ESG, Sustainable Investing’s Inherently Active Process Helps Investors Align with Their Goals, Finds Paper
June 18, 2020
Buttonwood Communications Group
Washington, D.C. – June 18, 2020 – Sustainable investing inherently involves active decision-making, concludes a new white paper, Sustainable Investing is an Active Process, from the Investment Adviser Association’s Active Managers Council (AMC). In addition, the paper observes that “the traditional fully active approach allows for a more nuanced consideration of quantitative and qualitative factors, which helps investors tailor their portfolios to their sustainability goals.”
In addition to integration with investor goals, actively managed approaches to sustainable investing focus on a tailored assessment of individual investments, a future-focused evaluation of risk and opportunity, a holistic approach to portfolio risk management and a long-term commitment to stewardship. These activities supplement insights from sustainability ratings, which serve only as a starting point of analysis. In sum, active approaches take the long view, assess not just short-term risks but also the direction of long-term trends.
Key findings include:
- Sustainable Investing is Inherently Active – Sustainable investing inherently involves active decision-making that begins with an assessment of the materiality of sustainability issues. Perhaps the most compelling evidence for the subjective nature of the process is the dispersion of the sustainability ratings used in the index-based approach.
- Active Approaches Take the Long View – The in-depth nature of the active research process makes it possible for advisers to assess not just short-term risks that are visible in the current data but, even more importantly, the direction of long-term trends and how they will affect companies.
- Traditional Active Approaches Help Investors Align with Their Goals – The active approach is adaptive – able to react to innovation and changes in the environment and to quickly evaluate how they impact the achievement of investor goals.
“Sustainable investing isn’t ‘set it and forget it.’ The materiality of sustainability issues is changing constantly,” noted IAA President & CEO Karen Barr. “Active managers can help investors stay on top of these changes and achieve their long-term goals.”
To review the paper, Sustainable Investing is an Active Process, or learn more about active management, please visit www.activemanagers.com.
About the IAA
The Investment Adviser Association (IAA) is the leading trade association representing the interests of SEC-registered investment adviser firms. The IAA’s more than 650 investment adviser member firms collectively manage assets in excess of $25 trillion for a wide variety of institutional and individual investors. For more information, visit www.investmentadviser.org or follow us on Twitter, LinkedIn, and YouTube.
About the AMC
The IAA formed the Active Managers Council to support education and research on the value of active management for investors and the capital markets and to engage on relevant public policy issues. For more information, visit www.activemanagers.com or follow us on Twitter, LinkedIn and YouTube.