Positive Impact Spotlight: 2020 Annual Report

Executive Summary

  • 2020 saw the greatest inflows into sustainability investment strategies of all-time. Sustainable investing assets under management grew 42% to $17.1 trillion.
  • Sustainable strategies are evolving with impact investing emerging as a distinct strategy.
  • “Greenwashing” claims are increasing. Companies and asset managers must respond.
  • As of March 31, 2021, the Positive Impact Core and Sustainability strategies will merge and retain the Positive Impact Sustainability name. Both strategies had narrowed in differences and merging the strategies would reduce complexity and better serve client interests. The Positive Impact Sustainability strategy will continue to be managed using the same strategy and approach. The Positive Impact Diversity strategy was closed as of December 31, 2020.
  • Bigelow’s Positive Impact strategies performed well. Model returns outpaced their benchmarks and posted better than benchmark environmental, social and governance ratings, lower emissions and greater board independence and diversity. Actual portfolio performance may differ.
  • Momentum is building to create a unified sustainability reporting framework and improve data transparency for investment strategies and products.

The Mainstreaming of Sustainable Investing

2020 brought unforeseen challenges to families, companies and the economy. The pandemic led to widespread layoffs, recessionary economic conditions, enormous strains on healthcare systems, and unprecedented government stimulus. The pandemic spurred scientific breakthroughs, most notably multiple Covid vaccines developed and approved in less than a year, the launch of a work-from-home economy, accelerated adoption of cloud computing, and the emergence of resiliency as a fundamental company asset.  2020 also witnessed the mainstream adoption of sustainable investing strategies.

According to the US SIF Foundation Biennial “Trends Report”, sustainable investing strategies reached $17.1 trillion in assets under management, an increase of 42%.  Per the report, an estimated 1 in 3 dollars of total U.S. assets under management are invested in sustainable investing strategies.

What is driving demand for sustainable investing strategies? How are investors implementing sustainable investing strategies and incorporating environmental, social and governance (ESG) factors into their investment decision making process?  What is impact investing? What is greenwashing? How did Bigelow’s Positive Impact Portfolio strategies perform?

Image of Positive Impact core atributesImage of Positive Impact diversity atributesImage of Positive Impact Sustainability atributes

The 2020 Positive Impact 2020 Annual Report addresses these questions.

What is sustainable investing?

Sustainable investing has emerged as the umbrella term that includes investment strategies that consider ESG criteria in the decision making process. ESG investing is often used interchangeably with sustainable investing.

The US SIF, the Forum for Sustainable and Responsible Investing, defines sustainable investing as “an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact.”

The basic premise of sustainable investing is that investors can achieve both a financial return and an additional non-financial return. The goal is to “do well by doing good.” Investors use different strategies to achieve this dual goal. The general trend is toward ESG ‘best in class’ screening and incorporating ESG factors into traditional security analysis.

Source: Global Sustainable Investment Review

Investors can easily measure the financial return component of the dual goal and compare their portfolio returns to benchmarks and/or their required return to achieve their financial and life goals. The math is straightforward.   It is the non-financial return component that is much harder to define and measure. One investor may attribute significant value to not owning a specific industry.  Another investor may attribute value to having a portfolio with lower carbon emissions rather than a specific benchmark, such as the S&P 500 or Dow Jones Industrial Index. A third investor may want to tilt their portfolio to companies that have greater board and management diversity.

After the investor preferences are defined, the next step is measuring how the portfolio is tracking or achieving these non-financial goals. Investor demand for company data on material sustainability issues has skyrocketed. Investors are requesting data on carbon emissions, water usage, waste generation, hiring policies and practices, employee safety performance, compensation comparisons, governance policies, product safety, data and privacy issues and much more. Companies are responding, but absent mandated disclosure through regulation, data availability varies widely by company and sector. Non-financial return measurement data and reliability continues to lag financial return measurement.

An additional non-financial return consideration is defining impact. Sustainability investing strategies often involve measuring a company’s ESG performance relative to their industry or sector peers. These comparisons typically analyze how a company’s operations perform on the material ESG issues for their sector or industry.  Does Intel use water more efficiently in their semiconductor than peers? Is Bank of America leading the industry in gender pay parity? Does Johnson and Johnson have industry leading safety standards? Most of these comparisons focus on ESG operational performance and less on the impact from a company’s products and services or supply chain.

