HOW DO YOU DETERMINE BOND ELIGIBILITY FOR THIS STRATEGY?
When reviewing potential Social Advancement purchases, our in-house credit research team first determines whether the municipal bond meets our credit thresholds — taking into account environmental, social, and governance (ESG) risk factors. Our credit research team then examines the types of projects that bond proceeds will fund and evaluates whether those projects fit within our guidelines of a social advancement focused bond.
Our guidelines involve targeting investment in projects that strengthen a community’s educational systems, environmental efforts, public infrastructure, or social service facilities, to help that community advance down a more sustainable path, by doing one or more of the following:
- Improving a community’s school facilities or infrastructure
- Reducing a community’s environmental impact
- Enhancing and encouraging the sustainability of a community’s social fabric
Explore our areas of focus to view the types of projects financed by bonds that fit within our Social Advancement strategy guidelines.
HOW DO THE BONDS ELIGIBLE FOR THIS STRATEGY DIFFER FROM GREEN BONDS?
- Are intended to fund projects that have positive environmental benefits
- Can either be unlabeled or labeled (i.e., “certified”) by a third party
- Are not entirely restricted to the municipal bond market
While both unlabeled and certified green bonds in the municipal bond market are eligible for consideration for purchase for our Social Advancement portfolios, we do not specifically target green bonds. More so, our Social Advancement portfolios include a larger universe of bonds than purely those with an environmental focus, including bonds that we see as providing educational or community-related benefits.
HOW LARGE IS THE INVESTABLE UNIVERSE FOR THIS STRATEGY?
While the investable universe is narrowed for each area of focus in our Social Advancement strategy due to our highly targeted concentration on either a specific type of project (for our Environment or Education areas of focus) or the intended beneficiaries (for our Community area of focus), we have designed the strategies to maintain appropriate diversification and liquidity for clients.
WHAT TYPES OF BONDS WOULD YOUR TEAM DEEM INELIGIBLE FOR THE COMMUNITY AREA OF FOCUS?
The Community area of focus in our Social Advancement strategy is intended to allow for targeted investment in projects benefitting low- to moderate-income and high-poverty communities, including sectors that promote accessibility for all. With this objective in mind, some examples of projects that could be funded by municipal bond proceeds, but do not meet our investment guidelines include:
- Coal-burning power plants
- Nuclear power plants
- Sports stadiums
- Prisons or jails
- Buildings primarily benefitting the private sector
In addition, we exclude bonds that inadequately document how the bond proceeds will be used.
WHAT ARE THE CUSTOMIZABLE OPTIONS FOR SOCIAL ADVANCEMENT PORTFOLIOS?
We work with clients to build customized Social Advancement portfolios that meet client needs and objectives while still maintaining broad diversification of bonds’ locations, sectors, and obligors (i.e., the entity contractually bound to make all principal repayments and interest payments on outstanding debt).
In addition to having the option to concentrate your Social Advancement portfolio in municipal bond investments that are focused on education, the environment, or building or improving community infrastructure in low- to moderate-income communities, Social Advancement portfolios can be tailored to satisfy your preferred investment horizon (i.e., short-, limited-, or intermediate-term), and, investors in California can optimize tax efficiency through California state-specific portfolios. In consideration of clients’ best interests, we only purchase bonds with high-quality credit profiles that adhere to our strategy objectives. For this reason, other state-specific options are not available given that we do not see sufficient availability of attractive bonds that fit our investment criteria for this strategy while supporting portfolio diversification.
HOW DOES THE RISK-RETURN TRADE OFF COMPARE TO OTHER STRATEGIES?
Our Social Advancement strategy benefits from the same independent credit research and quantitative analysis that our other municipal strategies do. When compared to our similarly structured municipal strategies, our Social Advancement strategy exhibits only nominal differences in some key statistics and has exhibited either similar — or better — performance. We invite you to compare our strategies.
ARE MY CURRENT MUNICIPAL BOND HOLDINGS ALREADY ELIGIBLE FOR THIS STRATEGY?
We would be happy to perform a complimentary assessment of your existing municipal bond portfolio, to determine whether your current municipal bond holdings are suitable for our Social Advancement strategy. For bonds that may be deemed ineligible for purchase for this strategy, we will work with you to determine whether and when to restructure your portfolio. In your complimentary analysis, we will also provide our detailed commentary on the credit quality and structure of your portfolio overall.
For more information about what to expect in a portfolio assessment, please review our sample portfolio review.
To learn more about how we can customize portfolios to meet investors' specific investment objectives, please contact our Advisory Services team by calling (858) 436-2200 or by emailing