ESG Investing Offers Significant Potential Return Opportunities

Today millions of people will participate in Earth Day, the global holiday celebrating our planet and its health. At AMG, we have seen growing interest amongst our clients for Environmental, Social and Governance (ESG)-oriented investments, allocating all or part of their portfolio to investments that are doing good by the environment and society, and that have strong governance practices.

Broadly, investing according to ESG principles is meant to provide long-term capital support to companies with sustainable business practices. And it can position investors to benefit from innovative new technologies and strategic corporate initiatives—which often produce attractive returns.

Since sustainable investing is a broad concept, the UN Principles for Responsible Investing (PRI) establishes a useful set of criteria for investors who choose to use an ESG approach in their investment analysis and decision-making processes.

These six Principles for Responsible Investment aim to close the gap between a good cause and a good investment, and gives investment managers who adhere to an ESG approach multiple ways to promote corporate sustainability:

1. Incorporate ESG issues into investment analysis and decision-making processes
2. Be active owners and incorporate ESG issues into ownership policies and practices
3. Seek appropriate disclosure on ESG issues by the entities in which we invest
4. Promote acceptance and implementation of Principles within the investment industry
5. Work together to enhance effectiveness in implementing the Principles
6. Report on corporate activities and progress towards implementing the Principles

AMG incorporates sustainable investing for clients through a range of investment options:

• We identify best-of-breed external ESG-oriented active investment managers
• We manage an in-house sustainable global dividend equity strategy that utilizes ESG criteria
• We seek to invest in cutting-edge new technologies that will positively affect the environment through our private capital funds.

SUSTAINABILITY THEMED INVESTING

Some of the most exciting ESG-oriented investment themes our public and private markets investments teams are seeing today include:

• Biomanufacturing—Replacing materials/chemicals traditionally made with oil to new and innovated bio-based feedstock and processes.
• Food security and agriculture innovations—Efficient and earth-friendly farming techniques that improve crop dependency and yield while improving soil quality.
• Electric vehicles (EVs)—Accelerating adoption of EVs by businesses and individuals will have a positive effect on reducing global greenhouse emissions from the transportation sector.
• Green power—Engineering efficient and resilient energy grids in metro areas that can increasingly support renewable energy sources.
• Green supply chain—Companies are looking more holistically at the environmental impact their products have and on cutting their carbon cost up and down the supply chain.
• Artificial intelligence-enhanced manufacturing and logistics—Optimizing manufacturing processes and logistics to increase efficiency and lower input costs.
• Circular economy—Overhauling of how products are designed, manufactured, sold, refurbished, and recycled.
• Carbon capture—Direct air capture, soil capture, or capture through plants like kelp and trees. Supported by tax credits and corporations seeking offsets for the carbon dioxide they produce.

Some of these themes are featured in the Biden Administration’s sweeping $2 trillion American Jobs Plan, which proposes investments for a myriad of programs as “a once-in-a-generation investment in America, unlike anything we’ve seen or done since we built the interstate highway system and the space race decades ago,” (New York Times video).

While the final form of this package of proposals is not yet known, we anticipate ESG-oriented investments could benefit from fiscal policy-aligned opportunities as more details on the plan emerge.

Please reach out to your AMG Wealth Advisor or via our Contact Us page to learn more about how we work with clients who choose an ESG approach to investing.