Source: MSCI Website

Impact investing has emerged as a distinct investment strategy that focuses less on operational ESG considerations and more on addressing specific societal challenges.

What is impact investing?

GIIN (Global Impact Investment Network) defines impact investments as “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.” GIIN states that “the growing impact investment market provides capital to address the world’s most pressing challenges in sectors such as sustainable agriculture, renewable energy, conservation, microfinance, and affordable and accessible basic services including housing, healthcare, and education.”

Source: Impact Management Project

Two primary elements of impact investing are 1) the intent to address a specific challenge and 2) the measurement of the impact.  This greatly simplifies what impact investing is and how impacts are measured. For more details on impact investing and measurement, visit the Impact Management Project and Impact Investing Institute.

Source: Impact Management Project

To illustrate the difference between impact investing and ESG performance-focused investing analysis, consider a company that provides rainwater collection systems to communities in Africa with limited clean water resources.  The collection systems would help reduce disease and health risks by providing a clean stable source of water, create more time for working and education by reducing water collection time, provide additional water for agriculture purposes, and reduce environmental damage from overuse of natural ground water resources. Impact measurements could include hours saved from water collection, wage growth from more time to work, and lower incidence of disease. Assuming a reasonable financial return, an investment in the company is an attractive impact investing candidate.

From an ESG performance analysis standpoint, the exact same company may have significant issues and risks. The company could have supply chain issues, inefficient water, waste and carbon emissions usage, poor governance controls, a gender pay gap and little board or workforce diversity. The company’s positive external impact could outweigh the negative ESG performance issues resulting in a net overall positive impact.  However, impact data availability lags ESG operating data limiting the ability to calculate a company’s overall net impact. As more investors demand and receive more data on the positive and negative impact from a company’s products and services, the opportunity to determine a company’s holistic impact will improve. It’s important to recognize that ESG investing uses a different lens than impact investing.

Companies can and do provide positive external impact. A company that pays living wages and offers affordable healthcare, employee training and attractive benefits is creating positive impact. Similarly, a company hiring a diverse workforce is also creating positive impact. However, these are positive impacts related to the investment in the company, not the primary impact created by the investment itself. As more companies align their strategies and product development toward solving larger issues, an enormous opportunity exists to leverage private capital. Businesses are starting to align with the Sustainable Development Goals.  Businesses can map company goals using benchmarks and tools such as the SDG Compass.


Source: Sustainable Development Goals website

As more companies align and improve their policies and practices in growing and protecting their human, natural, and social capital, positive system-wide benefits emerge. As more people receive a living wage and companies prioritize community input, or prioritize the environment, systemic changes occur. The benefits from this would accrue to more stakeholders. To push companies to make changes, effective engagement and advocacy is a must.  More discussion on this in our Engagement and Advocacy section.

Bigelow’s Positive Impact strategies focus on incorporating ESG factors into the investment decision making process. The data used to assess company performance is primarily internal company level data and operationally focused. Data on direct external impact is limited to environmental and natural capital factors, such as water, waste, and greenhouse gas emissions. When tools to assess product and services impacts improve and reliable data emerges, Bigelow’s Positive Impact strategies will integrate more impact-oriented data. Currently, Bigelow’s Positive Impact strategies are best characterized as an ESG integration and positive screening approach. Why call out this distinction? Greenwashing.

What is greenwashing?

Greenwashing is a “communication that misleads people into forming overly positive beliefs about an organization’s environmental practices or products” (Lyon and Montgomery, 2015).

The Financial Conduct Authority, the UK’s asset management regulator, defined greenwashing as “marketing that portrays an organization’s products, activities or policies as producing positive environmental outcomes when this is not the case”.

Greenwashing claims have increased in all sectors. Consumers are shifting their spending toward more environmentally friendly products and sustainability-focused businesses. Businesses are shifting their marketing to target these consumers and capture these dollars. Yet green and sustainability marketing often leads to actual green product development and sustainability initiatives. The investment industry is no different. The enormous growth in sustainability investing strategies, up 42% in 2020 or over $3 trillion, has led to an influx of new sustainability funds and strategies. The risk that greenwashing erodes investor confidence is real.

