Citi Perspectives Spring 2020

Sabrina Hartzog Global Product Manager, Liquidity Management Services, Treasury and Trade Solutions, Citi Climate change, sustainability, diversity and inclusion: These topics continue to be focal points for environmentally and socially conscious companies and, increasingly, the individuals within them who drive investment policies and decisions. This article provides a look at factors institutional investors may want to consider when incorporating environmental, social and governance (ESG) strategies into their money market fund portfolios. Despite the current buzz around sustainable investing, it’s hardly a new idea. Today’s schema of sustainable investing, also known as “impact” investing, can be traced to the rise of social activism in the sixties and seventies, an era of history-making events that included the passage of landmark civil rights and environmental laws in the U.S. and the first appearance of a social-responsibility issue on a company’s proxy statement. 1 Despite a steady rise in corporate commitments to social responsibility over the years, sustainable investing itself has only recently gained traction, having ballooned by more than a third since 2017 to represent some $30 trillion, or more than a quarter of the world’s professionally managed assets. 2 This fast-growing niche of the money market fund industry offers an array of investment opportunities and considerations for companies looking to advance their sustainability agendas. It has taken shape around a relatively new set of evaluation metrics with ESG components. Fund providers might, for instance, analyze underlying securities against environmental factors, such as a firm’s carbon footprint or pollution-related criteria. Social considerations could include activities related to human rights or an ethical culture, while governance criteria might include factors such as minority ownership or board composition. 1 Source: https://www.thebalance.com/a-short-history-of-socially-responsible-investing-3025578 2 Source: https://corpgov.law.harvard.edu/2020/01/13/into-the-mainstream-esg-at-the-tipping-point/