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MainStay Partners with Candriam, a Leader in Sustainable and Responsible Investments

Sustainable & Responsible Investments

Candriam Investors Group was acquired by New York Life Investments in 2014 and its name is the acronym of its core company values: Conviction AND Responsibility In Asset Management. Candriam is a European asset manager, with €95 billion in assets under management.1 Candriam offers multiple areas of investment expertise, with particular strength in sustainable and responsible investments (SRI) and alternative investments.

With 20 years of leadership in SRI, Candriam covers all the SRI approaches to provide a broad range of SRI strategies across geographic regions and asset classes.

What is Sustainable & Responsible Investing?

1. Sustainable & Responsible Investing (SRI) is an investment approach that considers Environmental, Social, and Governance (ESG) factors in portfolio selection and management. The Global Sustainable Investment Alliance (GSIA) definitions of sustainable investment have emerged as a global standard of classification.

2. Let’s take a closer look at ESG factors. ESG factors refer to the broad set of sustainable investment criteria used alongside traditional financial criteria in managing and selecting investments. There is no one exhaustive list of ESG issues. They are often interlinked, and it can be challenging to classify an ESG issue as only an Environmental, Social, or Governance issue.

A Closer Look at ESG Factors
See table »

These ESG issues can often be measured (i.e., what is the employee turnover for a company?), but it can be difficult to assign them a monetary value (i.e., what is the cost of employee turnover for a company?).

Historically, many investors have considered ESG issues in fundamental investment analysis by including an assessment of reputational risk, regulatory developments, or such megatrends as an aging population. But now, ESG analysis refers to a systematic consideration of relevant and material ESG issues, and it is a complement to (not a substitute for) traditional fundamental analysis. ESG issues remain relevant throughout the investment process, from the initial analysis to the buy/sell/hold decision, to ongoing ownership practices.

3. SRI covers a broad range of approaches.

Candriam's Competencies
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4. SRI is not to be confused with Socially Responsible Investing.

Socially Responsible Investing, a term historically used widely in the U.S., differs in that it is an investment style that includes or excludes companies in a portfolio based on social, moral, ethical, and religious criteria. For example, a Socially Responsible portfolio might exclude companies whose revenue might derive from areas such as weapons, tobacco, alcohol, or gambling.

By limiting these sectors, these strategies might prevent potential diversification and/or growth of capital opportunities. They also do not take into account the ESG-related behavior of a company and thus do not contribute to a sustainable economic growth.

Nowadays, the “Sustainable, Responsible, and Impact Investing” terminology is becoming the new standard. Candriam has been using this approach since 1996.

5. Myth vs. Reality

The practice of considering ESG issues in investing has evolved significantly from its origins in exclusionary screening of listed equities on the basis of moral values. There are, however, some lingering myths about ESG considerations.

Myths about ESG Considerations
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Why Sustainable & Responsible Investing?

1. A Growing Market

Investors have turned to ESG in greater numbers over the last decade, especially in the past few years. In fact, the U.S. is the fastest growing SRI market. From 2012 to 2014, there was a 61% growth in global SRI assets.2

Proportion of SRI Relative to Total Managed Assets
See chart »

The growing acceptance of ESG can also be seen in the rise in the number of signatories to the United Nations Principles for Responsible Investment (UN PRI), an initiative for investment organizations with a focus on ESG issues. There were six members in 2006 and more than 1,400 in 2014.

This environment raises companies’ awareness as well. More companies are focusing on ESG and finding it can help improve financial results. Companies are also finding that consumers may favor good corporate citizens (i.e., companies that use alternative energy or purchase ethically sourced raw materials) which can also be good for the bottom line. Companies are also becoming more transparent about their ESG commitments to publish metrics related to ESG issues.

2. SRI is attracting a large pool of investors and, with them, more capital.

Women and millennials favor ESG investing more than other investors do. A recent study1 shows that 84% of millennial investors (76% of female investors) were interested in sustainable investing and were twice as likely as investors overall to make sustainable investment decisions. And these two groups are also rapidly becoming more influential investment decision makers. By some estimates, $30 trillion is going to pass from baby boomers to the younger generation over the next half century2.

