Xylem (NYSE:XYL), Etsy (NASDAQ:ETSY), and Copel (NYSE:ELP) are three examples of superior ESG investments approved by top tier portfolio managers.
Amberjae Freeman is CEO and Board Chair at Etho Capital and this Xylem (NYSE:XYL) investor is one such portfolio manager.
Amberjae Freeman, CEO and Board Chair, Etho Capital.
Her career in sustainable finance began 15 years ago when she received dual fellowships with the Clinton Global Initiative in New York City and the Clinton Hunter Development Initiative in Kigali, Rwanda.
Ms. Freeman developed innovation-focused thematic portfolios for fintech startup Swell Investing.
As senior analyst for the SRI Wealth Management Group at the Royal Bank of Canada (RBC), she developed proprietary ESG and impact research and mission-related investment solutions for institutional, foundation, and endowment portfolios representing US$2 billion in assets.
Ms. Freeman was also an adjunct political science and economics professor at Santa Barbara City College (SBCC) and coordinated country-specific research to support asylum cases for the Center for Gender & Refugee Studies (CGRS) at UC Hastings College of the Law.
Ms. Freeman received bachelor’s and master’s degrees in global and international studies from the University of California, Santa Barbara.
In this 3,136 word interview, exclusively in the Wall Street Transcript ESG Investing Report, Amberjae Freeman explores the techniques behind ESG investing and what process leads to a portfolio pick like Xylem (NYSE:XYL).
“Our approach is quantitative and qualitative.
Our key differentiator is that we focus first on carbon emissions data.
We use total supply chain carbon emissions data Scopes 1, 2, and the critical and often overlooked Scope 3 carbon emission information to determine a company’s overall climate efficiency and investability.
We also conduct qualitative ESG bad actor risk assessments as well. That means firms with poor management decision-making regarding social and environmental concerns and companies with a significant track record of poor corporate governance would not be appropriate for investment.
We also avoid companies involved in certain kinds of activities, such as the production of alcohol, companies that primarily derive revenue from gambling, or the production and sale of weapons are also ineligible for inclusion…
The way we think about sustainable investing has a lot to do with not just avoiding so-called “bad actors” but also avoiding certain kinds of industries and sectors altogether. For example, we avoid tobacco because the cultivation of tobacco is very carbon-intensive and detrimental to the environment.
In the same way, violent conflicts and war are ecologically disastrous and detrimental to humans and wildlife, so we avoid investing in weapons…
I am surprised that some investors still cling to the notion that investing sustainably means you will have to sacrifice returns. This assumption is patently false.
The idea behind modern portfolio theory is that an investor can maximize their return by taking on the optimal amount of risk and that the best way to minimize risk is to distribute your capital across industries and sectors.
This is, of course, solid reasoning.
However, simply distributing your investments across sectors and industries doesn’t account for the fact that some industries and sectors may experience a significant loss of value over time as they become less viable investments as market demand changes.
The idea behind sustainable investing is that you are trying to create value for your investors in perpetuity. That means forever. To do that, we must have an eye on what is happening in the markets today and what solutions and technologies will shape the future.”
This detailed process has led to an investment in Xylem (NYSE:XYL), along with many other portfolio picks.
“…You may also find Xylem (NYSE:XYL). It is a water technology company that thinks about water solutions holistically. They create water solutions for residential and industrial areas.”
But Xylem (NYSE:XYL) is not the only US stock for investors, our next portfolio manager is a investor in Etsy (NASDAQ:ETSY).
R. Paul Herman, FSA, is CEO, Founder, Chief Investment Officer, Portfolio Manager and Series 65 Investment Adviser at HIP Investor.
R. Paul Herman, FSA, CEO, Founder, Chief Investment Officer, Portfolio Manager and Series 65 Investment Adviser, HIP Investor.
HIP Investor licenses its 140,000 impact investment ratings of stocks, bonds and funds to investors, investment advisers, wealth advisers, fund managers, hedge funds, fiduciaries and retirement plans, including 401(k)s.
HIP’s ratings have helped drive the Newsweek Green Rankings and the Peter Drucker Index.
HIP’s strategies focus on great places to work, sustainable real estate, global dividends and sustainability leaders.
Mr. Herman’s book “The HIP Investor: Make Bigger Profits by Building a Better World” is included in 28 university, MBA and MPA curricula.
Mr. Herman is a graduate of the Wharton School of Finance at the University of Pennsylvania, he has advised boards and executives while with McKinsey, and is an adviser to the Sustainability Accounting Standards Board (SASB), Net Impact and Sustainable Brands.
In his 3,200 word interview, exclusively in the Wall Street Transcript, Paul Herman leads investors through the thought process that led to his Etsy (NASDAQ:ETSY) investment.
“We focus on companies that have declared a goal ranging from net zero by a certain year to being climate positive by a certain year. And those all relate to greenhouse gas emissions and other environmental factors.
You’ll find companies across all sectors, all industries, including companies like Novo Nordisk (NYSE:NVO), which battles diabetes, that has an aggressive climate goal, as well as companies like Etsy (NASDAQ:ETSY) that have a business model that reuses materials and hence can have a lower climate footprint, as well.
We also have a Great Place to Work strategy.
This, again, generally is about 50 companies in the strategy.
