Active Ownership Strategies for Sustainable Investing: A Guide to ESG Excellence

Active ownership strategies allow investors to influence the companies they own, promoting positive change and long-term value creation.

A key aspect of active ownership is engaging with companies on ESG issues, such as climate change, diversity, and human rights. For instance, investors can use shareholder resolutions to push companies to adopt more sustainable practices.

Regular portfolio reviews are essential for identifying areas for improvement and tracking progress. This involves monitoring ESG metrics, such as greenhouse gas emissions and water usage.

Investors can also use proxy voting to influence company decisions, such as appointing board members who prioritize sustainability.

Active ownership is not incompatible with passive investing. At Boston Trust Walden, we focus on investing client assets in securities we judge to be high financial quality, which involves evaluating a company's ESG performance to enhance our understanding of potential financial outcomes.

Our ESG investment analysts and traditional securities analysts work together to assess a company's ESG performance, recognizing the financial materiality of ESG factors. This approach helps us identify potential risks and opportunities for companies.

Passive investing has surpassed active strategies in the US, with assets managed under passive strategies now exceeding those under active strategies. However, this shift doesn't mean that passive investing is incompatible with active ownership.

Governance and Engagement is a crucial aspect of active ownership strategies for sustainable investing. Strong oversight, transparency, and accountability mechanisms enhance management of ESG risks and opportunities.

Boston Trust Walden focuses active ownership on comprehensive and decision-useful sustainability disclosures, transparency and alignment in lobbying policies, oversight, and expenses.

Engaging at the state, regional, national, and international levels is also a key aspect of governance and engagement. Public Policy Advocacy is a vital part of this, as seen in the efforts of Boston Trust Walden.

Active ownership involves the use of the rights and position of ownership to influence the activities or behavior of investee companies. This can include engagement and voting activities, as seen in the proxy voting efforts of Boston Trust Walden.

The PRI defines active ownership as the use of the rights and position of ownership to influence the activities or behavior of investee companies. Boston Trust Walden takes a thoughtful, principled approach when casting votes at company annual meetings on behalf of their clients.

Boston Trust Walden has filed nearly 600 shareholder resolutions since 1987, and they've withdrawn 44% of these after companies committed to improve their ESG policies, practices, or performance. This demonstrates the effectiveness of their engagement efforts.

Here's a list of key governance and engagement strategies:

These strategies are essential for effective governance and engagement in sustainable investing. By implementing these strategies, investors can influence the activities and behavior of investee companies and promote more sustainable business practices.

Climate and sustainability are crucial aspects of active ownership strategies for sustainable investing. Mitigating climate risk requires science-aligned targets and interim milestones, transition plans, and decision-making, which includes setting science-based targets for reducing greenhouse gas (GHG) emissions, creating Climate Transition Plans, and lobbying alignment with corporate climate commitments.

Standardized sustainability reporting by all companies is essential to enhance transparency, manage sustainability risks, and ensure comparable and reliable information for better investment decisions globally. Storebrand advocates for this practice to promote responsible investment.

To address climate change, Principal issued a $600 million sustainability bond in August 2021, financing eligible social and environmental assets such as affordable housing, green buildings, energy efficiency, and renewable energy. The bond's proceeds are allocated to each eligible category, with environmental and social performance indicators reported annually in the Sustainable Financing Report.

Climate risk is a pressing concern that requires a thoughtful approach to mitigate its effects. Science-based targets for reducing greenhouse gas (GHG) emissions are crucial in this effort.

To achieve these targets, companies need to develop Climate Transition Plans that outline the steps they will take to reduce their emissions. These plans should be aligned with their corporate climate commitments.

Lobbying efforts should also be aligned with these commitments, ensuring that companies are not working against their own climate goals. Science-based public policy advocacy is also essential to create an enabling environment for companies to transition to a low-carbon economy.

Here are the key strategies for mitigating climate risk:

Storebrand advocates for standardised sustainability reporting by all companies to enhance transparency and manage sustainability risks. This approach ensures comparable and reliable information for better investment decisions globally.

