Technological innovations meet social needs to grow SRI investing
by Andrew D.W. Hill, CFA President,
Andrew Hill Investment Advisors, Inc.
Socially responsible investing (SRI), or the practice of selecting investments based on a particular company’s social value in concert with the advisors’ customary financial analysis, has become one of the fastest growing trends in the investment industry.
According to The Forum for Sustainable and Responsible Investment, assets managed with an SRI strategy have grown 50 percent over the past two years. This growth can be traced to heightened environmental concerns, growing social issues and, most important, technological innovation that is providing solutions for society’s biggest problems.
Environmental, social and governance (ESG) factors have been integrated into our firm’s investment process and our business practices since the founding of Andrew Hill Investment Advisors in 2010. We have always believed ESG factors have given us a competitive advantage as few investment advisors in Southwest Florida have focused on SRI.
There are several motivations for sustainable investing. For example, consumers seeking companies with good labor and environmental practices are becoming better informed about the products and services they purchase. Also, climate change has given credence to the global warming issue and focused increased awareness. Unfortunately, evidence of these issues has become a political issue. What is less apparent is the rise of lung cancer, partially caused by the same sources of pollution.
As a firm, we are focused on economic opportunities that are expected to produce higher investment returns while bettering society. While there have been many recent innovations, lithium battery technology may have the most significant impact. The two merging applications of battery technology include renewable energy and electric vehicles. Ironically, Exxon began development of the lithium battery in the 1970s.
The cost of lithium batteries has been falling for a decade as innovation and supply of materials have become more prevalent. Integrated with 5G communications and other low carbon fuels such as hydrogen, lithium batteries could be the aorta to a clean energy future and economic opportunity.
The growth in ESG investing has been a positive wind behind the performance in our client portfolios. For example, NextEra Energy, a core holding in most accounts, has transitioned from a boring, traditional utility to now the world leader in the production of renewable energy with battery storage and natural gas plants for power production.
Another client portfolio example is Nucor. This innovative company is growing again as the auto and appliance markets demand more products. Although it has a way to go with lowering its costs as renewable energy and artificial intelligence enter into the steelmaking process, Nucor serves as an example of a billion dollarbusiness based on recycling.
Our firm’s motto has always been “we are focused on making money, not making friends.” It is clear, sustainable investing is a growing investment strategy that has a positive societal impact. But it’s also good for generating long-term financial returns.
To learn more about the competitive performance of sustainable investment strategies, please contact our firm at (239)777-3129 or visit us online at www.ResponsibleAdvisors.com.