Several efforts are underway to improve product transparency and comparability. The CFA Institute is developing “a voluntary, global industry standard to provide greater product transparency and comparability for investors by enabling asset managers to clearly communicate the ESG-related features of their investment products.” Efforts are underway in Europe to disclose how sustainability data is collected and reviewed.

Bigelow’s sustainable investing approach centers on a commitment to disclosing how our sustainability investing strategies are created, sharing the underlying data with our clients, discussing the challenges of gathering and interpreting sustainability data, distinguishing between ownership of highly rated ESG companies and impact investing, and supporting our clients in creating portfolios that reflect their interest in “doing well by doing good” while recognizing their preferences. Transparency is the best disinfectant against greenwashing.

Greenwashing Related Articles

ESG Greenwashing Under Scrutiny

Greenwashing-What Investors Need to Know

Greenwashing is going to get more expensive

Positive Impact Portfolio Strategies

Bigelow offers Positive Impact strategies to support investors interested in incorporating environmental, social and governance (ESG) considerations into their portfolios. Research indicates that material ESG issues including corporate governance, carbon emissions generation, fossil fuel exposure, water and waste management and usage, board and management diversity, employee safety and wellbeing, and customer and community relationships are affecting the financial and investment performance of companies and issuers.

Investors may also ascribe additional value to owning companies that are reducing their ESG impact (e.g. lower carbon emissions) or targeting new opportunities (e.g. renewable energy) emerging from global sustainability issues.

Bigelow’s Positive Impact strategies target and prioritize companies and issuers with better than peer performance on the sustainability issues material to their businesses and industries. Portfolios are managed to maintain appropriate diversification, alignment with a client’s individual risk tolerance, and exposure to asset classes appropriate for a client’s return needs.

Bigelow’s Positive Impact Portfolio Strategies: Measurement and Attributes

  • Bigelow offers three sustainable investing strategy models: Positive Impact Core, Positive Impact Sustainability and Positive Impact Diversity, as well as more customized options.  As of March 31, 2021, the Positive Impact Core and Sustainability strategies will merge and retain the Positive Impact Sustainability name. Both strategies had narrowed in differences and merging the strategies would reduce complexity and better serve client interests. The Positive Impact Sustainability strategy will continue to be managed using the same strategy and approach. The Positive Impact Diversity strategy was closed as of December 31, 2020.  Contact your advisor with questions.

Image of Positive Impact core atributesImage of Positive Impact diversity atributesImage of Positive Impact Sustainability atributes

The ESG data provided below is based on the Positive Impact Core portfolio model. Actual portfolios may differ. The Positive Impact Core model targets greater than benchmark overall ESG performance as well as higher ratings for the environmental, social and governance pillars. Performance is measured on the overall portfolio ESG performance which is the market value weighted average of the underlying company holdings performances.

The Positive Impact portfolio strategies utilize positive screening, tilting the portfolio toward companies with better-than-peer ESG performance. Equity asset classes are measured vs. their benchmark (e.g. Russell 3000 for U.S. equities). Fixed income asset classes are measured vs. their benchmark (e.g. Bloomberg Barclays Intermediate U.S. Government and Credit Index) on a best efforts basis because many bond issuers are not rated and do not disclose ESG related data (e.g. U.S. federal government, mortgage backed securities).

Sustainalytics, MSCI, Just Capital, Bloomberg, company filings (10-K, sustainability reports) and asset management firm-based data (e.g. Calvert, Blackrock, Vanguard, Nuveen, others) are used to measure and assess company and portfolio ESG performance. Not all companies disclose ESG data or sufficient ESG data to assess their performance.  However, 95%+ of the underlying market value of the Positive Impact Core equity portfolio, U.S. and foreign, was rated providing reasonable coverage.  All data is as of December 31, 2020. Actual portfolios may differ.

Bigelow’s 2020 Positive Impact Core Returns

The Positive Impact Core equity portfolio model returns exceeded their respective underlying benchmarks. Actual portfolios may differ. Portfolios benefitted from favorable sector weights, such as overweight technology and underweight energy, and strong security selection.  The incremental return generation from specific sustainability factors is difficult to quantify.

