BOSTON (May 2, 2018) – Assets placed in ESG investments – those which integrate environmental, social and governance factors – in Cambridge Associates’ client portfolios have more than doubled over the past five years to approximately $9.5 billion from $4 billion in 2012.
Further, more than 130 of the global investment firm’s clients, including endowments & foundations, pensions and families have already invested in ESG and impact strategies. And a recent survey of Cambridge’s endowment & foundation clients shows that 61% of them plan to increase their impact-oriented allocation over the next five years.
A number of forces are contributing to the evolution of ESG – both in the investing industry at large, and for Cambridge Associates’ clients:
- A strong economic basis behind several ESG themes has emerged. For instance, the confluence of global population growth and a deeper understanding of climate risks heighten the need for resource efficiency, sustainable food supplies and innovative solutions to mitigate risks and capitalize on opportunities.
- The expansion of ESG disclosures by listed companies and a growing analytics industry have improved both the quantity and quality of information about impact-oriented opportunities. While investments in strategies that integrate ESG may previously have been perceived to represent a “trade-off” in financial performance, there are both active and passive investment strategies where ESG integration has enhanced returns. For instance, since the inception of the MSCI Emerging Markets ESG Leaders index in June 2013, it has outperformed the overall MSCI Emerging Markets index by over 3% on an annualized basis, as of February 28, 2018.
- The convergence of several variables is leading to something of a melding of traditional return-focused strategies and impact investing, predominantly in venture capital; generating positive social and environmental impacts is increasingly important to many talented Millennial entrepreneurs and venture capital executives.
- There are more ESG-related funds to choose from. More than 1,000 opportunities are in the firm’s proprietary database, giving investors a broad universe of managers to evaluate and choose from. Cambridge also conducts over 300 meetings a year with ESG- and impact-related managers.
“ESG and impact investing – what we collectively refer to as mission-related investing – is a core component of many clients’ investment programs today. More and more, our clients want to integrate environmental and social priorities with their financial objectives, and they recognize the opportunities to do so through a sophisticated and sustainable investment policies and strategies,” said Noel O’Neill, global head of investment research at Cambridge Associates.
Cambridge Associates established a formal mission-related investing (MRI) practice in 2008 to stay ahead of the increasing demand for top-tier investment ideas that align with clients’ missions and ESG priorities. The practice is now fully integrated with the firm’s global research and investment platforms. Cambridge has 35 ESG/MRI-focused investment professionals working across the platforms, which includes research and investment teams, serving all core client segments, including endowments & foundations, private clients and pensions.
“ESG and impact investments increasingly have the potential to support many portfolios’ long-term investment return and risk objectives, and it is critical to integrate ESG and impact investing in holistic ways in our clients’ portfolios,” added O’Neill. “Our goal is to help our clients exceed their objectives, including the mission alignment and impact goals that are in their sights – both through financial outperformance and the social themes of certain investment strategies.”
To learn more about Cambridge Associates’ approach to ESG and MRI, click here to read “Navigating the “Alphabet Soup” of Mission-Related Investing.”
About Cambridge Associates
Cambridge Associates is a leading global investment firm. We aim to help endowments & foundations, pension plans, and private clients implement and manage custom investment portfolios that generate outperformance so they can maximize their impact on the world. Working alongside its early clients, among them leading university endowments, the firm pioneered the strategy of high-equity orientation and broad diversification, which since the 1980s has been a primary driver of performance for institutional investors. Cambridge Associates delivers a range of services, including outsourced CIO, non-discretionary portfolio management, and investment consulting.
Cambridge Associates maintains offices in Boston; Arlington, VA; Beijing; Dallas; London; Menlo Park, CA; New York; San Francisco; Singapore; Sydney; and Toronto. Cambridge Associates consists of five global investment consulting affiliates that are all under common ownership and control. For more information, please visit www.cambridgeassociates.com.
Client portfolio assets referenced in this release include assets for which Cambridge Associates does not provide investment advisory services, and as such, the increase in allocation to ESG investments may not be based on our recommendations.