SUSTAINABLE INVESTING SOLUTIONS THROUGH MUTUAL FUNDS AND ETFs

Values-based Investing: A strategy based on the guiding principle of investments that align with a set of faith-based or religious beliefs, ethical, moral, environmental or social mandates, aimed at achieving a positive societal outcome. Typically, this approach is executed via negative screening, divestiture, or divestment from companies or sectors misaligned with specific values.

Screening and Exclusionary Investing: This involves the overweighting or underweighting of stocks, bonds and other instruments in portfolios based on their ESG scores or categorically excluding securities, companies or certain sectors or industries as eligible securities based on specific ethical, religious, social or environmental guidelines or preferences. Traditional examples of exclusionary strategies cover the avoidance of any investments in companies fully or partially engaged in activities like gambling, sex-related industries, the production of alcohol, tobacco, firearms, fossil fuels, or even nuclear energy. These exclusionary categories have been extended in recent years to incorporate serious labor-related actions or penalties, compulsory or child labor, human rights violations, and genocide.  Screening can also extend to positive/best in class screening or norms-based screening in which issuers may be selected on the basis that they would outperform peers on specified ESG metrics or exceed a minimum ESG-rating threshold or excluded when issuers violate international standards such as the UN Global Compact, OECD Guidelines or ILO conventions.

Impact Investing: A relatively small but growing segment of sustainable investing, impact investments are directed to companies, organizations, and funds with the explicit intention to achieve measurable social and environmental impacts alongside a financial return. The direct capital in this strategy addresses challenges in sectors such as sustainable agriculture, renewable energy, conservation, microfinance, and affordable and accessible basic services, including housing, healthcare, and education.

Thematic Investing: An investment approach with a focus on a particular idea or unifying concept. Clean energy, clean technology, and gender diversity are a few of the leading sustainable investing fund themes. Investing in green, social, and sustainability bonds or low-carbon-emitting stocks, bonds, and funds also falls into the thematic investing category.

ESG Integration: This investment strategy involves the systematic, ongoing analysis of financially material environmental, social, and governance factors and risks. When deemed relevant and material to an entity’s long-term financial performance, these factors directly influence the buy, hold, and sell decisions of a security.  Within this category of sustainable investing, significant variations exist regarding how ESG integration is deployed in investment portfolios.  That said, no automatic restrictions on the investable universe are implied.    

Engagement/Proxy Voting: Employed either in conjunction with one of the above-mentioned categories or on a stand-alone basis, this approach leverages the power of stock ownership in publicly listed companies and, on a more limited basis, bond investments.  At one of the range, investors may seek information regarding a company’s strategies through direct corporate engagement and exercising proxy voting responsibilities.  But investors can exercise their ownership rights through action-oriented methods to influence corporate behavior, file shareholder proposals, and approach proxy voting in a more strategic manner.   While not owners, bond investors can also leverage their power of scale as investors, but their scope and leverage are more limited.  

It should be noted that these approaches are not mutually exclusive.  In practice, investors often blend several techniques. e.g., ESG integration plus thematic tilts plus active stewardship—to balance risk, return and real-world impact.