For the team at Genus Capital Management, doing their clients proud is part of the job description.
The pioneering investment management firm was founded in 1989, long before impact investing was mainstream. At that time, only climate scientists and environmentalists were aware of the dangers of climate change, and the market for responsible investments was in its infancy.
Much has changed. Today, citizens worldwide are aware of the dangers presented by a warming planet. And in 2019, the global market for socially responsible investing topped $30 trillion.
In the intervening years, the team at Genus has worked with individual, family and institutional investors to develop sustainability-focused, mission-aligned portfolios.
In this piece, the third in a series of interviews with financial advisors and planners we learn from Sue-May Talbot, a Partner and Portfolio Manager with Genus. She describes the firm’s pioneering investment approach and how they leverage private impact bonds to make their clients proud.
Investing with Mission in Mind: Fossil Free, Impact Investing & Impact Bonds
For clients wishing to align their portfolio with their values, Genus places sustainability at the centre, through a ‘Fossil Free’ approach to investing. The firm’s portfolios exclude all companies directly involved in extracting, transporting, processing or storing fossil fuels. And additionally, Genus screens out companies with poor performance on environmental, social and governance (ESG) issues.
For client’s who want to take their impact even further, Genus is a leader in providing impact investing products and solutions.
“Impact investing is also known as mission-based investing, explains Sue-May Talbot, Portfolio Manager with Genus. “This strategy allows our clients to specifically choose industries or companies they would like to support, innovators like renewable energy or alternative energy companies as examples.”
Unlike traditional investments, impact investments are those made with the intention to generate positive, measurable social and environmental impact, alongside a financial return. Impact investment products exist across asset classes, including cash and cash equivalents, private debt, public debt, and private equity.
As the impact investing sector has grown, one of the most common types of impact investment products to emerge is the private impact bond, such as CoPower’s Green Bonds and the Centre for Social Innovation’s Community Bonds. Impact bonds often have a low minimum investment (typically ranging between $1,000-$10,000), have varied payout options (quarterly, at maturation), modest returns (ranging between 1-5%) and vary in term length (often from 3-7 years).
Why Impact Bonds? Deeper Impact than in the Public Market
For some investors, impact bonds appeal because they can offer a greater opportunity to achieve environmental and social impact with their capital, while offering steady, predictable returns.
“Offering these unique products allows our clients to have greater values alignment which is very important to them,” Talbot explained. “The impact is extremely high with products like CoPower, which is very meaningful for clients.”
Through impact bonds, capital is pooled with the investments of other forward-thinking investors and used to directly support community-level projects achieving direct impact. In the case of CoPower’s Green Bonds, capital is lent out to finance community-scale, green energy projects, such as solar rooftops, LED lighting retrofits, and residential geo-exchange projects. The projects are transparent, and the impact is clear.
Further, on a quarterly basis, CoPower provides investors with impact reporting through an online dashboard, detailing the environmental impact of the client’s investments like greenhouse gas emissions avoided, energy saved, and clean energy generated. Many clients appreciate this transparency -- and it offers benefits for advisors too.
Impact investors with large portfolios often invest in several products within a given impact category (e.g. environmental, women’s empowerment, etc.). For these investors, it’s often a significant value add for their financial advisor to be able to share the total impact of their investments -- something that’s only possible with clear reporting and impact measurement.
Suitability: New Investors, Diversification and Risk
While bonds create value for some, Talbot cautions that they’re not suitable for all. For investors requiring high liquidity, impact bonds aren’t a strong fit, as capital is locked up for the term of the investment, ranging from 3-7 years for most products.
“Private investments are illiquid, so these products are not for everyone,” she explained.
Additionally, at Genus, impact bonds are only accessible to accredited investors, individuals with over $5M in assets, or who have earned a pre-tax income of over $200,000 for the past two years in a row.
For investors seeking steady returns, and a balanced portfolio, however, they can be a great option.
“For Genus clients that are seeking to maximize social and environmental impact and have a higher risk tolerance, these products can play a role in a diversified balanced solution,” Talbot said.
Further, impact bonds also offer an on-ramp to impact investing for many clients, owing to their simple structure and their low minimum investments. The most recent issuances of CoPower’s Green Bond and the Centre for Social Innovation’s community bond had minimum investments of $10,000 and $1,000 respectively.
While impact bonds sometimes require advisors to do additional education with clients, they can offer an opportunity for the deepening of advisory relationships, through more comprehensively achieving the client’s impact mandate.
“I've had clients mention they are proud to be with Genus specifically because of these pioneering strategies,” said Talbot.
For the team at Genus, while it isn’t this admiration that drives them, it sure does feel good.
The investor testimonials/endorsements that appear on this page were solicited by CoPower Inc. and may not be representative of the views of other investors or potential investors in CoPower Green Bonds or any other securities offered or that may be offered by affiliates of CoPower Inc.
The information provided herein is intended for informational purposes only and is not intended to constitute a public offer, or investment advice or financial, legal, accounting, tax or other advice and should not be relied upon for such purpose. Always consult a professional regarding your specific needs and circumstances. For information specific to your situation you should consult a professional. Securities offered by affiliates of CoPower Inc. and sold by CoPower Inc. are available only to those investors resident in the Permitted Jurisdictions who meet certain legal requirements. Please carefully read the applicable offering documents and ensure that your questions are thoroughly answered by a dealing representative before investing. Green Bonds purchased through CoPower Inc., are not eligible for protection by the Canada Deposit Insurance Corporation or any other government insurer or by VCIB.