Part of what we do here at Balanced Rock is review the ESG (Environmental, Social, Governance) impact of potential investments. For a values-motivated client, we select investments by taking both financials and corporate behavior into consideration. We call this Values+Value™ because we believe that over the long run, using ESG metrics to identify companies that are more sustainable will help us make better investment decisions and mitigate risk. We purchase research from a company called MSCI which provides information on how companies are behaving using ESG data and analysis. But values-based investing is far from black and white. In a situation that hits very close to home, for over two years now, local residents and government officials have been trying to prevent the construction of a natural gas pipeline called the West Roxbury Lateral Pipeline which is currently being built through West Roxbury by Spectra Energy.
Our Concern with the West Roxbury Lateral Pipeline & Spectra’s Rating
The construction of the West Roxbury Lateral Pipeline has been a hot-button issue for a number of reasons, including, the dangers associated with natural gas transport, the pressurized gas that will flow to the substation which is being built in a residential area, the environmental damage caused by extraction of gas through hydraulic fracturing (“fracking”), and the moral battle over the widespread use of fossil fuels and their effect on our planet’s climate.
The company building the pipeline is Spectra Energy Corporation (ticker SE). Based on Spectra’s rating in each of the ESG categories, MSCI scores the company as a AA rated corporation (the second highest possible rating), placing it in the top 19% of utilities companies. At first glance, this may surprise those opposed to fracking and fossil fuels in general. MSCI’s ratings (and the ratings of other major ESG research companies) are primarily chosen from the perspective of risk exposure, management and mitigation efforts in each of the ESG categories, which is less subjective than being purely based on ethics.
How We Handle It
At Balanced Rock, we use MSCI as a tool, in combination with many other tools and resources, to manage our clients’ portfolios in a way that reflects their values. This perhaps deceiving rating for Spectra is one of the reasons we think it’s so important to have clients’ portfolios truly customized to match their values, with a personal understanding of what’s important to each client. Here we search for companies that not only are mitigating risk from an ESG standpoint, but also appeal to our clients as proponents of responsible corporate decision making. It is our duty not to blindly screen for high-rated companies through our research tools, but to discern the reasoning and deeper values behind the companies in which our clients invest.
In the case of Spectra, despite its high ratings, we know that almost every local values-oriented client is happy to avoid Spectra and its West Roxbury Lateral Pipeline in their portfolios. We are proud to be able to deliver such a customized approach to investment management. We are also proud of our own Sustainable Community Coordinator, Hendrix Berry, pictured here preparing for and then protesting inside (that’s her in the dark!) the construction site at the West Roxbury Lateral Pipeline, before her arrest for civil disobedience. That’s what we call walking the talk!
By Elliot Bruce