Heartland Trust Company Brings Responsible Investing to Our Clients

This is a topic that has been flying under the radar for a bit too long. What does “responsible investing” mean and why would someone allocate their assets towards it?

In industry talk, we refer to this as environmental, social, and governance (ESG) investing. Responsible portfolios are centered on these three criteria. Until recently, the problem with many of the funds in this space was that one fund’s ESG criteria could differ from another’s. It was awfully hard to distinguish if funds were simply using it as a marketing moniker or if they actually meant what they said.

We didn’t want to put our client’s hard-earned assets into funds that didn’t represent their values. Finally, a coherent set of principles started to gain traction a few years ago.

Back in 2005, the United Nations invited some large institutional investors to help to develop Principles for Responsible Investment. Below are the principles that emerged from their meetings:

  1. We will incorporate ESG issues into investment analysis and decision-making processes.
  2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
  3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
  4. We will promote acceptance and implementation of the Principles within the investment industry.
  5. We will work together to enhance our effectiveness in implementing the Principles.
  6. We will each report on our activities and progress towards implementing the Principles.

Initially, there wasn’t much buy-in from investment managers, but with time (and, probably more importantly, client demand) some of the large players in the industry signed on. It took time for them to conduct research, launch funds, and, vitally, produce performance history.

Any fund that goes into an ESG account at Heartland Trust must subscribe to these principles.

Now to address the elephant in the room: How do these funds perform? Quite well, actually. Sure, there are a lot of underperforming and lackluster funds in the space, but that’s common across the entire industry.

After applying the same rigorous due diligence that we do for any fund we invest in, returns are very comparable to what we earn in other portfolios. You don’t have to sacrifice returns if this is something you want to pursue with your investments.

If you want to hear more about ESG portfolios, contact us. We’d be happy to answer your questions.

Dustin Sobolik - Investment OfficerHeartland Trust Company Brings Responsible Investing to Our Clients

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