Before delving into our unique values-aligned investment (“VAI”) framework and implementation, I would like to summarize and reference additional academic studies, which further dispel the myth that one sacrifices financial performance when participating in VAIs.

CFA Institute Research Foundation in collaboration with Swiss Sustainable Finance published the Handbook on Sustainable Investments in 2017, which summarizes that “there is ample academic evidence that ESG parameters have a positive influence on the returns from financial assets.” For instance, a 2015 MSCI research report titled “Can ESG Add Alpha?” found that over an eight-year period, the ESG portfolio relatively outperformed the global benchmark by +1.1% per year.

In 2016, Barclays Research published a report titled “Sustainable investing and bond returns,” which concluded that ESG factors “can be applied to credit markets without being detrimental to bondholders’ returns.” Furthermore, bonds with a positive ESG tilt delivered “a small but steady performance benefit.” In 2018, Barclays Research expanded upon their study with an updated report titled “The case for sustainable bond investing strengthens.” The recently updated report confirmed that credit portfolios favoring bonds with high ESG ratings, while keeping all other risk factors unchanged, led to higher returns. Specifically, from July 2009 – March 2018, U.S. and European investment grade bonds with high ESG ratings consistently outperformed those with low ESG ratings. For example, in March 2018, U.S. investment grade bonds with high ESG ratings relatively outperformed by +2.4%.

Similarly, the Journal of Banking and Finance published an article in 2016 titled “The effect of social screening on bond mutual fund performance,” which compared the risk-adjusted performance of more than 100 ESG-focused fixed income funds in the U.S. and eurozone against a sample of conventional fixed income funds. The analysis concluded that over a 13-year period, the ESG funds relatively outperformed by +0.5% annually, which is a noteworthy margin for fixed income investing.

Provided the foundation does not have to sacrifice financial performance in order to participate in VAIs, we incorporated a VAI sleeve into the foundation’s portfolio in 2018. We believe that the foundation’s corpus can be invested in such a way to generate both a competitive financial return while simultaneously achieving a positive impact, or non-financial return.


Brittany Priester

Brittany Priester

Portfolio Manager