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Brown Advisory Sustainable Growth Inv BIAWX Sustainability

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Sustainability Analysis

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Sustainability Summary

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Brown Advisory Sustainable Growth Fund has a number of positive attributes that may appeal to sustainability-focused investors.

This strategy holds securities with low exposure to ESG risk relative to those of its peers in the Morningstar US Equity Large Cap Growth category, earning it the highest Morningstar Sustainability Rating of 5 globes. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.

Brown Advisory Sustainable Growth Fund has a sustainability or ESG-focused mandate. Funds with an ESG-focused mandate are more likely to align with the expectations of an investor who cares about sustainability issues. One key area of strength for Brown Advisory Sustainable Growth Fund is its low Morningstar Portfolio Carbon Risk Score of 2.73 and very low fossil fuel exposure over the past 12 months, which earns it the Morningstar Low Carbon Designation. Thus, the companies held in the portfolio are in general alignment with the transition to a low-carbon economy.

The fund's 13.6% involvement in carbon solutions is roughly in line with the 15.0% average involvement of its peers in the Large Growth category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. The fund has a modest level of exposure (6.65%) to companies with high or severe controversies. Companies with controversies are involved in incidents such as corruption, employee abuses, and that pose some degree of business risks to the company. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, they controversies can damage the reputation of both companies themselves and their shareholders.

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ESG Commitment Level Asset Manager

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Finding the advantage in sustainable businesses.

Brown Advisory has come a long way from the launch of its first sustainable fund in 2010. Since then, clients have increasingly turned to the firm as a reputable sustainable investor. Increasing demand for existing funds along with for the five additional strategies launched since 2020 propelled a jump in the firm’s sustainable assets from under a fourth to almost half of AUM over the course of two years. These strategies employ a proprietary methodology that seeks businesses where sustainability drives success, creating a repeatable and comprehensive structure for investment professionals to follow during the security selection process. A majority of non-ESG-focused strategies still consider ESG factors, meaning that nearly all strategies are within the purview of the firm’s strong ESG process.

The firm embodies a culture of sustainability, with both analysts and portfolio managers being well-connected to the ESG risks and opportunities of each portfolio position. Analysts conduct detailed ESG assessments, incorporating engagement outcomes and targets for holdings across all portfolios. The firm’s dedication to on-the-ground information gathering through site visits brings together ESG considerations and more traditional, fundamental analysis. Traditional investment professionals and ESG specialists of all experience levels conduct site visits in tandem, aligning the teams on multiple counts.

Brown Advisory clearly and directly links its team’s thorough and well-documented engagements to investment decisions. Dedicated stewardship professionals ensure that the investment thesis and time horizon of each holding has a detailed engagement plan right from the start of the investment period. This oversight provides support for investment professionals when deciding whether and how best to escalate through increased engagement or even divestment when investment companies don’t meet expectations. Clear proxy-voting guidelines and a solid track record of support for ESG-related shareholder proposals over the past three years accompanies a culture of stewardship that centers shareholders at every step.