• Sustainable & Responsible Investing (SRI)

Sustainable & Responsible Investing

A Holistic Approach to Sustainable and Responsible Investing

Investing in companies who place sustainable and responsible policies and practices at the forefront of their innovation present, in our opinion, some of the best investment options available in public markets. Those companies that actively treating their employees and communities fairly, exercise transparent governance and policy,  and properly manage and work to reduce their externalities (such as waste, energy, greenhouse gas, and water use) are doing themselves a favor by cutting long-term expenses while hedging against and preparing for future uncertainties.

The issue with many current sustainably focused funds and strategies is that they are exclusionary based (where certain industries or companies are simply removed from the investment pool) or are very narrow in their scope (focusing only on energy). In our opinion these approaches fail to grasp the intent of sustainable investing and ignore key data points that should be taken into consideration.

Our SRI strategy seeks to remedy this by applying a holistic, comprehensive, and constantly evolving SRI screening and evaluative framework (which was developed in-house) over stock picks we find both fundamentally and technically strong.

While philosophically we believe the public market is flawed due to its insatiable appetite for and dependence on infinite growth, we also recognize that investors need options. We understand that, while not perfect, many companies are actively taking great steps in the right direction. Our approach is not exclusionary based and instead compares companies to their peers within the same industry to determine who is making the biggest strides forward (based on the evaluation of over 100 different qualitative and quantitative metrics from our screening process). Companies that score well and pass our traditional technical and fundamental analysis get added to our SRI investment universe.

If you’d like to learn more about our process and philosophy on Sustainable and Responsible Investing please give us a call!

Sustainable & Responsible Investing Framework Overview

Step 1: ESG & Policy Screen



Transparency Screen

Our initial screen determines a company or investments level of transparency. We determined this would start our screening procedure since it filters out companies that do not report on key metrics necessary to make informed decisions around sustainable investments. Companies with low scores are less transparent and share less information regarding social, environmental, and governance practices. We can confidently say that if a company has a poor disclosure score we will not be able to accurately determine if it is a sustainable company since this critical information, key to evaluation, is simply not available. This process helps narrow our investment universe to only contain companies with a desirable level of transparency.


Policy Screen

Our next screen examines which policies the companies in our investment universe have put in place and follow. We examine policies in several core areas including: Social Policies, Environmental Policies, and Governance Policies. Knowing whether a company has put these policies in place is a good indicator that lets us know a company is not only thinking about these things but actively trying to do something regarding them.

Step 2: Resource Efficiency & Externality/Waste Management


Efficient Resource Use Screen

Companies then must pass an efficiency screen where we measure resource use (focused on water and energy). This way we can compare similar companies in similar industries most effectively by determining who is using their resources most efficiently in their class. We extend this screen over a five year time period to see if resource use has been increasing or decreasing. Paired with additional research this tells us if a company has been actively improving their systems over time to use resources more efficiently.


Waste Management Screen

Similar to resource efficiency use we also measure direct externalities produced by companies over a five year period. We focus mainly on greenhouse gas production and total waste generated.  We can then monitor if a company is producing more waste or actively working toward fulfilling waste reduction goals.


Step 3: Supply Chain Analysis



In our next review we look to make sure that companies we deem sustainable are sourcing their resources from other sustainable companies.  There are several factors in supply chains that we take into account when assessing a company’s supply chain. Specifically we are looking at labor and human rights issues of the suppliers, ecological impact of suppliers, and we also determine if the company has sound methods for evaluating their suppliers.

A prime example where disconnects can happen and why assessing supply chains is essential for our review is when looking at Apple, Inc. – while the company is amazingly green and very efficient, they source many of their product pieces from companies with a horrible track records of human right violations and terrible working conditions.  We believe this step is crucial in determining a truly sustainable company.

Step 4: Social & Environmental Review


The forth step of our screen focuses on finding and interpreting several quantifiable and qualifiable metrics regarding a company’s social impacts, community engagement, public perception, news, and local or regional impacts among others.  Analysis of these points helps us to determine that our company picks are not just good on paper but in real and actual practice.


Step 5: Financial Analysis



Once we have narrowed our investment pool down with all the previous screens and reviews we apply our traditional top-down investment analysis model to determine which companies are not only sustainable but financially viable and poised to be solid investments. This helps to mitigate risk and ensures our picks are of the highest possible quality according to our strict standards.

Step 6: SRI/ESG Universe Creation


Once the company passes our screens, reviews, and analysis it will make it into our SRI/ESG Investment Universe. These companies have all passed our standards for transparency, responsibility, resource use efficiency, environmental impacts, and social justice.  Our SRI Investment universe will hold a wide range of different small, mid, and large cap companies spanning each industry sector to fill the needs of different clients’ investment objectives, to ensure diversity in investment options, and to mitigate risk.


Step 7: Monitoring & Continuous Evaluation



Because of the dynamic nature of our world it is absolutely critical that we stay vigilant monitoring and evaluating the companies that make it into our SRI/ESG Investment Universe. We have put several structures in place to capture new developments from these companies that may affect our overall assessment by reaffirming our stance or resulting in a company’s expulsion from our SRI/ESG Investment Universe.  This is a continuously evolving process that ensures only the best companies get chosen and invested in.