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Sustainable Investing Rewards Investors and Communities


by Elisa Smith


in causes consistent with their beliefs and values had few options other than making donations to like-minded organi- zations. The financial investment marketplace was designed to focus on return on in- vestment, regardless of the natural, hu- man or environmental impact. The shift to sustainable investing has changed all that. Last year, over $6 trillion was invested in companies offering social and/or environmental benefits including sustainable agriculture, lower carbon economies and community develop- ment. Often exceeding the performance of traditional investments, these funds are gaining in awareness and popularity among socially conscious investors. We spoke to financial advisor


U


Julie Knight of Allentown to learn more about socially concious/sustainable investment.


What is socially conscious/sustainable investing?


Morgan Stanley defines sustainable investing opportunities available through our Investing with Impact Platform as an approach that aims to generate market- rate financial returns while demonstrat- ing positive environmental and/or social impact. Increasingly, individuals and institutions want to invest in a manner that is consistent with specific beliefs and values. A growing number of inves- tors are exploring sustainable investing. In 2012, $1 out of every $9 of U.S. as- sets under professional management was invested in some form of sustainable in- vestment, primarily in public equities. In 2014, that number increased to $1 out of every $6 – to a total of $6.57 trillion now invested sustainably, according to the report US Sustainable, Responsible


30 Lehigh Valley


ntil fairly re- cently, those wishing to invest


and Impact Investing Trends, published by The Forum for Sus- tainable and Respon- sible Investing.


Our Institute


for Sustainable Invest- ing defines sustain- ability as a commit- ment to economic


well-being for both the present and the future, balancing society’s needs today with the demands of tomorrow. Sustain- ability encompasses behaviors, pro- cesses, tools and technologies that can be perpetuated and replicated in ways that achieve economic, social or envi- ronmental benefits. We see sustainable investing as the practice of mobilizing capital to businesses that engage in these behaviors and practices.


What criteria do you use to determine if a company is “sustainable?” There are many ways we can customize a strategy to achieve impact goals. Current thematic examples include faith-based in accordance with specific religious values, fossil fuel aware to support the transition to a lower carbon economy or mission- aligned to amplify the impact of personal or organizational mission.


How does a person know your criteria are aligned with his or her own? Are there options within that definition? We start with the discovery process where we articulate and identify invest- ment goals to determine what causes and issue areas are of particular inter- est. Then, we establish an investment plan and document the investment strategy alongside impact goals. We can evaluate existing portfolios using an impact lens to evaluate existing invest- ments and exposures in comparison to impact goals. Next, we develop an im- plementation strategy to determine the portfolio approach to integrating impact


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while considering risk/return priorities. On an ongoing basis, we re-evaluate the plan to review the portfolio for align- ment with financial and impact goals, making adjustments as appropriate.


What types of investment funds are available?


Morgan Stanley continues to expand the Investing with Impact Platform to reflect growing interest from clients and prospects. With nearly 130 third party products, multi-asset class firm discretionary portfolios, a single stock model portfolio, green bond offerings and select opportunities in alternatives, the Platform is becoming more dynamic than ever before. This includes mutual funds, separately managed accounts and ETFs—and includes a range of asset classes, investment styles and impact themes. Examples of sustainable investment themes available include community development, water, sus- tainable infrastructure and transitioning to a lower carbon economy. This new platform represents the first phase in Morgan Stanley’s effort to meet your desire for investment opportunities that center on positive social and envi- ronmental impact, without sacrificing financial performance potential.


What kind of risk and return can one expect from sustainable investing ver- sus traditional investing? Many investors might think there is a necessary performance trade-off involved in sustainable, responsible and impact investing, but a recent report from the Morgan Stanley Institute for Sustainable Investing busts this myth. The research examined performance


data from over 10,000 mutual funds and 2,800 separately managed accounts over the last seven years. The study found sustainable investment funds usually met, and often exceeded the performance of comparable traditional investments and exhibited similar or lower volatility. This analysis proved true on both an absolute and a risk-adjusted basis, across asset classes and over time.


Why should a person use an investment advisor? Can’t he or she research and select companies on his or her own?


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