Sustainable investment themes are varied and the very word means a lot of different things to different people. Morgan Stanley, a large and reputable investment bank has recently come out with a study as they and a lot of the investment community attempts to quantify SRI investments and the role in a portfolio.

They define sustainability as follows; “We define sustainability as a commitment to economic well-being for both the present and the future, balancing society’s needs today with the demands of tomorrow. Sustainability encompasses behaviors, processes, tools and technologies that can be perpetuated and replicated in ways that achieve economic, social or environmental benefits. We see sustainable investing as the practice of mobilizing capital to businesses that engage in these behaviors and practices.”

The trend in this direction is real as according to the same report, $1 out of $6 is going toward sustainability. Audrey Choi, chief executive officer of Morgan Stanley’s Institute for Sustainable Investing, led an initiative to look at some historical data and the found some evidence that warrants a robust continued conversation on the topic.

“They analyzed performance data for 10,228 open-end mutual funds and 2,874 managed portfolios known as Separately Managed Accounts (SMAs). They compared investment strategies that use environmental, social, and governance data—sustainability metrics—to those that don’t.

Sustainable investments in almost every asset class performed as well, or better, than traditional investment strategies. Sustainable equity mutual funds had equal or higher median returns and equal or lower volatility for 64 percent of the periods examined over seven years.

In contrast, the managed portfolios underperformed traditional counterparts for 64 percent of the periods. But the sustainable investments had significantly less volatility, and on a risk-adjusted basis, they performed similarly.”

In our opinion it is worthwhile and even essential for firms to develop a thesis around this topic to be able to market successfully and as robustly as possible to take care of their current client base and to potentially cater to the millennial demographic. This is supported by one survey done by Morgan Stanley, as they found, In a poll of 800 investors, 71 percent said they are interested in sustainable investing. Millennials and women were each twice as likely as others to pursue sustainable investments.

While there are skeptics and there continues to be much work to do, a 2012 Harvard Business School Study that tracked the performance of 180 companies over 18 years found that the 90 companies that adopted environmentally and socially responsible policies significantly outperformed their peers. Every dollar invested in a portfolio of sustainable companies in 1993 would have grown to $22.60 by 2011. That beats the rise to $15.40 for a portfolio of companies less focused on sustainability .

The evidence continues to build that supports the case for a thorough look at the various aspects of the SRI/ESG and the impact investment landscape. It could help bolster firm recognition as clients recognize the more robust service offering and this could lead to additional referrals.

It could also help serve the specific needs of clients with a strong sense of support for one or more areas of the sustainability arena.


Tom Koehler-CIO

“Socially Responsible Investments represent a complex asset class and while we covered a small amount, there is a lot more information needed prior to making an investment decision. Let us know if we can provide more information to help in that process.”