New Report from MMI and TIIP Reveals Key Considerations in the Development of Sustainable Investment Due Diligence Procedures

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“Sustainable Investment Products and Due Diligence: Insights from Industry Experts” serves as a catalyst for industry discussion

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"This report is an acknowledgement that the sustainable investment landscape is changing rapidly, and that due diligence techniques must change with it."

As investor interest in “sustainable” investment strategies grows, many asset managers are expanding their sustainability-related services. In response, the Money Management Institute (MMI) and The Investment Integration Project (TIIP) convened industry experts and investment gatekeepers to discuss how best to support due diligence officers, financial consultants, and investors in distinguishing between the increasing number of sustainability-focused managers and products available and identify those that align with their interests and goals.

A new report based on those discussions, entitled “Sustainable Investment Products and Due Diligence: Insights from Industry Experts,” shares insights and reflections from the group to prompt further dialogue on the nature and types of sustainability products on the market and identifies issues that commonly arise in assessing their quality and success.

“Investors are increasingly asking their financial advisors to align their investment portfolios with their personal values and help address certain societal and environmental issues,” said Craig Pfeiffer, President and CEO of MMI. “This report is an acknowledgement that the sustainable investment landscape is changing rapidly, and that due diligence techniques must change with it. We hope these insights from leading experts and stakeholders will advance the conversation about that evolution.”

Addressing four key dimensions of concern, the report:

  • Provides a typology of sustainable investment products and services that aligns with investors’ motivations for pursuing a sustainable investment approach;
  • Discusses the cross-cutting considerations in the application of traditional due diligence procedures to sustainable investment products;
  • Examines specialized due diligence considerations that can arise in relation to the various types of sustainable investment products and services; and
  • Outlines the challenges of benchmarking, rating, and ranking the sustainability aspects of these products.

“As market adoption rapidly increases, due diligence officers, financial consultants, and asset owners find themselves challenged to incorporate new perspectives and new metrics into their research processes in order to qualitatively and quantitatively examine these new strategies,” said William Burckart, President of TIIP. “Establishing a new foundation of important questions to ask, key performance indicators to examine, and an ability to compare approaches will help these stakeholders arrive at judgments on the quality of the rapidly growing number of products in the field.”

The report answers common questions from due diligence officers and investors, including: What do managers mean when they call a product “sustainable?” How can due diligence officers, consultants, and asset owners determine which of the many “sustainable” products on the market are living up to their names? Who is doing a good job in this emerging discipline, and who is not?

“At Thornburg, we have a long-standing commitment to sustainable investment solutions for clients and across our operations,” said Jason Brady, President and CEO of Thornburg Investment Management, which supported the development of the report. “This is one of the most comprehensive how-to guides available on sustainable investing due diligence issues, and we are proud to support its publication.”

About Money Management Institute (MMI): Established in 1997, the Money Management Institute (MMI) is the industry association representing financial services firms that provide financial advice and investment advisory solutions to investors. Through conferences, educational resources, and thought leadership, MMI facilitates peer-to-peer connections, fosters industry knowledge and professionalism, and supports the development of the next generation of industry leadership. MMI member firms are dedicated to helping individual and institutional investors, at every level of assets, plan for and fulfill their financial goals. For more information, visit http://www.mminst.org

About The Investment Integration Project (TIIP). TIIP’s mission is to help investors understand how healthy environmental, social, and financial systems can benefit their portfolios. TIIP provides thought leadership, research, and consulting services that support investors’ pursuit of system-level investing, an advanced sustainable investing approach that focuses on managing systemic risks and investing in solutions to systemic problems. For more information, visit https://www.tiiproject.com

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