Driven by a number of factors, including the United Nations Sustainable Development Goals, sustainable investment has prompted a paradigm shift in capital markets. In many parts of the world, policymakers, investors, and consumers are increasingly calling for companies to play a larger role in creating a more sustainable, inclusive, and prosperous future. 

Wellington Management is a global asset manager that aims to drive excellence for clients and positively impact millions of beneficiaries’ lives. By creating value for investors through sustainable investment approaches, firms like Wellington are aiming to lead the way to reshape the investing landscape. For example, ESG research is an important investment capability that many of Wellington’s investment teams believe is critical to understanding the long-term prospects for a potential investment, as Carolina San Martin, Director of ESG Research, points out: 

“The pace of change with ESG and sustainable investment more generally has been incredible. We are always looking for ways to enhance our capabilities and continue to invest and stay ahead of our competitors. We’re doing that by investing in our ESG research capability. We have our analysts, plus we’ve continued to hire for sector and investment expertise.” 

Combining this knowledge with a more extensive understanding of ESG analysis has enhanced the ability of Wellington’s investment teams to incorporate ESG considerations into their decision-making mosaic.  In addition, Wellington’s structure of individual investment boutiques, combined with a culture of deep research and meaningful two-way dialogue with company management is at the heart of their engagement philosophy. 

Wendy Cromwell, Head of Sustainable Investment, describes the firm’s approach to engagement:   

“Influential engagement means meeting with a company’s management and directors, and expressing to them what we see as best in class within their industry. Oftentimes when CEOs are doing road shows, they’re only meeting with equity investors. We bring equity, fixed income ESG climate researchers, into that room, and by asking questions through multiple lenses, we get differentiated insights.” 

While Wellington has incorporated climate change considerations into its research for over ten years, it has continued to build its knowledge and expertise base. Chris Goolgasian, Director of Climate Research, says that lately, the company has shifted up a gear: 

“In 2018, we really formalized our climate change research by partnering with the Woodwell Climate Research Center. This has given us access to the best scientific knowledge on the physical risks of climate change and brings that into our process as well. We recently also announced a collaboration with MIT to study the transition risks of climate change.”

Wellington also aims to deliver competitive returns for clients by investing in solutions that support the UN SDGs. As Oyin Oduya, Impact Measurement and Management Practice Leader, explains:

“One of the primary benefits of impact investing for society is channeling capital to where it’s most needed. There is a $2.5 trillion annual funding gap in terms of meeting the Sustainable Development Goals. The impact investing industry is a way to encourage private enterprise to get involved as much as possible. People expect private companies to do more to solve these global problems, or not make them any worse. Impact investing is trying to drive down the cost of capital for companies who are doing good so they can do more good, more quickly.” 

“WellSustain is our approach to corporate sustainability, and it has 3 key pillars: Environment, Community, and Culture” says Lucy Dormandy, Director of Corporate responsibility. Just as the physical and transition risks of climate change are incorporated into investment decision making, the firm also strives to incorporate these considerations into its own business practices.

In 2021, Enel Green Power North America and Wellington Management agreed to terms for a 10-year virtual power purchase agreement to purchase 11 megawatts of green energy from their wind turbine project to cover Wellington’s US office’s electricity usage, and also the usage of employees in the US at home.

Carolina San Martin sees exciting times ahead for Wellington and the wider investment community:

“ESG and sustainable investing is undergoing an incredible evolution. We need to stay ahead of that by making sure that we have the expertise on emerging issues such as biodiversity or supply chain accountability. This will create a virtuous cycle as investors focus more on these issues, bring them up in their engagements with companies, and that will drive continued improvement on these key sustainability issues from the companies themselves.”