Companies that prioritize sustainability reporting can make informed decisions about their investments. By doing so, they can mitigate potential risks and capitalize on opportunities.

Storebrand's commitment to sustainability reporting is evident in their own practices. They issue a Sustainable Financing Report annually, which includes details on the allocation of proceeds from their sustainability bond.

The report provides a clear picture of how the bond's proceeds are being used to finance eligible social and environmental assets. This level of transparency is essential for investors and stakeholders who want to understand the impact of their investments.

In fact, Principal, a company that issued a sustainability bond, also releases an annual Sustainable Financing Report. Their report includes environmental and social performance indicators, as well as the balance of unallocated proceeds.

By publishing these reports, companies like Principal demonstrate their commitment to sustainability and accountability. This transparency helps build trust with investors and stakeholders, who can make more informed decisions about their investments.

We're making significant strides in protecting our planet's biodiversity. By 2025, we aim to eliminate commodity-driven deforestation.

This goal is crucial because deforestation contributes to nature loss, which has severe consequences for our ecosystem. We're working to mitigate this impact through our environmental stewardship efforts.

We're prioritizing dialogue with companies operating in ecologically sensitive areas to ensure their practices align with our sustainability goals. This collaboration will lead to more effective environmental stewardship.

Impact and Reporting is a crucial aspect of active ownership strategies for sustainable investing. Our annual impact report highlights the success of these strategies, featuring examples of their effectiveness.

Boston Trust Walden's active ownership strategies have achieved significant impact on behalf of their clients. This is evident in their annual impact report, which showcases the results of their efforts.

The report provides a detailed look at the company's active ownership strategies and their impact. This transparency is essential for investors who want to see the tangible results of their investments.

By sharing their impact report, Boston Trust Walden demonstrates their commitment to responsible investing. This commitment is a key factor in the success of their active ownership strategies.

ESG considerations have been included in the investment process for decades, starting with the exclusion of sectors or companies deemed unethical or against investors' values.

At Boston Trust Walden, ESG factors are recognized as financially material, and analysts evaluate a company's ESG performance to enhance understanding of potential financial outcomes.

The financial materiality of ESG factors is a key aspect of the investment process at Boston Trust Walden, where analysts consider risks and opportunities associated with issues like physical risk to operations and generating new sources of revenue.

Sustainability disclosure is crucial for transparency and better investment decisions globally, with Storebrand advocating for standardized sustainability reporting by all companies.

Principal issued a $600 million sustainability bond in August 2021 to finance eligible social and environmental assets, such as affordable housing and renewable energy.

The bond's proceeds were allocated to eligible categories, with environmental and social performance indicators disclosed in the Sustainable Financing Report.

The Principal Sustainable Financing Framework governs the process for sustainability bonds and future issues of green, social, and sustainability bonds, with eligible assets aligned with the United Nations Sustainable Development Goals (U.N. SDGs).

Approximately 61% of the firm's sustainable investing AUM increased from 55%, and 66% of the general account AUM was covered by establishing sustainable investing goals.

By 2018, global sustainable investing in five major markets stood at USD 30.7 trillion, according to the 2018 Global Sustainable Investment Review.

Passive investing has reached a major milestone, surpassing active strategies in the US in September 2019.

The assets managed under passive strategies now outstrip those under active strategies.

In 2019, passive investing became the dominant force in the US financial market.

However, the rise of passive investing doesn't necessarily mean it's incompatible with active ownership.

Active ownership is one of the six tenets of PRI's principles of responsible investment.

At the heart of our active ownership strategies are three focus areas that drive our sustainable investing approach. We focus our active ownership in three areas that are strategically aligned with the diverse interests of our broad client base.

These areas include company engagement, which involves working closely with companies to address key issues and promote positive change. Our team has deep expertise in this area, allowing us to effectively engage with companies and drive meaningful outcomes.

Our focus areas are designed to be strategically aligned with the diverse interests of our clients, ensuring that our active ownership strategies meet their unique needs.