LOS ANGELES – Sustainable energy finance may maintain momentum even as President Trump moves to protect fossil fuel interests.
On June 1, the same day the president announced the U.S. would withdraw from the Paris Agreement, an international accord aimed at reducing carbon emissions, Gurtin Municipal Bond Management unveiled a Municipal Social Advancement strategy designed in part to meet investor demand for sustainable investment products.
The $13 billion asset manager, which specializes in high grade municipal bond portfolios for high net worth individuals, said the strategy enables customization of separately managed municipal bond portfolios that align investors' values with their investments. Investors can tailor those portfolios to emphasize one or a combination of categories including infrastructure, education, and the environment.
Considered a mere niche segment of the investment market a few years ago, sustainable investment products and strategies for muni investors have begun to take off. As more issuers see value in issuing specially-designated “green” bonds or otherwise trumpeting the environmentally friendly nature of their projects, asset managers are increasingly conscious of investors keen to make sustainable investments.
"With the vast majority of municipal bonds being issued to finance projects for the public good, the $3.7 trillion municipal bond market is a natural for socially responsible investment,” said Bill Gurtin, the company’s chief executive and investment officer. “Even so, very few municipal asset managers offer a socially responsible strategy. Given our singular expertise in municipal bond management and our investment in independent municipal research capabilities, we are thrilled to offer this unique new strategy to a clearly underserved market."
Gurtin’s analysis weighs credit metrics across various environmental, social, and governance categories, in what is known as “ESG investing.” The concept has been well established in private sector investing, but even there has grown substantially in recent years.
Emily Robare, Gurtin’s vice president of credit research, said the company had been working toward this strategy since 2014. Not only was credit analysis generally beginning to place more emphasis on environmental risk, but a new wave of younger investors was beginning to demand a more socially-conscious way to invest, she said.
“We were seeing a lot of existing demand,” Robare said. “Younger demographics in particular are interested.”
Carin Pai, executive vice president and director of equity management at Fiduciary Trust Company International, said she has seen much more focus on ESG investments recently, a development she attributed to two factors: demographic changes and increased transparency in investing.
"Millennial and younger generation investors are more interested in how their investments impact their communities and the environment,” Pai said.
Pai said the change in investor attitudes can be illustrated by the private sector example of the annual reports of S&P 500 companies. Some 80% of those companies now include sustainability efforts in their annual reports, versus just 20% five years ago.
The increased interest in this type of investing comes as the question of a sustainable future may be coming to a head.
Most analysts agreed that Trump’s move probably wouldn’t do much to save the coal and oil industries long-term, as the market has expressed a desire to invest in a new generation of technologies. Pai said her clients are dedicated to divestment from fossil-fuel heavy strategies.
"The fact is that the new administration is arguably more pro-fossil fuels than the previous administration," she said, "but the movement is not changing.”