Unsubscribe

Confirm you would like to unsubscribe from this list

You have unsaved changes on the page. Would you like to save them?

Remove strategy

Confirm you would like to remove this strategy from your list

Welcome to Thornburg

Please select your location and role to help personalize the site.
Please review our Terms & Conditions

For Institutional / Wholesale / Professional Clients

The content on this website is intended for institutional and professional investors in the United States only and is not suitable for individual investors or non-U.S. entities. Institutional and professional investors include pension funds, investment companies registered under the Investment Company Act of 1940, financial intermediaries, consultants, endowments and foundations, and investment advisors registered under the Investment Advisors Act of 1940.

TERMS AND CONDITIONS OF USE

Please read the information below. By accessing this web site of Thornburg Investment Management, Inc. ("Thornburg" or "we"), you acknowledge that you understand and accept the following terms and conditions of use.

Disclaimers

Products or services mentioned on this site are subject to legal and regulatory requirements in applicable jurisdictions and may not be licensed or available in all jurisdictions and there may be restrictions or limitations to whom this information may be made available. Unless otherwise indicated, no regulator or government authority has reviewed the information or the merits of the products and services referenced herein. Past performance is not a reliable indicator of future performance. Investments carry risks, including possible loss of principal.

Reference to a fund or security anywhere on this website is not a recommendation to buy, sell or hold that or any other security. The information is not a complete analysis of every material fact concerning any market, industry, or investment, nor is it intended to predict the performance of any investment or market.

All opinions and estimates included on this website constitute judgements of Thornburg as at the date of this website and are subject to change without notice.

All information and contents of this website are furnished "as is." Data has been obtained from sources considered reliable, but Thornburg makes no representation as to the completeness or accuracy of such information and has no obligation to provide updates or changes. Thornburg disclaims, to the fullest extent of the law, any implied or express warranty of any kind, including without limitation the implied warranties of merchantability, fitness for a particular purpose and non-infringement.

If you live in a state that does not allow disclaimers of implied warranties, our disclaimer may not apply to you.

Although Thornburg intends the information contained in this website to be accurate and reliable, errors sometimes occur. Thornburg does not warrant that the information to be free of errors, that the functions contained in the site will be uninterrupted, that defects will be corrected or that the site and servers are free from viruses or other harmful components. You agree that you are responsible for the means you use to access this website and understand that your hardware, software, the Internet, your Internet service provider, and other third parties involved in connecting you to our website may not perform as intended or desired. We also disclaim responsibility for damages third parties may cause to you through the use of this website, whether intentional or unintentional. For example, you understand that hackers could breach our security procedures, and that we will not be responsible for any related damages.

Thornburg Investment Management, Inc. is regulated by the U.S. Securities and Exchange under U.S. laws which may differ materially from laws in other jurisdictions.

Online Privacy and Cookie Policy

Please review our Online Privacy and Cookie Policy, which is hereby incorporated by reference as part of these terms and conditions.

Third Party Content

Certain website's content has been obtained from sources that Thornburg believes to be reliable as of the date presented but Thornburg cannot guarantee the accuracy, timeliness, completeness, or suitability for use of such content. The content does not take into account individual investor's circumstances, objectives or needs. The content is not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services, nor does it constitute investment advice and should not be used as the basis for any investment decision.

Suitability

No determination has been made regarding the suitability of any securities, financial instruments or strategies for any investor. The website's content is provided on the basis and subject to the explanations, caveats and warnings set out in this notice and elsewhere herein. The website's content does not purport to provide any legal, tax or accounting advice. Any discussion of risk management is intended to describe Thornburg's efforts to monitor and manage risk but does not imply low risk.

Limited License and Restrictions on Use

Except as otherwise stated in these terms of use or as expressly authorized by Thornburg in writing, you may not:

  • Modify, copy, distribute, transmit, post, display, perform, reproduce, publish, broadcast, license, create derivative works from, transfer, sell, or exploit any reports, data, information, content, software, RSS and podcast feeds, products, services, or other materials (collectively, "Materials") on, generated by or obtained from this website, whether through links or otherwise;
  • Redeliver any page, text, image or Materials on this website using "framing" or other technology;
  • Engage in any conduct that could damage, disable, or overburden (i) this website, (ii) any Materials or services provided through this website, or (iii) any systems, networks, servers, or accounts related to this website, including without limitation, using devices or software that provide repeated automated access to this website, other than those made generally available by Thornburg;
  • Probe, scan, or test the vulnerability of any Materials, services, systems, networks, servers, or accounts related to this website or attempt to gain unauthorized access to Materials, services, systems, networks, servers, or accounts connected or associated with this website through hacking, password or data mining, or any other means of circumventing any access-limiting, user authentication or security device of any Materials, services, systems, networks, servers, or accounts related to this website; or
  • Modify, copy, obscure, remove or display the Thornburg name, logo, trademarks, notices or images without Thornburg's express written permission. To obtain such permission, you may e-mail us at info@thornburg.com.

