Portfolio 21’s Merger with Trillium

By The Portfolio 21 Investment Team
Both founded in 1982, Trillium and Portfolio 21 have been in the Sustainable and Responsible Investing (SRI) field for decades.
With the growing recognition and popularity of Sustainable and Responsible Investing (SRI), the merger comes at a very natural time. Trillium’s domestic equity expertise, marketing and distribution capability and larger scale will allow the Global Equity Strategy to become more cost competitive while at the same time offering Trillium clients a broader range of products including separately managed accounts and now a mutual fund.
Over the years, Portfolio 21 and Trillium have collaborated on many issues. Sharing a deep concern about the proposed Pebble Mine in Bristol Bay Alaska, we brought the investor perspective to the EPA and the White House in filings urging the administration to protect vital salmon resources. Similarly, we have led investors in urging the Obama Administration to adopt robust methane regulations. And in Oregon, we are working with Ceres to urge Oregon legislators to remove the Clean Fuel Program sunset provisions.
The Global Equity Strategy Portfolio Managers have managed the Strategy since its inception and the Global Equity Strategy Research Analysts have been with the Strategy for nearly a decade, building and developing an investment philosophy and process that complements Trillium’s.

After more than fifteen years of searching the globe, Portfolio 21 has found fewer than 300 publicly traded companies that meet our stringent environmental criteria.

The near unanimous evidence that climate change is inexorably linked to fossil fuels has corresponded with increased demand from investors for fossil fuel free investment options. Our Global Equity strategy has been Fossil fuel free since inception.

A leader in environmental investing, the Global Equity team has been managing investment portfolios of “global leaders” for well over a decade. We define global leaders as companies that exhibit superior ESG characteristics and formidable operating fundamentals.
These companies must adhere to our Principles for Investment which encompasses ecological limits, environmental management, human rights and equality, societal impacts and corporate governance. Specifically, a company needs to recognize environmental constraints, including climate change, pose significant risk (or in some cases opportunity) to the global economy and to their business operations, and demonstrate a commitment to mitigating the risk. The Global Equity team has rigorous risk standards and evaluates opportunities using proprietary investment criteria. In fact, after more than fifteen years of searching the globe, we have found fewer than 300 publicly traded companies that meet our stringent environmental criteria. As companies evolve and environmental constraints become more apparent we expect more firms to take the necessary steps to protect their businesses and shareholder capital.
A company’s strong financial profile is, of course, imperative for inclusion in the strategy. High quality companies are more likely to produce strong financial results, and ultimately respectable stock performance. Growth, profitability and shareholder returns are the characteristics that we examine when evaluating companies from a financial perspective. We also value stability and consistency and therefore require strong balance sheets and solid execution from management.

The Global Equity strategy has been fossil fuel free since inception.

We believe that a well-diversified portfolio of global leaders can produce competitive returns while participating in positive environmental and social change. We also believe it is also possible to construct portfolios that exhibit lower relative volatility resulting in positive alpha, or growth of earnings per share.

To demonstrate that our diligent, proprietary research into companies’ environmental performance matters, we utilized Trucosts’ methodology to calculate our environmental impact compared to that of our Benchmark, the MSCI All Country World Index (ACWI).
First we sought to understand our carbon footprint calculation. The Trucost carbon footprint calculation considers the nine greenhouse gases, including the six covered by the UN Kyoto Protocol. This analysis showed that as of December 31, 2014, Portfolio 21’s Global Equity Strategy was 56% less carbon intensive than the index.
In addition to greenhouse gas accounting, Trucost collects data and constructs models for an additional five categories: water use, waste, land and water pollutants, air pollutants and natural resource use. For this calculation, an individual company is assigned an Environmental Impact Ratio, which calculates the total environmental external costs of its business activities (direct from operations and indirect from supply chains) and divides that by the company’s revenue. We achieved a score of 1.99 versus the index’s score of 3.87, indicating a 49% lower overall environmental impact.

And while our research is focused on the environmental aspect of company behavior, close attention is also paid to the social and governance components as well. MSCI IVA rates companies (AAA the best to CCC the worst) by normalizing the key issue scores for that sector that fall under three pillars: environmental, social and governance.

We look forward to continuing our work with current products but also through shareholder advocacy and community investing where we have a long background of innovation. Hopefully this evolution will continue to reflect well on the ideals on which both Trillium and Portfolio 21 were founded.

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Editor’s Note: This article was originally published in the Spring 2015 issue of Trillium’s newsletter, Investing For a Better World.