Sustainable Investing

The four pillars of sustainability

We consider environmental, social, and governance (ESG) issues and sustainability themes in our investment strategies and stewardship activities because we believe they contribute to our number one priority: generating positive investment outcomes for our clients. We work closely with our clients to construct the right solution, and we organize our approach to sustainable investing around four key pillars:

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ESG risk

ESG integration is crucial to better risk management and captures important issues that may be mispriced. We’ve developed our own methodology for assessing the material ESG risks of companies. ESGiQ is our proprietary rating system we created to assess ESG risk. It applies insights from our scientific learning team use external data as well as structured, qualitative understanding from our investment research analysts to allow us to provide additional in-house-driven points of view.
Globe with grid lines

Climate

Climate change affects every facet of investing. We are taking action to address climate-related implications so we can provide our clients with solutions that reflect the realities of a changing world. We established the Climate Change Working Group — a cross-functional group that integrates climate risk concepts into investment research. This initiative is integral to our ability to work on solutions that acknowledge the risks and opportunities coming from climate change itself and the global reaction to it.
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Impact

As the market for sustainable investing develops, there is a shift toward wanting to understand, identify, and quantify the “impact” of environmental and social impact of investments across asset classes. This new transparency demanded by stakeholders and investors alike also means a growing interest in searching for investment products designed to generate financial returns while simultaneously focusing on positive environmental and/or social outcomes.
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Stewardship

Stewardship is integral to our investment process. Details of our stewardship initiatives can be found in our 2021 Stewardship Report (PDF).

We aim to be active owners of the companies in which we invest. This gives us a voice and enables us to exercise our ownership rights with two important goals:

  • Improving corporate disclosures and transparency to benefit investment decision-making
  • Driving improvement in corporate operating, financial, and sustainability performance to maximize long-term risk-adjusted returns for our clients

Together, our Stewardship and investment teams are working to deliver strong stewardship of the assets in our portfolios. We realize the value of constructive, focused engagements with companies reinforced by and aligned with proxy voting action.

Stewardship

Stewardship is integral to our investment process. Details of our stewardship initiatives can be found in our 2021 Stewardship Report (PDF).

We aim to be active owners of the companies in which we invest. This gives us a voice and enables us to exercise our ownership rights with two important goals:

  • Improving corporate disclosures and transparency to benefit investment decision-making
  • Driving improvement in corporate operating, financial, and sustainability performance to maximize long-term risk-adjusted returns for our clients

Together, our Stewardship and investment teams are working to deliver strong stewardship of the assets in our portfolios. We realize the value of constructive, focused engagements with companies reinforced by and aligned with proxy voting action.

Read more about our Sustainable Investing Approach (PDF). We are committed to providing our clients with ease of access to our policies and guidelines showing our approach to sustainable investing. Access all of our Sustainable Investing Policies and Guidelines in one location.

Investing in emerging and developing markets

Allspring’s Senior Advisor, Nico Marais, discusses some of the ways that investment firms can support the transition of emerging and developing countries towards net zero.

Nico Marais: We have no choice. If we want to effectively deal with global warming and the challenges across the globe, we need to partner. We need to ensure that as emerging and developing countries, we come together, we hold hands, and we solve and deal with these problems together.

I want to share some thoughts around financial flows. As an investor, what could we do? Where are the opportunities? Where are the threats in terms of us making a meaningful impact?

Investors invest according to benchmark allocations. And unfortunately, emerging economies are underrepresented in benchmarks. We need to rethink benchmarks. We need to be more creative.

But the good news is that this is already happening. When you look at the rapid growth in green funds, blue funds, sustainable funds, transition funds, a great commitment for us at Allspring. Those investments are benchmark agnostic. It's circumventing some of the challenges we face. And I can see this having a meaningful impact in terms of ensuring credible, intelligent flows into emerging markets. But we have to think differently. And we are starting to think differently about what return means.

It's not just the money that you make on your investment. Return is also doing good. Return is also investing in your children and your grandchildren, making sure that they will have a planet that's worth living on.

Let's talk about the risk side. There's an interesting opportunity between public and private flows into emerging markets. There can be much greater partnership. Let me explain. If a public fund would invest a billion dollars in an emerging economy, that's a great investment. If part of those funds are used as a backstop or a guarantee for private flows that significantly increases the flow into these countries. There's a tremendous pent up demand for flows or investments into these economies. Let's make sure that we can change our risk profile in order to enable them.

Thirdly, what limits flows is just the lack of data. The lack of clarity around the definitions. Investors are nervous. They don't use the same criteria. We need consistency. We need to understand what we deal with and we have to make progress.