Severability, Governing Law

Failure by Thornburg to enforce any provision(s) of these terms and conditions shall not be construed as a waiver of any provision or right. This website is controlled and operated by Thornburg from its offices in Santa Fe, New Mexico. The laws of the State of New Mexico govern these terms and conditions. If you take legal action relating to these terms and conditions, you agree to file such action only in state or federal court in New Mexico and you consent and submit to the personal jurisdiction of those courts for the purposes of litigating any such action.

Termination

You acknowledge and agree that Thornburg may restrict, suspend or terminate these terms and conditions or your access to, and use, of the all or any part this website, including any links to third-party sites, at any time, with or without cause, including but not limited to any breach of these terms and conditions, in Thornburg's absolute discretion and without prior notice or liability.

Decline
Give Us a Call

Fund Operations
800.847.0200

FIND ANOTHER CONTACT
Germany, Herzogenrath, Overhead view of solar panels at sand mine
Sustainability and ESG

ESG Investing: Active Management is More Needed Than Ever

Jake Walko
Director of ESG Investing & Global Investment Stewardship, Managing Director
19 Apr 2022
4 min read

ESG investing is a nuanced process that requires a keen eye for materiality and the ability to sift through data to separate “noise” from legitimate insights.

There’s growing consensus among investors that allocations should take into account environmental, social, and governance (ESG) factors. However, there’s far less consensus around exactly what factors fall under the ESG umbrella—and the best way to measure them. For example, one ESG investor might prioritize risk-return management, while another emphasizes thematic funds, and others want to invest according to their values or to make a tangible impact.

It’s a convoluted scene, but there is a solution. ESG investors can adopt active management approaches to accommodate their individual objectives and challenges. As a result, the fundamentals of portfolio construction—such as valuation, liquidity, time horizon, and suitability—aren’t ignored. At Thornburg, we view ESG as a vital element of our essential expertise.

Our unique approach to ESG is based on the following:

Sifting Through the Noise to Locate Materiality

In terms of understanding an investment’s risk and return profile, academic research shows it’s far more beneficial to focus on fewer, more meaningful (i.e., material) factors than attempt to master every possible angle (See table below).[1] As such, we use the principles of the Sustainability Accounting Standards Board (SASB) to guide our initial evaluation of materiality.[2]

Performance of Material and Immaterial Sustainability Issues

Stock Returns (annualized alpha) by Type of Sustainability Performance
Performance on Material Factors
High
6.01% 1.96%
Low
-2.90% 0.60%
Low High
Performance on Immaterial Factors

Source: Harvard Business Review, March 2015

ESG data and disclosures have evolved significantly in recent years. That said, parsing such data still requires capable minds to not only separate signal from noise but also recognize all the ways its conclusions may mislead investors.[3] Moreover, the lack of correlation among data providers may offer insight into diverse approaches, but it can also lead inexperienced asset managers to build portfolios that rely too heavily on a particular data vendor’s point of view.

In other words, ESG can be meaningful—but only if there’s a collaboration between sophisticated clients and capable managers who both understand the inherent complexities, challenges, and especially tradeoffs of the due diligence process.

Leveraging the Strengths of Active Management to Make Difficult Decisions

Historically, passive approaches to ESG have relied heavily on exclusions based on a moral (rather than return-focused) stance. This blunt approach works better on some trades than others. For example, the decline of coal power is arguably a less complex phenomenon than a bet on the decline of a fossil fuel like natural gas.

Along the same lines, it’s also unadvisable to invest in a broader theme simply because it complies with general ESG ideals. While it’s fair to say solar power represents a key component of a future power mix, not everything about solar passes tests on environmental and social values and not all parts of the solar economy have performed well. This reinforces the value of active management. As an active manager, we can pinpoint investments within an opportunity theme as well as an appropriate part of the sector and at the right valuation.

