A new conceptual framework to help “mission driven” institutional investors create social and environmental impact across their portfolios has been proposed in a new white paper from Boston-based think-tank, Tellus Institute.
The ‘Total Portfolio Activation’ idea has been put forward in a paper commissioned by the not-for-profit Tides group and sustainable funds firm, Trillium Asset Management.
The paper is called Total Portfolio Activation – A Framework for Creating Social and Environmental Impact across Asset Classes and it’s available here.
It aims to provide concrete steps to help institutions “begin working toward a fuller activation of their portfolio in support of their mission”.
“We believe this report provides a beneficial framework and guide for any mission driven organization to consider how to put their investments to work in support of their long-term social, economic, and environmental goals,” said Tides Chief Executive Melissa Bradley.
The key insight of the report is that every investment across every asset class has social and environmental impacts—positive and negative. The report concentrates on five asset classes: cash and equivalents; fixed income; public equities; private equity; and real property.
So the 95-page study provides both a framework and a set of analytical tools to help investors understand thespecific impact opportunities in every asset class in their portfolios.
The paper, prepared by Tellus’ Joshua Humphreys, Ann Solomon and Christi Electris, draws on discussions with investors, investment officers and fund managers as well as case studies.
The authors identify four related areas with “opportunities for impact” in each asset class:
1. Investment selection — incorporating environmental, social or governance (ESG) issues and impact into investment review, decision-making and performance analysis.
2. Active ownership — exercising the stewardship rights and responsibilities, voice and votes, that often accompany owning an asset.
3. Networks — joining wider groups and coalitions of stakeholders around common environmental and social issues of concern, in order to leverage collective power.
4. Policy — engaging in public policy to tap government resources and incentives or encourage regulatory oversight and intervention in support of impact objectives.
And they outline 10 key steps that investors can take to implement ‘Total Portfolio Activation’, starting with taking an inventory of environmental and social issues, evaluating the impact of current investment activities and identifying the ‘Impact Opportunity Set’ specific to issues and asset allocation.