Environmental, social and governance (ESG) investing, once a sideline practice, has gone decisively mainstream, and this is creating real opportunities for investors. These opportunities meet the interests of a wide spectrum of clients, from fiduciaries aligning their portfolios with the realities of a rapidly changing world to clients who are increasingly looking to have their investments express their values.
Better data, refined tools and improved methods have expanded the possibilities across all of those interests. As a result, ESG investing is no longer a carve-out within a portfolio — it is the portfolio for some investors. What was once the province of a small number of family offices and foundations has drawn sharply increased participation among pension funds, insurance companies, nonprofits and faith-based investors.
At Goldman Sachs, the growth of ESG investing has been significant in recent years. We have seen a virtuous cycle in which demand has driven product and service innovation, creating new models for success and driving further demand. As a result, our assets under supervision in dedicated ESG strategies have grown significantly, to $6.5 billion by the end of 2016.
Fundamental to this growth is an increased understanding that a disciplined approach to ESG investing can drive competitive risk-adjusted returns — just as with any other investment. Risk/return profiles of ESG portfolios now mirror the markets and span asset classes, fueling the evolution of impact investment strategies that meet conventional risk/return hurdles, but also include social and environmental impacts that are both intentional and measurable.
World Resources Institute
How does a research-driven, global institute focused on sustainability manage its portfolio for the long term? One way is by leveraging its own research on trends to more effectively steward their endowment while also using this work to create a model for other institutional investors. Here, the World Resources Institute’s President and CEO Andrew Steer and Head of Sustainable Investing Elizabeth Lewis discuss WRI’s objectives and investing approach with Goldman Sachs’ John Goldstein.
Municipal Bonds: An Overlooked Impact Investment?
As interest grows in achieving positive impacts while generating market-rate returns, investors may forget about the opportunity in their own backyards: municipal bonds. Often focused on financing redevelopment, infrastructure and key community needs for education, health, housing and sustainability, municipal bonds can drive ESG impact in addition to providing clear tax advantages. Senior portfolio manager Ben Barber and research analyst Michael Kashani of Goldman Sachs Asset Management explain. Read the discussion.
This article is paid for by Goldman Sachs.
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