As Oregon's treasurer explores the possibilities, a leading Portland firm develops a global sustainable investing strategy
by Pete Danko
Portland Business Journal
Oregon Treasurer Tobias Read walks a fine line when he talks about what sustainable investing means to an office that helps manage a state investment portfolio approaching $100 billion.
“Our obligation is to generate returns for retirees,” Read said in an interview this week. “So however strongly we feel about an issue, politics can’t be a driver in what we do.”
And yet, he added: “We are not doing our job if we are not taking into account risks, including climate change.”
Read has pulled together state and national investment industry leaders for a conference in Portland on Sept. 6 to explore how those two notions fit together. The Sustainable Investing Summit comes amid signs that a long migration toward incorporating environmental, social and governance (ESG) factors into decision-making has now made sustainable investing a mainstream approach.
Nationally, ESG-based investing increased five-fold from 2010 to 2016, according to the Forum for Sustainable and Responsible Investment, and now comprises at least one-fifth of assets.
Locally, there might be no better indication of ESGs growing sway than the decision by the Portland firm Ferguson Wellman to develop a Global Sustainable Investing strategy.
Launched in May, the Ferguson Wellman program has drawn $40 million so far, making it one of the firm's fastest-growing investment strategies.
Ferguson Wellman says client demand was one part of its decision to offer the strategy after years of consideration. The second was the new availability of robust data. Companies, eager to demonstrate their ESG bona fides in the hope of drawing investor interest, are increasingly making information available. Research firms — themselves recognizing opportunity — are gobbling it up and providing deep comparative analysis.
“The data availability has allowed us to create a strategy that we think won’t give up return or add additional risk,” said Peter D. Jones, the firm's vice president of research.
In picking companies to invest in, Ferguson Wellman begins with a traditional financial analysis. If a company isn’t a sound investment to start with, it won’t make the cut.
Then managers overlay an ESG analysis, zeroing in on companies that rank high on the categories of waste, emissions and resource efficiency under the “E”; employee diversity, product integrity and community impact under the “S”; and board diversity, corporate structure and executive pay under the “G.”
“We’re comfortable at this point saying it’s not going to hurt our returns,” Jones said. “We can’t go out there and say it’s definitely going to help our returns, but we think there is a possibility of that as far as it being a risk management tool, also.”
That assessment is a bit of a contrast with some sustainability-focused investors, like Equilibrium, the Portland-based firm that invests in sustainable real assets for institutional investors: “We believe that sustainable practices are the drivers of returns,” Equilibrium Chairman David Chen said in a 2015 Business Journal cover story.
Read, the treasurer, takes the view that ESG considerations can bring rigor to the state’s investment approach — if engaged deeply and seriously. To that end, in June, he brought on Anna Totdahl in a new position focused on ESG research.
“Every basis point counts, and we can’t make decisions that are going to cost us in the long run,” he said. “Now we have an investment officer who can help us develop tools and techniques to understand the risks and opportunities.”
What: Sustainable Investing Summit 2018
Why: Treasurer Tobias Read says a growing interest in leveraging investment dollars to help tackle climate change led to organizing the event.
Featuring: Along with Read, notable presenters and discussion participants will include John Streur, who heads up Calvert Research and Management, and Rukaiyah Adams, chair of the Oregon Investment Council and CIO at the Meyer Memorial Trust. Gina McCarthy, former EPA administrator and current operating advisor at Pegasus Capital Advisors, will deliver a lunchtime keynote.
Where and when: Leftbank Annex, 101 North Weidler St., Portland; Sept. 6
For more info and to register: oregon.gov/treasury/Pages/summit.aspx
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