Threshold Group and Trucost Partner to Advance Carbon Audits for Family Foundation Investment Portfolios

New strategic alliance to advance methods to gauge greenhouse gas emissions tied to North American portfolios

Carbon-impact calculation instrumental for investors choosing to divest and invest

SEATTLE & LONDON--()--Threshold Group (http://thresholdgroup.com) and Trucost (http://trucost.com) have formed a strategic partnership to provide carbon audits of investment portfolios, particularly those of family foundations. The firms are also extending their methodology to assess the carbon risk exposures of underlying assets in derivative investments.

Several of Threshold’s clients, including The Russell Family Foundation, representing the family that owns Threshold Group, have commissioned carbon audits to understand the environmental impact of their portfolio selections and inform divestment/investment decisions.

“Being able to assess the portfolio’s carbon footprint has grown increasingly important to many of our clients concerned about the environmental impact of their holdings,” says Ron Albahary, CFA, chief investment officer of Threshold Group.

“But that begs the question, ‘what next?’ Our goal is to construct outcome oriented portfolios, which means also providing clients investment strategies that reduce the carbon risk exposure, and an evolution for getting there. Together with Trucost, we seek to enhance clients’ decision making framework around the divestment-investment challenge and, ultimately, effect change in their portfolios.”

London-based Trucost Plc is a global authority on the economic consequences of “natural capital” dependency, providing its clients with information to manage risk from hidden and rising environmental costs. The firm began assessing the carbon risk exposures of large institutional investment portfolios in 2002 and has since expanded its analysis to address a wide range of asset classes and environmental factors, including water-related issues and stranded assets.

“Our data driven, scientific insights expose environmental risks previously concealed within investment portfolios. To the best of our knowledge, several of the steps we are taking with Threshold Group are the first of their kind in the investment portfolio domain, and represent useful next steps in the divestment movement,” notes Libby Bernick, senior vice president, North America, for Trucost. “We have appreciated Threshold Group’s innovative ideas on how to transform our insights into action for its clients.”

Threshold Group is a national (U.S.) wealth management firm and a Registered Investment Advisor, based in Seattle. This relationship is the latest in a series of initiatives by the firm to bring its clients actionable methods and advantages for impact and mission-related investing, as well as place-based, regional investing.

For more than eight years, Threshold Group has served the mission-related investment needs of foundations and high-net-worth individuals. Approximately a third of the firm’s current assets under management is for clients who have set the objective of aligning their portfolios with their missions.

Threshold Group was founded and is owned by the Russell family, which created the global investment services firm known today as Russell Investments. While most often recognized for its stock indices, Russell Investments’ core competency was built through decades of excellence in the evaluation of investment managers.

Greenhouse gas emissions – not all industries are equal

While some investors are pledging to divest their holdings in extractive companies to align more closely with their missions, not all divestment approaches are created equally. “The investment ecosystem is evolving. Shifting away from fossil fuels (coal, petroleum and natural gas) is a short-term divestment priority for some,” explains Brad Harrison, impact strategist for Threshold Group. “But what may be a more strategic and effective approach is to set long-term reduction targets for portfolio carbon emissions. That has the power to continuously move us along the path toward a low-carbon future.”

“For example, if our client’s goal was to lower their portfolio’s carbon footprint, it could be advisable to divest the top holdings within the Utilities sector first, as that sector is roughly three times more carbon intensive than the Energy sector. In designing mission-aligned investment strategies, we help investors avoid the pitfall of re-allocating to investments that may be actually more carbon intensive – a real risk,” says Harrison.

“What is exciting about this research partnership,” Harrison explains, “is that it provides us a comprehensive lens with relevant data, including trends among companies and industries that are making measured improvements in their carbon efficiency and environmental footprint. As investors, we believe this yields long-term competitive advantages.”

Tracing the carbon in derivatives

Some of the investment tools Threshold Group uses to maximize upside risk and minimize losses contain derivatives. Threshold Group and Trucost are jointly developing a best-practice approach to measuring the greenhouse gas emissions associated with derivatives. That work is expected to expand divestment methods for clients and investment advisors alike.

“Analysis of traditional corporate securities goes a long way in evaluation of a portfolio’s carbon footprint, but by analyzing derivatives, we can go a step further and provide clients a more complete picture,” says Alex Hokanson, CFA, FRM, director of asset allocation strategies at Threshold Group in Philadelphia.

“Evaluation of derivatives and their impact on the carbon footprint presents unique opportunities due to the complexities inherent in their structure,” adds Hokanson. Researchers from both firms are collaborating on a framework for evaluating how to weight the impact of derivative exposures on the carbon footprint of investments.

The carbon audits and financial derivatives work are led for Trucost by Dr. James Salo, senior vice president and manager of the firm’s North American research team, based in Boston. For Threshold Group, Harrison is on point for the strategic partnership between the companies.

About Threshold Group

Threshold Group is a family-owned wealth management firm, dedicated exclusively to serving families, individuals and family foundations. It serves clients in more than 25 states. The company provides integrated investment guidance, financial planning, legacy planning and family office services – all aimed at helping clients achieve their missions and priorities. Threshold Group is a Registered Investment Advisor, with approximately $3 billion of assets under management (AUM) as of December 31, 2014. Offices are in Seattle, Gig Harbor, Wash. and Philadelphia. Threshold Group may be reached at 888-252-3889.

©2015, Threshold Group is a Registered Investment Advisor.

The information contained herein reflects the opinion of Threshold Group on the date of production and is subject to change at any time without notice. Where data is presented that is prepared by third parties, such information will be cited, and these sources have been deemed to be reliable. However, Threshold Group does not warrant the accuracy of this information. Threshold Group and Trucost are separate and unaffiliated, and are not responsible for each other’s products, services or policies. The information provided herein is for information purposes only and does not constitute financial, investment, tax or legal advice. Investment advice can be provided only after the delivery of Threshold Group's Brochure and Brochure Supplement (Form ADV Part 2A & B) and once a properly executed investment advisory agreement has been entered into by the client and Threshold Group. All investments are subject to risks.

About Trucost

Trucost helps companies and investors to achieve success by understanding environmental issues in business terms. Our data-driven insights enable organizations to manage risks and identify opportunities for growth. We are the world’s leading experts in quantifying and valuing the environmental impacts of operations, supply chains, products and financial assets. By putting a monetary value on pollution and resource use, we integrate natural capital into business and investment decisions. With offices in Europe, the U.S. and Asia, Trucost works with businesses worldwide to increase revenues, improve communications, meet marketplace expectations and comply with regulatory requirements.

Contacts

Threshold Group
Elizabeth Hendrix, 206-748-3692
ehendrix (at) thresholdgroup.com
or
Trucost Plc North America
Libby Bernick, +1-800-402-8774

Release Summary

Threshold Group and Trucost have formed a strategic partnership to provide carbon audits of investment portfolios, particularly those of family foundations.

Contacts

Threshold Group
Elizabeth Hendrix, 206-748-3692
ehendrix (at) thresholdgroup.com
or
Trucost Plc North America
Libby Bernick, +1-800-402-8774