3. An enhanced expertise and offer.

ESG-related strategies have evolved rapidly. The “old” common used “negative screening” strategy, often considered as restrictive, is no longer the sole strategy with respect to ESG. Nowadays, it is far more nuanced and sophisticated with a wide range of investment strategies (positive/best-in class screening, norms-based, community investing…). “Modern” ESG strategies allow investors to align their investments with their personal values while searching for profitable companies.

4. SRI has the potential to be good for your portfolio

Historically, it was common to think that ESG analysis comes with a performance penalty. Taking into account ESG criteria is a source of long-term value that cannot be captured by traditional financial analysis. More and more academic and industry studies are demonstrating that sustainable investing has not underperformed conventional investing, and there is mounting evidence that incorporating ESG factors can have a positive impact on performance.

A recent study of U.S.-based mutual funds and separately managed accounts (Morgan Stanley3) concluded that sustainable investments usually met and often exceeded the performance of comparable traditional investments on both an absolute and risk-adjusted basis. 89% of academic studies show that strong ESG standards correlate stock price outperformance (Deutsche Bank4). Past performance is no guarantee of future results, which will vary.

Combine SRI and Performance
See chart »

1. “Sustainable signals: The Individual Investor Perspective”, February 2015, Morgan Stanley Institute for Sustainable Investing.
2. “The ‘Greater’ Wealth Transfer: Capitalizing on the intergenerational shift in Wealth”, 2015, Accenture.
3. “Sustainable Reality: Understand Performance of Sustainable Investment Strategies.” March 2015. Morgan Stanley Institute for Sustainable Investing.
4. Deutsche Bank, Sustainable Investing Report 2012.

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Candriam—Leading the Way in SRI for 20 Years

With 20 years of leadership in SRI, Candriam covers all the SRI approaches to provide a broad range of SRI strategies across geographic regions and asset classes.

Candriam Timeline: 1996–Present Day
See timeline »

1. 20 years of experience in SRI and one of the founding signatories to the UN Principles of Responsible Investment (PRI) in 2006.

2. Unique “Best-in-class” approach. Based on proprietary sector-specific models and covering all asset classes and regions.

3. Extensive and proprietary database rating each company based on SRI criteria.

4. Dedicated SRI analyst team specialized by sector.

5. Independent SRI Advisory Board. Performing controls on the SRI analysis methodology and sector reviews, and helping to identify new issues relevant to sustainable development and to define Candriam’s SRI strategy.

6. Proven track record of the SRI selection. Candriam’s mission is to maximize return on investment over the long term, by generating two sources of added value that are interdependent and result from sustainability and financial analysis.

7. Active ownership activities. Ongoing dialogue with companies and dedicated proxy voting policy.

8. Broadest range of SRI funds in continental Europe and more than 21% of Candriam’s AUM in SRI strategies (as of 12/31/2015).

9. All of SRI funds are signatory to the European SRI Transparency Code.

10. Active promotion of sustainable development as a member of many associations.

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1. AUM as of 3/31/16
2. Source: GSIA 2014 survey (Global Sustainable Investment Alliance)

Disclaimer
This material should not be relied upon by the reader as research or investment advice regarding any funds or any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. This material does not constitute an offer or solicitation to sell or a solicitation of an offer to buy any shares of any fund (nor shall any such shares be offered or sold to any person) in any jurisdiction in which an offer, solicitation, purchase, or sale would be unlawful under the securities law of that jurisdiction.

Candriam's web site and the information contained therein do not constitute and should not be construed as an offering of advisory services or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. Funds managed by Candriam are not registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and may not be directly or indirectly offered or sold in the United States or any of its territories or possessions or areas subject to its jurisdiction or to or for the benefit of a U.S. Person (as defined in Regulation S under the Securities Act). Links to web sites not controlled by Candriam are intended only as a service to the visitor and do not constitute advice, a form of advertising or a value judgment.

The intellectual property rights of Candriam must be respected at all times, and the contents of this document may not be reproduced without prior written approval. Candriam Investors Group is a New York Life Company.

MainStay Investments® is a registered service mark and name under which New York Life Investment Management does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. Securities are distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company.

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