Finally, it's also about portfolio construction and asset allocation. An area that is an intense interest for us at Allspring. Think about capital market assumptions, those assumptions that you put into your portfolio. When they start including global warming, the entire picture changes.

We need to work together. They are challenges, but equally in my comments, significant opportunities in how we could solve these issues. It's simply a case of refining, redesigning, rethinking the way we look at the world and then jointly commit to solve these problems. Thank you.

US: PAR-0222-00666  EMEA: PAR-0122-00091  APAC: PAR-0122-00088 

Insights

Our sustainable investing insights are designed to support investors and to engage in the industry conversation about how we progress forward. Our insights are grouped by category such as Capabilities, Educational, Climate sector research series, and The future.

View our full library

Insights

Our sustainable investing insights are designed to support investors and to engage in the industry conversation about how we progress forward. Our insights are grouped by category such as Capabilities, Educational, Climate sector research series, and The future.

View our full library

Road going thru a field of yellow flowers

Our investment solutions

Our specialized investment teams incorporate ESG considerations in line with their investment styles and investment analysis processes. These can include the varying aspects of ESG approaches and tools that form integration — applied from municipal debt, to emerging market equities, to multi-asset solutions. In addition to integration, we have strategies with explicit sustainability intentions and financial goals and we partner regularly with investors to discuss potential new solutions that suit their needs and objectives.

Learn more about our Municipal Sustainability Fund.

Our investment solutions

Our specialized investment teams incorporate ESG considerations in line with their investment styles and investment analysis processes. These can include the varying aspects of ESG approaches and tools that form integration — applied from municipal debt, to emerging market equities, to multi-asset solutions. In addition to integration, we have strategies with explicit sustainability intentions and financial goals and we partner regularly with investors to discuss potential new solutions that suit their needs and objectives.

Risk, return, and sustainability

Co-Heads Hannah Skeates and Chris McKnett share their views on global trends.

Environmental, Social, and Governance

Hannah Skeates: We live in a changing world. It’s changing for our investors. It’s changing for our client base. It’s changing for everybody who engages with the investment community. And that means that we have to come up with new solutions, exciting solutions, ones that we haven’t really considered in the past, so that we can solve for these really challenging issues of our time. As we see this technological transition play out and we think about our sustainability as a society and how we can live within this global context, I think it’s much more likely that we look at portfolios with a number of different metrics that we don’t currently utilize or see on a regular basis. Things like the carbon contained within a portfolio. Things like the impact that those portfolios will have on the general society. And be able to consider those in conjunction with more typical metrics and make overall decisions around whether or not we and our clients believe those to be appropriate.

Christopher McKnett: Moving forward, the three trends that we want our clients to be aware of are first, the financial conviction around the linkage between ESG (environmental, social, and governance) performance and investment risks and return. Two, the global public policy and regulatory agenda is very conducive and supportive of embedding sustainability and ESG considerations in the capital markets. And three, the data arms race. What I mean by the data arms race is making sense of the explosion of ESG information through advanced analytical techniques to make better, more informed investment decisions. From an investment perspective, we think about ESG as an additional set of information that our investment teams can harness to make more informed insights. And when we look at the composition of the market's value overall, we see more and more of it is comprised of intangible assets. These are things like the strength of its human capital, its environmental efficiency, the quality of its leadership and corporate governance. And ESG really helps illuminate a lot of these non-traditional drivers of investment value. And so, we think that a great company and a sustainable company today and tomorrow has to be operationally excellent, financially sound, and ESG proficient.

PAR-0422-00026

Industry involvement

Our approach places significant value on best practices, and contributing to the development of ESG and sustainability concepts in the marketplace. We have close partnerships and involvement with leading industry associations, disclosures and standards bodies, nonprofit organizations, and other cutting-edge global initiatives. We look to help lead and drive the latest approaches in a practical and useful way.

Learn more about our involvement with sustainable investment and finance initiatives.

Your team of experts

Our sustainable investing professionals welcome the opportunity to partner with you to explore your objectives and help you pursue your goals.

Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Bond values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. Changes in market conditions and government policies may lead to periods of heightened volatility in the bond market and reduced liquidity for certain bonds held by the fund. In general, when interest rates rise, bond values fall and investors may lose principal value. Interest rate changes and their impact on the fund and its share price can be sudden and unpredictable. Investing in environmental, social, and governance (ESG) carries the risk that, under certain market conditions, the investments may underperform products that invest in a broader array of investments. In addition, some ESG investments may be dependent on government tax incentives and subsidies and on political support for certain environmental technologies and companies. The ESG sector also may have challenges such as a limited number of issuers and liquidity in the market, including a robust secondary market. Investing primarily in responsible investments carries the risk that, under certain market conditions, an investment may underperform funds that do not use a responsible investment strategy.