Sources: Bloomberg data, Bigelow data; Risk = standard deviation of returns in 2020

Bigelow’s Positive Impact Core U.S Equity Portfolio Model

The Positive Impact Core U.S. equity portfolio model is well diversified with exposure to all eleven major sectors (e.g. Consumer Discretionary, Financials, Health Care, Information Technology, etc.). Technology was the largest overweight and energy was the largest underweight vs. the Russell 3000 index. No tobacco companies or civilian firearms companies were held in the portfolio (debt or equity). The largest position was 4.9% of the portfolio and the largest ten positions were 21.5%. The concentration in the largest ten positions was 18.2% in 2020. Actual portfolios may differ.

Sources: Bloomberg data, Bigelow data

The Positive Impact Core U.S. equity portfolio ratings exceeded the ratings of its U.S. equity benchmark, the Russell 3000 Index.  Ratings are based on Sustainalytics data and “performance” comparisons are relative to the market cap weighted average for the benchmark.  As shown below, the portfolio exceeded the benchmark’s overall ESG rating and the benchmark’s environmental, social and governance ratings. The greatest outperformance is in governance. Governance is material for all companies, and governance performance is often a lead indicator for performance in environmental and social factors. The overall and individual pillars (E, S and G) outperformance gap narrowed versus 2019.

Sources: Bloomberg data, Bigelow data, Sustainanlytics

While it is important to consider how the portfolio compares to the benchmark, selected data is also presented on an absolute basis to assess how the Positive Impact Core U.S. equity portfolio performed. Ultimately, positive absolute performance for private industry overall and the economy is needed to achieve system-wide change and deliver system-wide impact.

As shown below, total greenhouse gas emissions declined 27.6% annually. The lockdown of the U.S. economy and other pandemic related impacts was a key factor in the decline.  Total waste generated was flat.  Water usage declined 55.1%. Again, the lockdown of the U.S. economy and other pandemic related impacts was a key factor in this decline.   The portfolio generated 29.4% of the emissions of the benchmark using weighted averages. The portfolio was also more efficient in greenhouse gas intensity, generating fewer emissions per dollar of sale.  The portfolio was also less efficient in water intensity. The portfolio had better than benchmark diversity as measured by the percentage of women on the board and more independent directors on the board.  Actual portfolios may differ.

Sources: Bloomberg data, Bigelow data

Bigelow’s Positive Impact Core U.S Equity: Top 20 Holdings Ratings

As shown below, in the top 20 holdings there is significant overlap in the ratings of the Positive Impact Core U.S. equity portfolio among rating providers. Fifteen are rated A or better by MSCI, and ten are rated as industry leaders.  Sustainalytics overall rating is 28.2% above the benchmark.  JUST Capital ranks fifteen in the top three of their industry, eight as industry leaders and six in the top ten of all companies. Actual portfolios may differ.

Sources: Bloomberg data, Bigelow data, Just capital, MSCI ESG Ratings Corporate Search Tool, Sustainanlytics

Bigelow’s Positive Impact Core Foreign Developed and Emerging Markets Portfolio Models

This year we are also providing similar metrics and data for the Positive Impact Foreign Developed and Emerging Markets Equity strategies. Actual portfolios may differ. Similar to the U.S. Core Equity Portfolio Models, the portfolios exceeded overall and pillar specific (E, S and G) benchmark ratings, as measured by Sustainanlytics, and generated fewer greenhouse gas emissions. Additional data provided below.

Sources: Bloomberg data, Bigelow data, Sustainanlytics

Sources: Bloomberg data, Bigelow data, Sustainanlytics

Sustainability Ratings

Sustainability disclosure standards, ratings methodologies and measurement practices continue to evolve. While there is general agreement on what factors to measure (e.g., diversity is important and creates value), investors and ratings agencies may differ on how much to weigh particular issues (e.g.  Is diversity 10% of the overall rating or should it be 5%?), and how to measure an issue (e.g., gender diversity on the board vs. gender diversity in executive rankings vs. gender workforce diversity).  As such, convergence in ratings among the major ESG ratings providers is unlikely to reach the level of convergence among credit ratings providers. Credit ratings providers’ (S&P, Moody’s) ratings are nearly identical over 90% of the time. More ESG data is likely to improve measurement and assessment. However, we expect differences of opinion to continue and view it more as an opportunity than a hindrance.

