Sustainable investing is at once intuitive and confusing; it seems like the right thing to do, but there are many different ways to do it. It promises a contribution to solving global issues, but perhaps at the expense of investment returns. It represents new risks, opportunities, and ways of doing business in a rapidly changing world of finite resources. At TIFF Investment Management—a not-for-profit outsourced CIO firm managing approximately $9 billion on behalf of roughly 600 not-for-profit member institutions and this author’s employer—environmental, social, and governance (ESG) research is one component of the manager selection process.
Investors need not bear the weight of the world to implement an effective sustainable investment strategy and make a difference through thoughtful capital allocation. Sustainability issues are business issues that affect corporate value, and investment analysis must consider ESG information to be considered complete; for example, energy use is a cost, and different sources of energy present different risks. Poor supply chain management, including the use of child labor, can destroy a brand. Diverse and independent boards are often more effective than homogeneous and intertwined ones.This is an excerpt from a longer article. Please download the PDF to read more.