Many ESG issues are inherently complex, which makes them a good use case for active management, as competing considerations can be uncovered and balanced. For example, society is growing increasingly concerned about pollution from plastics in terms of its effects on the environment and biodiversity (particularly in oceans), as well as the accumulation of microplastics in human tissue and its health consequences.

However, eliminating plastic producers from a portfolio is an insufficient solution because those producers create both the disposable items that cause the problems as well as those that are highly recyclable and reduce the overall draw of natural resources into packaging. A skilled active manager can rectify the situation by studying how plastic producers currently manage (and plan to resolve) this predicament. Consequently, active ownership enables investors to confidently satisfy the E and S considerations of ESG.

Clean energy isn’t the only use case, though. Diversity, Equity, and Inclusion (DE&I) topics have also become points of emphasis for many investors. However, bringing accountability to companies on these matters is another delicate balance. One must consider catalysts like privacy, disclosure regulations, and the geographic disposition of workforces — which, in and of itself, introduces unique considerations. We recently led a conversation on this topic as part of a UN PRI Roundtable, and we found that stewardship in favor of better disclosure is universally agreed upon.[4] That said, the evaluation of a company’s DE&I program requires an appreciation of nuance and the respect to get this right—requirements that don’t lend themselves to the handy numerical grades favored by the rigid approach required of passive investors.

Laying the Foundation for Meaningful Engagement

As constructive shareholders, active managers can now have more meaningful engagement with the companies in which we invest. At Thornburg, we have intentionally placed ESG experts throughout our investment team and staffed our ESG Committee solely with investment professionals. This empowers us to avoid the industry pitfall of making nebulous promises around ESG as it evolves from a formulaic prohibition of ownership to a real strategic factor within our investment selection process. In turn, we can make actionable decisions that contribute to the success of our clients’ portfolios.

It is our hope that just as an issuer respects shareholders who understand the challenges of sustainability, so, too, will clients respect and gravitate toward managers that put process above gimmicks.

 

[1] Khan, Mozaffar N., George Serafeim, and Aaron Yoon. “Corporate Sustainability: First Evidence on Materiality.” Harvard Business School Working Paper, No. 15-073, March 2015.

[2] The organization is currently undergoing a merger with the International Integrated Reporting Council (IIRC) and will be known in the future as the Value Reporting Foundation (VRF)

[3] Kotsantonis, Sakis, and George Serafeim. “Four Things No One Will Tell You About ESG Data.” Journal of Applied Corporate Finance 31, no. 2 (Spring 2019): 50–58.

[4] United Nations Principles for Responsible Investment

Discover more about:

Stay Connected

Subscribe now to stay up-to-date with Thornburg’s news and insights.
Subscribe

More Insights

Press Release from Thornburg with a branded megaphone image.

Thornburg Income Builder Opportunities Trust Announces Distribution

Thornburg Income Builder Opportunities Trust (NASDAQ: TBLD) announced its monthly distribution.
Cut to the Chase webcast

Cut to the Chase: Seizing Fixed Income Opportunities

The Fed looks set to cut interest rates this week, prompting a re-evaluation of fixed income strategies. There are strategies and opportunities in fixed income to exploit.
Press Release from Thornburg with a branded megaphone image.

Thornburg and Bow River Announce Private Credit Joint Venture

Thornburg and Bow River announced the formation of a joint-venture to provide flexible private credit solutions that support the needs of lower- and middle-market businesses.
Press Release from Thornburg with a branded megaphone image.

Thornburg Income Builder Opportunities Trust Announces Distribution

Thornburg Income Builder Opportunities Trust (NASDAQ: TBLD) announced its monthly distribution.
A woman with umbrella and smart phone.
Markets & Economy

Finding Income, Opportunities and Defense in Today’s Markets

Gain insights on how to position fixed income portfolios for yield and ballast given mixed signals on consumer health and policy outlook.
Digital generated image of robotic hand touching line and making new multicoloured impulse on black background. Digitization, automation and artificial intelligence concept.
Global Equity

Generative AI: Finding Undervalued Investment Opportunities

Are there ways to invest in Generative AI that can help diversify the risk besides putting all the eggs in the U.S. large cap basket?

Our insights. Your inbox.

Sign up to receive timely market commentary and perspectives from our financial experts delivered to your inbox weekly.