The Power of the Purse / The Power of the Portfolio – Looking At Consumers and Investors in the United States of America

by Hank Boerner – Chair & Chief Strategist – G&A Institute

Facts:  The U.S. has the largest consumer market in the world (estimated spending is at US$12.5 trillion, or 26 percent of the global total consumer marketplace, and three times the size of the #2 consumer market, China).  “Personal” consumption accounts for 70% of US GDP.

Facts:  The US has the world’s largest investment base — for domestic bonds, that is $40 trillion of the $100 trillion worldwide bond market, and $20 trillion for domestic equities, roughly one-third of the $64 trillion entire global equities market.

Question: Imagine if the consumers and investors (of course, with much overlap here) in this nation of 331 million (third largest population in the world behind China and India) enthusiastically “dived into what living more sustainability means”.

Answer: It is happening, of course, from the American grassroots to grasstops — even if the President of the United States is withdrawing the nation from the historic Paris Agreement on Climate Change and denying the impacts of global warming et al. 

Our Top Story for you this week is from CNBC (NBC-TV Network), with commentary from Alicia Adamczyk about a new series to be telecast: “CNBC Make It”, examining different facets of consumerism and finance and how these related to climate change and sustainability. (CNBC carries investing and market news throughout the day and has popular program hosts through the day and evening. The original name: Consumer News and Business Channel.)

The series can reach a quarter million viewers and more on CNBC in prime time and content is especially geared to younger age cohorts. Every day, volumes of content are shared on the CNBC web platform.  As the editors say — Influencing tomorrow’s leaders! Who will be among the most influential consumers and investors in the USA. 

Why is this media effort important?  Consider: A 2019 survey told that us 72 per cent of Americans now say global warming is a personally important issue.  And 44% support a carbon tax, according to another survey.

State and local governments (especially New York State and City and California) have been launching comprehensive sustainability initiatives. Plastic bags for taking shopping items home are going the way of the extinct Dodo bird in New York State, for example.

On the investing front, 85% of individual investors in the USA and 95% of the Millennials expressed interest in “impact investing” and making their portfolios more sustainable (source: Morgan Stanley Institute for Sustainable Investing).

A doff of the cap to CNBC editors for their informational and educational efforts to help advance personal and institutional sustainability and sustainable investing.  You can learn more about their work at the link in our Top Story (there are links on the CNBC web platform to interesting sustainability topics).

And a short note on the future: This Coronavirus Crisis will pass and the world will get back to work. Investors and consumers will be looking at what companies are doing during and after the crisis to demonstrate their corporate citizenship. We may have an interruption in the trend, but the sustainability journey continues.

Top Story

More and more Americans want to live more sustainably—we’re diving into what that means
Source: CNBC – Over the past few years, sustainability has become one of the biggest buzzwords in personal finance, with consumers rethinking exactly where and how they spend their money.

Bolded Wall Street Names Advancing Sustainable Investing — Add Morgan Stanley

by Hank Boerner – Chair, G&A Institute

In recent weeks our conversations with asset owners and managers have been very encouraging — a host of brand name Wall Street houses have been tuning in to sustainable investing and a good number have been putting in place frameworks, models, methodologies, approaches to incorporate more analysis of corporate ESG performance in their portfolio management.  The terminologies are still in formation mode, so we hear about corporate ESG performance, corporate responsibility, triple bottom line…and the emerging favorite for many managers, sustainable investing.

Thanks to our colleague, Erika Karp of Cornerstone Capital (she was a 25-year UBS top manager before starting her own firm), we have settled on “sustainable investing” as the go-to term for conversations with asset owners, asset managers, analysts, and more frequently now, corporate investor relations officers (IROs).

The bolded names of Wall Street have been focused on sustainable investing for some time now, including Goldman Sachs, UBS, State Street, MSCI, Thomson Reuters, and Wellington (which acquired the venerable SRI complex, Domini Social Funds).  The bold name owners have adopted sustainable investing strategies and policies, including CalPERS, CalSTRS, TIAA-CREF, New York State Common Fund, Norges Bank (for the Norway Sovereign Wealth Fund) and more.

A recent bold name to add to the mainstream Wall Street roster:  Morgan Stanley, which late last year launched the MS Institute for Sustainable Investing.  Chairman/CEO James Gorman in announcing the move, said: “…the institute will build on Morgan Stanley’s ongoing work to advance market-based solutions to economic, social and environmental challenges…”

Positioning the sustainable investing concept for the mainstream market, Chairman Gorman noted that M-S will “operate from the foundational principle that sustainable investment can only achieve significant scale by attracting a broad range of private sector capital…”  (C’mon in — this is the new new thing for the capital market player!)

Among its strategic objectives, the M-S Institute will seek to drive capital toward investments that promise sustainable economic growth.  A goal has been set to raise US$10 billion in total client assets through Morgan Stanley’s Investing With Impact Platform over the next five years by developing new products and solutions to enable clients to meet the demand for sustainable investment.

In coordination with MS Investment Management’s Long Only and Alternative Investment Partners businesses, new products were created with positive sector and/or environmental impact as a core part of the underlying investment strategy.

We’ve been having discussions here in New York City with Peter Roselle, VP / Financial Advisor of Morgan Stanley Wealth Management, The Pelican Bay Group.  He’s an enthusiastic evangelist for his company’s sustainable investing initiatives and brought to our attention two of the first products for clients:

  • Sustainable ESG Large Cap Core Strategy – this seeks returns from a large-cap core strategy with low turnover, constructed from stocks selected from the Dow Jones Sustainability Index family (DJSI), which is managed by Dow Jones (USA) and RobecoSAM (Switzerland).
  • Sustainable ESG Covered Calls Strategy – this seeks to generate income utilizing a call writing strategy on a portfolio of US blue chip issues…again, using the Dow Jones Sustainability Indexes.  Stocks selected must display a high degree of corporate sustainability.

(Note the DJSI was launched in 1999 and was the first global corporate sustainability benchmark. The DJSI managers look at the world’s leading companies through the prism of economic, environmental and social issue criteria.  The component companies are rebalanced each year – watch for the fall announcement.)

The addition of the bold name “Morgan Stanley” is a welcome and affirmative sign of the rapidly-rising interest in sustainable investment in the mainstream capital market houses.  The firm announced in mid-year that wealth management client assets under management toped US$2 trillion. (During the awful year 2008, as the market downturn reached for the bottom, client assets under management were $546 billion).

For information about the Morgan Stanley products described here, you can talk with Peter Roselle, who has been keeping the G&A Institute team up to date on developments:  Peter Roselle, CPM and CFP, Morgan Stanley Wealth Management, The Pelican Bay Group.  email: Peter.Roselle@MS.com.  NYC phone:  212-603-6171,

 

 

 

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