more difficult for small firms to defer to management.
It also becomes more difficult for the same large firms to generally oppose other social and environmental resolutions. Critics have pointed out the inconsistent manner of proxy voting on climate change issues by firms like BlackRock—supporting a resolution at ExxonMobil while still opposing resolutions at other larger fossil fuel companies. One headline summarized the rate of change: "BlackRock and Vanguard’s climate change efforts are glacial."
This article is provided for informational purposes only. The information contained within this article was carefully compiled from sources Aperio believes to be reliable, and it is accurate to the best of our knowledge and belief. However, Aperio cannot guarantee its accuracy, completeness, and validity, and cannot be held liable for any errors or omissions. All information contained herein should be independently verified and confirmed. Aperio does not accept any liability for any loss or damage whatsoever caused in reliance upon such information. Aperio provides this information with the understanding that it is not engaged in rendering legal, accounting, or tax services. In particular, none of the examples should be considered advice tailored to the needs of any specific investor. Aperio recommends that all investors seek out the services of competent professionals in any of the aforementioned areas. With respect to the description of any investment strategies, simulations, or investment recommendations, Aperio cannot provide any assurances that they will perform as expected and as described in this article. Past performance is not indicative of future results. Every investment program has the potential for loss as well as gain. You cannot invest directly in an index.
Aperio is providing this link to a third-party website that displays a research report, article, webcast, video, or other content that we believe may be informational or educational for you. This linked content is presented by a source that we believe to be reliable, but we do not guarantee its accuracy or completeness, including any associated disclosures. Aperio has no control over the nature of the content on, or the availability of, this third-party website.
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Mark Bateman
Director of ESG/SRI Research (Salem, OR)
What are your key responsibilities? I work on the ESG/SRI team and play a couple of roles. First, I work with clients to develop a customized values policy document. This document serves as the road map for aligning their portfolios with their values on environmental, social, and governance (ESG) issues. Second, I stay on top of developments in the ESG research industry to understand what data are available to use in client portfolios.
Describe your key previous work experience. I have been in the ESG industry for more than 25 years. I started at the Investor Responsibility Research Center (IRRC), including stints as a research analyst on military and political issues, as a director of the Environmental Information Service, and as Vice President of Research and Operations. During this time, I served on the original Steering Committee of the Global Reporting Initiative (GRI), helping to develop standards for sustainability disclosure. More recently, I served as the Director of Research for IW Financial.
What is the most interesting aspect of the job to you? I really enjoy working with clients to understand their values and worldviews and then helping to create criteria that reflect those values in their investment portfolios. No two clients have exactly the same values, so every conversation is different.
Describe some noteworthy projects you have worked on that directly impact Aperio’s clients. I helped create the original SRI offerings available on the Aperio SRI/ESG Menu. These offerings can be an off-the-shelf solution for a client or the starting point for a more detailed conversation. I also helped create the online survey that we often use with clients to capture an initial sense of the issues that matter most to them.
What do you like most about working at Aperio? I like the people.
List any committees or organizations you are a member of outside Aperio. I serve on the board of directors for the Sustainable Investments Institute (Si2), a proxy research firm. I also serve in a number of church governance roles at the local, state, and regional levels.
What are some non-work-related things we should know about you? I’m a photographer, mostly nature and my kids’ sporting events. I also like to play—and create—board games.
What postsecondary degrees and/or professional certifications do you possess? BA from Johns Hopkins University; MA from George Washington University.
Until January 20, 2021, Condoleezza Rice will have been the highest-ranking African American woman to serve in the executive branch of the US government, having served as secretary of state from 2005 to 2009. With Kamala Harris’ assumption of the vice presidency...
As many of you likely have seen on our website, Aperio is Latin for “to make clear, to reveal the truth.” We looked in Google translate and found a definition we like even better: “disclose to view.” Aperio has always been a proponent of transparency...
Dear ESG Vendor: Having recently completed a comprehensive review of the ESG data offerings from most of the prominent ESG vendors, we want to share some of what we learned about the state of ESG research and data...