If you are like many of the highly discerning investors we work with, you might like to turn your portfolio “green” or “sustainable,” but you are not sure how. You may have concerns about “going green” as carefully as possible or about whether it will make a difference for the world.
At Blair Hall Advisors, we can address your concerns. In fact, we have already implemented sustainable investing for more than half of our clients. We have “green” investing as a core offering, while at other wealth management firms it may still be mostly talk.
Our Progress So Far
Already, about ten percent of our assets under management have been converted to what we call “climate-aware” investments. We use the term “climate-aware” because human-made climate change is the focus of our methodology. We reduce the carbon footprint in client portfolios mainly through a weighting of the companies in which we are invested, favoring the lower-carbon, greener enterprises.
At Blair Hall Advisors, our climate-aware implementation is also centered on key client considerations besides being environmentally favorable. For example, we work with each client individually to make sure we phase in climate-aware investing while diligently attending to their tax management objectives. Equally important, we maintain strong risk management through diversification, by continuing to invest in many hundreds of companies, so we do expect financial returns similar to non-sustainable investing.
Some Companies Are Filtered Out
Some companies and a handful of industries are exited outright. Companies that are highly dependent on fossil fuel reserves are excluded entirely in many cases. Besides the potential environmental benefit, this exclusion reduces the financial risk of owning potentially “stranded” fossil fuel reserves, with no long-term customers. In alignment with the ethical preferences of many clients, a small number of social responsibility filters are also in place; currently, for example, these filters eliminate tobacco companies, companies with child labor violations, and makers of cluster munitions from our climate-aware assets.
Making a Difference
We expect climate-aware investing to have a straightforward mechanism for benefiting the environment. As Blair Hall Advisors’ clients and other investors increasingly invest more in companies with relatively low-carbon operations, those companies may find generally stronger demand for their shares in the years ahead, relative to other investment options. Investment prices respond to supply and demand. Thus, we believe that climate-aware investing has a strong likelihood of influencing share prices and, through share prices, should incent more climate-friendly decision-making from company managers—since senior management compensation these days is generally linked to share price.
To synthesize and reiterate: We expect lower-carbon firms (and their management) will be rewarded with higher share prices and higher-carbon firms (and their management) will be penalized with lower share prices. Senior management teams will seek to be rewarded (lower carbon) rather than penalized (higher carbon).
Have the markets possibly already estimated and “priced in” all or most of the climate-investing-related forces that will be exerted on companies and their share prices? No one knows for sure, but we don’t think so. We believe there is more opportunity ahead and that an increase in climate-aware investing—by our clients and of course by many other investors—will likely make a difference. We anticipate success in influencing corporations’ behavior. We do believe our clients will contribute to improving the world through the choice to be climate-aware.
Looking to the Future
Certainly, it is still the early years for climate-aware and other socially responsible investing. At Blair Hall Advisors, we are excited to grow and evolve our approach over time.
If climate-aware or other socially responsible investing interests you or your family, we invite you to contact us to open a conversation.
Yours sincerely,
Tom and John
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