Earlier this year we reported that Envestnet is witnessing record adoption of ESG & Impact Investing. As part of our effort to continue to meet that client demand, we are excited to work with Worth Rises and Sustainalytics to release three new Impact Overlay screens this quarter.
Impact Overlay Services provides a customized impact investing experience, allowing advisors to exclude investment exposures based on a client’s personal convictions. The overlay restriction program at Envestnet allows clients to apply customized impact restrictions to their investment portfolios. There are now more than 20 different restriction criteria available.
New Impact Overlay screens
1. Prison industry
Based on Worth Rises’ biennial data report The Prison Industry: Mapping Private Sector Players our new screen will help financial advisors divest client portfolios from companies involved in the prison industry. This comprehensive screen captures companies involved in, but not limited to, bail bonds, immigration detention, prison labor, prison telecom surveillance, and electronic monitoring. Read more about Worth Rises methodology.
“We are thrilled to see investors finally answering the call to divest from mass incarceration — not just private prisons, but the entire prison industry. We are proud to turn our data into an actionable investment screen that even retail investors can access,” said Bianca Tylek, Executive Director of Worth Rises. “This investment screen goes far beyond where others have stopped — it screens out corporations involved in all aspects of the prison industry from prison construction to electronic monitoring. While the omnipresence of the prison industry means no screen could remove all exposure, this is among the most comprehensive screens for the prison industry available in the investment space. And the implications for those concerned are huge — more people divesting from the prison industry and working together to dismantle it.”
2. Unsustainable farming
For our unsustainable farming screen, developed with Sustainalytics, companies that derive more than 10 percent of revenue from the following are flagged as ineligible for investment:
- Development and/or cultivation of genetically modified seeds and/or plants
- Growing genetically modified crops (GMOs)
- Production and/or distribution of palm oil
- Manufacturing pesticides
Sustainable agriculture is a key environmental theme in investing. The use of genetically modified seeds is considered controversial because of health and socio-economic (patented biotechnology) concerns as well as environmental risks associated with the spreading of GMOs to other plants in ecosystems. Palm oil is considered controversial because large areas of tropical forests and other ecosystems in Africa, Asia & Latin America have been cleared to make room for vast monoculture oil palm plantations –destroying critical habitat for many endangered species. Other major ESG concerns related to palm oil production are violations of human, labor, and land rights. The use of pesticides is considered beneficial as it can help farmers prevent damage to their crops and control the number of invasive species. However, pesticides are considered controversial because of their potential toxicity to humans and animals and their bioaccumulation.
Also based on research from Sustainalytics, this overlay screens out companies that derive revenues from the production or retail sale of medical or recreational cannabis. Cannabis is considered controversial because it can create dependence and become addictive, and because of the health risks associated with heavy, long-term use. However, active substances of cannabis have been shown to have analgesic and anti-inflammatory properties and are sometimes used as treatment for chronic pain and for symptoms of difficult to treat conditions such as cancer, HIV/AIDS or multiple sclerosis. Because of these different perspectives, we find that advisors receive a lot of questions from clients about how to reflect their preferences on the cannabis industry in their portfolios.
More screens to come
Looking forward, it is our goal to continue the ways in which advisors can personalize client portfolios, both by working closely with established partners such as Sustainalytics, and by working with other boutique research providers like Worth Rises. Every day we’re having conversations with the goal of building out a robust menu of options that address the issues our clients care about.
“Having worked with Envestnet since its initial entrance into the ESG and impact investing space, we are delighted to see the uptake by investors, leading to this expansion of offerings,” said Bob Mann, President of Sustainalytics. “Our commitment to our mission of providing the insights required for investors and companies to make more informed decisions that lead to a more just and sustainable global economy is unwavering, so we’re excited to have Envestnet broaden the scope of our research to help advisors and their clients make investment decisions.”
Visit our Impact Overlay Services page to learn more about the screens we offer and how they work.
Sustainalytics, a Morningstar Company, is a leading ESG research, ratings and data firm that supports investors around the world with the development and implementation of responsible investment strategies. For more than 25 years, the firm has been at the forefront of developing high-quality, innovative solutions to meet the evolving needs of global investors. Today, Sustainalytics works with hundreds of the world’s leading asset managers and pension funds who incorporate ESG and corporate governance information and assessments into their investment processes. Sustainalytics also works with hundreds of companies and their financial intermediaries to help them consider sustainability in policies, practices, and capital projects. With 16 offices globally, Sustainalytics has more than 1000 staff members, including more than 350 analysts with varied multidisciplinary experience across more than 40 industry groups. For more information, visit www.sustainalytics.com.
About Worth Rises
Worth Rises is a non-profit advocacy organization working to dismantle the prison industry and end the exploitation of those it touches. Their work is conducted through two main strategies: exposing the exploitation and the commercialization of the criminal legal system through research, analyses, and storytelling unmasks the harms caused by the prison industry and organizing and advocacy that centers on protecting the resources of the impacted communities and stripping the industry of its power.
For more information, visit www.worthrises.org. Follow @worthrises on Facebook, Twitter, and Instagram.
The information, analysis and opinions expressed herein are for informational purposes only and do not necessarily reflect the views of Envestnet. These views reflect the judgment of the author as of the date of writing and are subject to change at any time without notice. Nothing contained in this piece is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.