As a seasoned financial advisor, my clients are interested in reflecting their values into their investment portfolios. I credit my great-grandfather, my grandfather, and the Callaway Family Foundations for my awareness of corporate responsibility. From an early age, I’ve been keenly aware of the needs of others and the world around me and after having served on the boards of both foundations for almost 25 years, the philosophy of good stewardship is deeply ingrained in my DNA. The work I do with my clients in this space is quite natural.
I had worked as a financial advisor and portfolio manager for almost 15 years at the time of the September 11 attacks. Shortly thereafter, I committed the focus of my practice to Socially Responsible Investing (SRI). Those events changed so many of us that day, and I was determined to make a positive outcome from something that was so devastating.
Since September 11, I have focused on educating and informing both clients and colleagues on the benefits of socially responsible investments. I’ve seen shifts in thought leadership and trends within SRI, which have created Environmental, Social and Governance (ESG) screens for selecting companies--the most current terminology of Sustainable, Responsible and Impact Investing. Terminology isn’t the only thing that’s changing; there is a fundamental shift in the way people are choosing to invest their money. The reality is that investors have a choice. They can choose to embrace organizations that promote social capital along with investment capital or they can choose to not. Increasingly individuals and institutions are choosing to embrace it by investing in a manner that’s consistent with their specific values.
Hard data substantiates this. According to US SIF (The Forum for Sustainable and Responsible Investment), nearly one in eight dollars under professional management in the United States right now — or about $3.07 trillion — follows investment strategies that consider corporate responsibility and societal concerns in some form.
In spring of 2012, Morgan Stanley launched its Investing with Impact Platform to offer a wide range of strategies to help investors with the impact investing process. Impact investment strategies include traditional considerations such as market outlook, industry prospects, company fundamentals and management’s ability to achieve its objectives. What makes it different is Investing with Impact is an investment approach that aims to generate risk-adjusted financial returns while also supporting positive environmental and/or social impact. In short, the goal is to create financial, social and environmental value. In business we call this the triple bottom line. I believe this positive shift will continue and that it will become more commonplace as more investment opportunities arise that are attractive, appropriate and accessible to a broad base of investors across a wide spectrum of risk appetites.
Last fall, I attended the SRI Conference on Sustainable, Responsible and Impact Investing, the largest annual gathering of SRI industry professionals in the country. Attendees included investment professionals, managers, community development, mutual fund companies, asset managers, social research organizations, proxy voting organizations, faith-based institutional investors, and social change nonprofits. During the conference there was a lot of discussion about how the investment paradigm itself is shifting as people want to know how and where their money is being spent.
A recent example of this paradigm shift occurred early this year following the tragic and heart-breaking attack at Sandy Hook Elementary in Newtown, CT. The California State Teachers Retirement System (CalSTRS) voted unanimously to divest holdings in the manufacturer of the Bushmaker semiautomatic rifle, that was used in the attack, in hopes that other investors would follow suit. In February, the New York City’s Teachers’ Pension Fund, which at the time was valued at $46.6B in holdings, announced its $13.5M divesture in any gun holdings. I mention this only as an example of how more people are becoming aware of what they are investing in and creating a financial voice when their investments are not in alignment with their collective personal values.
Having had a front row seat to watch the changes in this space over the past dozen years — and having seen the stunning rise in sustainability reporting and corporate reporting that includes both social and environmental impacts, I believe that in 20 years, our children and grandchildren will wonder why we didn’t start paying attention sooner. In fact, I foresee investing with an impact as being a backbone to most, if not all, investment portfolios.
Mark Callaway is a senior vice president with the Indigo Group at Morgan Stanley in Atlanta. He may be reached at 404-264-4288 or at http://www.morganstanleyfa.com/callaway/