{"id":2007,"date":"2019-08-29T12:32:39","date_gmt":"2019-08-29T16:32:39","guid":{"rendered":"http:\/\/blog.uvm.edu\/si-mba\/?p=2007"},"modified":"2019-08-29T12:30:47","modified_gmt":"2019-08-29T16:30:47","slug":"finding-impact-in-public-market-investments","status":"publish","type":"post","link":"https:\/\/blog.uvm.edu\/si-mba\/2019\/08\/29\/finding-impact-in-public-market-investments\/","title":{"rendered":"Finding Impact in Public Market Investments"},"content":{"rendered":"\n

This post was written by Peter Seltzer ’19<\/em><\/p>\n\n\n\n

Impact investing is the hottest\ntrend in finance right now with now over $12\ntrillion in assets invested<\/a>. Over the course of the last year I have spent\na significant amount of time studying the industry, including being on the winning\nteam of the Wharton Total Impact Portfolio Challenge (TIPC)<\/a>. Throughout the\nyear, I have looked for the best ways to generate impact through public market\ninvestments and below is summary of my conclusions.<\/p>\n\n\n\n

Invest in Companies with Embedded Sustainability Practices<\/strong><\/p>\n\n\n\n

In the TIPC my team encountered the question, how do you pick the best ESG (Environmental, Social, Governance) or SRI (Socially Responsible Investing) fund to invest in? In our corporate social responsibility course, we learned that the companies with the most successful sustainability efforts are those that embed these sustainability practices into their core business practices. To maximize the collective impact of a public equity investment, you should invest in funds that hold companies that are embedding sustainability into their core business practices. <\/p>\n\n\n\n

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Photo by\u00a0Markus Spiske<\/a>\u00a0on\u00a0Unsplash<\/a><\/figcaption><\/figure>\n\n\n\n

To determine how well a company is\nembedding sustainability we used a framework developed by the Sustainable\nAccounting Standards Board (SASB) to determine what the most material\nsustainability issues are for the companies being held by a fund. If a company\nwants to embed sustainability into their core business, then they must perform\nwell on the sustainability issues that are most material to their industry.\nBased on a scoring system we developed, we were able to quantify this\nembeddedness for public equity funds.<\/p>\n\n\n\n

Balance Long-Term and Short-Term Needs<\/strong><\/p>\n\n\n\n

Public market impact investments\nare focused on the long-term collective changes that need to happen to create a\nmore sustainable world. It is extremely important that these investments\ncontinue to occur. However, while we invest for the long-term, we cannot\noverlook the people who are suffering right now. It is great to invest in\ncompanies that are creating cheap renewable energy, but that does not immediately\nhelp the family that cannot pay their heating bill during these cold Vermont\nwinters. Investors need to harness the financial power that is generated\nthrough their long-term investments to help address the short-term needs that are\nso often overlooked. <\/p>\n\n\n\n

The most efficient way to create\nthe direct impacts needed to address these short-term problems is through\ncharitable donations. I know! Charity is a dirty word in finance, especially in\nimpact investing. It certainly has its flaws, but it is the most direct way to\nbalance long-term and short-term needs. <\/p>\n\n\n\n

Behavioral economics will suggest\nthat those that invest responsibly will be more likely to suffer from the\neffects of moral self-licensing, which in turn makes them less likely to donate\nto charity. I propose that those that participate in SRI or ESG investing,\nallocate a portion of the dividends they receive through these investments to\ncharitable causes that support short-term needs. Typically, dividends will automatically\nbe reinvested back into shares of the fund that distributed them, so this money\nnever enters the metal accounts of an investor. Thus, allocating a portion of\ntheir dividends to charity will have no effect on a person\u2019s mental accounting\nand eliminate any moral self-licensing effects of responsible investing. <\/p>\n\n\n\n

In summary, the best way to create\nimpact through a public market investment is to balance the long-term changes\nneeded, by investing in companies that embed sustainability into their core\nbusiness practices, with the short-term needs of today, by allocating a portion\nof a portfolio or fund\u2019s dividends to charity. <\/p>\n","protected":false},"excerpt":{"rendered":"

This post was written by Peter Seltzer ’19 Impact investing is the hottest trend in finance right now with now over $12 trillion in assets invested. Over the course of the last year I have spent a significant amount of time studying the industry, including being on the winning team of the Wharton Total Impact … <\/p>\n

Continue reading “Finding Impact in Public Market Investments”<\/span><\/a><\/p>\n","protected":false},"author":4489,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[26210,26,272245],"tags":[427001],"class_list":["post-2007","post","type-post","status-publish","format-standard","hentry","category-class","category-learning","category-strategy","tag-impact-investing"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p8b9n0-wn","_links":{"self":[{"href":"https:\/\/blog.uvm.edu\/si-mba\/wp-json\/wp\/v2\/posts\/2007","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.uvm.edu\/si-mba\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.uvm.edu\/si-mba\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.uvm.edu\/si-mba\/wp-json\/wp\/v2\/users\/4489"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.uvm.edu\/si-mba\/wp-json\/wp\/v2\/comments?post=2007"}],"version-history":[{"count":1,"href":"https:\/\/blog.uvm.edu\/si-mba\/wp-json\/wp\/v2\/posts\/2007\/revisions"}],"predecessor-version":[{"id":2009,"href":"https:\/\/blog.uvm.edu\/si-mba\/wp-json\/wp\/v2\/posts\/2007\/revisions\/2009"}],"wp:attachment":[{"href":"https:\/\/blog.uvm.edu\/si-mba\/wp-json\/wp\/v2\/media?parent=2007"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.uvm.edu\/si-mba\/wp-json\/wp\/v2\/categories?post=2007"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.uvm.edu\/si-mba\/wp-json\/wp\/v2\/tags?post=2007"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}