These are companies where employees have been surveyed, and historically, you’ve seen these firms in Fortune magazine working with the Great Place to Work Institute.
And those companies, in addition, usually have diverse workforces, workforces that don’t turn over, but actually stay inside the company and grow inside the company — and again, cutting across multiple industries and sectors.
But since many CEOs say people are the most important asset, this actually prioritizes companies that value their human capital and typically get a positive return on investment out of employee innovation and employee teamwork.”
While Xylem (NYSE:XYL), Etsy (NASDAQ:ETSY) pass the investment test for our portfolio managers, this portfolio manager has conducted high level analysis has led to an investment decision for Copel (NYSE:ELP).
Yongai Xu, CFA, is a Portfolio Manager at Canada’s Letko, Brosseau & Associates.
Yongai Xu, CFA, Portfolio Manager, Letko, Brosseau & Associates.
Before joining the firm in 2013, she worked for HSBC Bank (China) from 2009 to 2011, focused on retail banking strategy and investment advisory.
Ms. Xu is a graduate of HEC Montréal where she received a M.Sc. degree in finance, and Fudan University, where she received a bachelor’s degree in international economics.
She is a CFA charterholder and a holder of the FSA credential.
In her 2,136 word interview, a TWST exclusive, Ms. Xu goes through the investment analysis that leads to portfolio pick like Copel (NYSE:ELP).
“ESG analysis starts at the very beginning of an investment analysis.
And then each analyst at our firm has an industry-specific framework, because our company is organized along global sectors and global industries, so every analyst is a sector specialist.
They are the one who is most familiar with the most important ESG factors that are most relevant to their sector.
So, whether it’s for developed country companies or emerging market companies, they apply the same metrics.
For example, let’s take the mining industry.
We look at the labor relationship with local communities, the regulatory environment, the safety environment and safety policies of the company, the safety track record, and then all the way to the environmental footprint, like waste intensity, water pollution, and CO2 emission.
It’s a very comprehensive framework, but very particular to that industry.
And because this kind of expertise is needed for different sectors, we believe the analysts are the best people to integrate this ESG analysis, which means we do not layer on external reports or external third-party vendors for the ESG conclusion and ESG analysis.”
This led her to “…one company called Copel (NYSE:ELP).
It’s the third largest power distribution company in Brazil.
If you look at the energy mix of this company, 85% of their power generation assets are based on hydro and 14% of the assets are from wind and solar.
They have a joint venture in a gas plant. And in the most recent 2030 net zero target, they will eventually divest the stake in that gas plant to be net zero by the end of 2030.
And they have a very rich pipeline of new power generation capacities, mostly concentrated in renewable energy. This is the most important reason why we like the company.
And if you look at their corporate governance, they have recently migrated from a lower level to a higher level in terms of corporate governance in the Brazilian Stock Exchange.
And if we look at their track record of shareholder return policy, such as dividend policy and the board composition, and the level of board independence, it’s really a role model in emerging country companies in terms of ESG.”
Although not an investor in Xylem (NYSE:XYL), Etsy (NASDAQ:ETSY), and Copel (NYSE:ELP), Sheila King has some insights into creating an ESG friendly portfolio.
Sheila King, CFA, Vice President, Co-Portfolio Manager Fixed Income, Eagle Asset Management.
Sheila King, CFA, is Vice President, Co-Portfolio Manager Fixed Income at Eagle Asset Management.
Ms. King co-manages Eagle’s Tax-Advantaged Fixed Income strategies and Eagle ESG Focused Fixed Income suite of products.
She joined Eagle in 1987 and has 36 years of investment experience.
During her time at Eagle, Ms. King has served as a Credit Analyst and Co-Portfolio Manager.
Ms. King was named to InvestmentNews’ 2022 list of Women to Watch.
She also served on the board of directors for CASA (Community Action Stops Abuse) for 10 years.
She is an avid athlete, having completed Half Ironman and Ironman races and hiked to an elevation above 14,000 feet. She received a bachelor of science degree in business administration from the University of North Carolina and is a CFA charterholder.
In her Wall Street Transcript exclusive 2,755 word interview, Sheila King explains how Xylem (NYSE:XYL), Etsy (NASDAQ:ETSY), and Copel (NYSE:ELP) are not the only portfolio assets that an ESG investor should consider.
“Here’s the way I look at it.
As a portfolio manager, I’m not looking to go up against ESG indices.
I’m looking to go up against the traditional indices — that being, say, the Bloomberg Intermediate U.S. Government/Credit Index, or the 10-year muni-index.
I believe that over a long period of time from an ESG perspective, we’re looking to lower risk.
It’s something you’ll always see from a fixed income manager. And so, lowering risk and having attractive risk/reward returns fits very well for ESG.
So I’m always going up against your traditional indices. And I think that makes sense. I try to let the clients know that. So, certainly I believe that we can. The clients expect us to be able to be in line with — or beat — our indices.”
Xylem (NYSE:XYL), Etsy (NASDAQ:ETSY), and Copel (NYSE:ELP) are just a few of the many portfolio recommendations made by our experienced and expert portfolio managers.
Get them all by reading the entire interviews, exclusively in the ESG Investing report, only in the Wall Street Transcript.
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