Bigelow’s Positive Impact Core U.S Equity Portfolio Carbon Footprint

A large motivator for sustainable investors is concern surrounding the climate and the environmental impact from consumption and manufacturing. Environmental issues are strongly represented in the U.N. Sustainable Development Goals.  Significant work is required to reduce global emissions.  Using tools on the EPA website and underlying ESG portfolio data, greenhouse gas (GHG) emissions were converted to different equivalencies to illustrate the underlying savings. Savings is measured as the difference between Bigelow’s Positive Impact Core U.S. Equity Portfolio weighed average emissions and the benchmark, the Russell 3000 Index. Actual portfolios may differ.


This is the equivalent of the amounts in the chart below:

Sources: Bloomberg data, Bigelow data, EPA, https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

Sustainability Accounting and Reporting Standards

Current financial accounting standards do not fully capture the external impact of a company’s operations, products, and supply chain, and measure the related costs or benefits in financial or monetary terms.  Investor and stakeholder demand for sustainability data is increasing, and company responses vary. A combination of voluntary disclosure and mandated regulatory driven disclosure is the most likely outcome. 2020 saw significant efforts on both fronts.

The European Union (EU) has created a legislative plan to incorporate ESG factors as part of its financial services industry regulations. A core piece of the plan is the mandate and regulation of sustainability related financial disclosures (SFDR). Mandated disclosures start this year.

The IFRS (International Financial Reporting Standards) Foundation, which oversees the International Accounting Standards Board, made a proposal to create a global sustainability standards board. A new global sustainability standards board could provide an overall reporting framework and/or general standards and leverage current sustainability reporting and accounting standards from existing organizations.  Five of the most prominent standards and framework setters announced an agreement to align their efforts and work together to create comprehensive corporate reporting. Subsequent to this announcement, two of the organizations, the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council  have announced an intention to merge

The new merged entity and the Global Reporting Initiative (GRI) are likely to play a role in any global standard initiative. GRI provides sustainability reporting standards. The GRI standards are the first and most widely adopted global standards for sustainability. The standards are rooted in the public interest and take a multi-stakeholder user approach.   

Companies are seeking to disclose sustainability data and calculate their overall impact. To aid companies, the Impact-Weighted Accounts Project is promoting and creating accounting statements that capture external company impacts. The project is not trying to develop new standards but to illustrate how impact is quantifiable and translatable to accounting statements.

Other tools such as the B Impact Assessment helps companies measure their impact on workers, the community, environment, and customers. The B Impact Assessment guides companies interested in certifying as a B Corporation. Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.  

Engagement and Advocacy

Engagement and advocacy are critical to aligning company and stakeholder interests, driving corporate behavioral change and promoting accountability and effective governance. Engagement tools include direct dialogue with companies, proxy voting, the filing of shareholder proposals or resolutions and publicly advocating for issues.

Source: Calvert Research and Management

What is the best tool? It depends on the issue and company. However, pressure on asset managers to support ESG shareholder resolutions has increased significantly. Two voting record studies ShareAction Proxy Voting Analysis and majority action Climate in the Boardroom Report illustrate that management accountability includes the investment fund industry as well. As the management of fund families commit to sustainability issues and change, investors expect fund managers’ voting records to align with their public comments and sustainability commitments.

The overall voting trend is encouraging, with more asset managers supporting ESG shareholder resolutions.


Source: Morningstar Fund Families Support ESG Analysis

Bigelow closely monitors the proxy voting guidelines and engagement and advocacy efforts of the asset managers used in the Positive Impact portfolios. Bigelow recognizes that voting record alone is not a sufficient metric to assess an asset manager’s overall engagement efforts. However, asset managers must provide additional metrics to help investors understand the asset managers’ engagement priorities and indicators of success.

Looking Ahead

2020 saw the mainstreaming of sustainable investing. Investor demand and expectations have never been higher. Sustainable investing continues to hold great promise for addressing global sustainability issues by encouraging companies to assess their impact, provide capital to deliver solutions, and increase individual and corporate awareness of the challenges and opportunities to create value for all stakeholders. While much progress has been made, significant work remains.