In recent years, the field of sustainable investing has expanded substantially, and more data have become available on the environmental performance of public companies.
In 2014, we set out to work with Dimensional Fund Advisors (DFA) to see if its U.S. and international sustainability funds could be improved by incorporating these new data sets to better reflect the biggest environmental challenges faced by today’s world.
As a result, the funds adopted a new sustainability strategy on February 29, 2016. We want to share the highlights of this transformation:
1. Carbon Emissions at the Center
With the world coming together on the path toward avoiding climate change by reducing carbon/greenhouse gas emissions, a company’s carbon emissions now make up a much larger part of the environmental “score” given to each company (85% now versus 20% from 2008 until the change). This means that companies with lower carbon emissions per dollar of revenue relative to their industry peers will be overweighted in the funds, while higher-emitting companies will be underweighted or perhaps excluded if their score is among the lowest.
2. Fossil Fuel Divestment
To incorporate the critical connection between fossil fuel reserves as a source of future carbon/greenhouse gas emissions and climate change, the funds now include fossil fuel reserves ownership as part of their screening criteria. However, rather than indiscriminately divesting from all fossil fuel reserve owners, the type of fuel (coal versus natural gas versus oil) and the value of their fossil fuel reserves as a percentage of their overall assets are used as guidance. This nuanced approach to fossil fuel divestment makes the screening more precise and meaningful.
3. Social Values
Certain social criteria are now also included. These are limited to companies that are involved with cluster munitions, child labor, tobacco and factory farming.
4. How the Funds Vote
Shareholder engagement is an important part of sustainable investing, and Dimensional will now make its proxy voting summaries available on its website (us.dimensional.com).
Abacus is very proud to help continue the innovation with investment funds that offer our clients an approach to sustainable investing that doesn’t sacrifice the rigorous financial criteria that Abacus has believed in since our inception. These funds have the same reliance on Nobel Prize-winning academic research as the rest of Dimensional’s investment funds. As a final note, you’d think that these improvements would increase expenses for investors, but in this case Dimensional has made another improvement. It reduced the fees in the funds, by 22% for the US Sustainable Core 1 Portfolio and by 13% for the International Sustainable Core 1 Portfolio.1
1 – For the DFA US Sustainability Core 1 Portfolio, the fee went down from 32 bps to 25 bps, and for the DFA International Sustainability Core 1 Portfolio, the fee went down from 48 bps to 42 bps.
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This is not an offer to sell any type of security, and there is no investment currently available through Abacus, which would allow someone to invest in JUMO World. Abacus Wealth Partners is the General Partner of Abacus Impact Fund 2013, LP, a fund of funds that ultimately has an interest in JUMO World. The information presented in the “Impact Investment Profile” is to provide additional qualitative reporting to Abacus clients who own Abacus Impact Fund 2013, LP, as well as to help educate Abacus clients about impact investing.
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