Parnassus Investments, a partner of Equities.com, is a research-driven investment company that offers mutual funds and ETFs focused on building wealth responsibly by investing in high-quality companies with both strong financial prospects and sustainable business practices. The following feature article is based on a conversation between Equities.com CEO Paula DeLaurentis and Marian Macindoe, managing director for sustainable investment strategy at Parnassus.
Marian Macindoe, managing director for sustainable investment strategy at Parnassus Investments, told Equities CEO Paula DeLaurentis in a recent sit-down that the firm looks to invest in quality companies that have sustainable business practices, increasingly relevant products and services, and durable competitive advantages, or a so-called investment moat.
Parnassus emphasizes the importance of investing in companies that cultivate a good workplace, minimize their environmental impact, take responsibility for their products and the impact that they have on communities and on consumers, and uphold high standards of governance and ethics.
“Every company operates in an ecosystem where they need to think about the stakeholders that they rely on and that rely on them. This includes their employees, suppliers, customers, investors, and the communities in which they operate,” she said.
Parnassus places an emphasis on investment stewardship. Macindoe said another way of thinking of stewardship is “active ownership.”
“It means understanding the companies in which we’re invested, understanding how they make money, understanding the ecosystems within which they operate, and thinking about the long-term risks and opportunities that present themselves to companies either positively or negatively,” she said.
Parnassus, in its recently released annual Sustainability & Stewardship Report, outlines examples of how it is delivering on its Principles and Performance philosophy.
“We detail the principles upon which all of our work is based and offer real data about how our funds are performing against the benchmark on environmental and social indicators,” Macindoe said.
Four tools to affect change
Leaning into the rights and responsibilities of shareholders, Parnassus relies on four specific tools to affect change in its portfolio companies: Company engagement, shareholder proposals, proxy votes and industry advocacy.
Company engagement, Macindoe said, “helps companies think about disclosing their emissions, understanding their impacts, reducing those emissions by setting science-based targets, preparing climate risk assessment plans to address the risks and opportunities that companies may face.”
Parnassus engages companies on more than just climate changes. Macindoe said the firm recently approached companies about emerging risks like chemical safety, specifically in consumer-facing products, and the responsible use of artificial intelligence in terms of privacy, safety, accuracy, and non-bias.
“We do this because we think those things are important and believe that companies that aren’t thinking about these things may face costly and distracting lawsuits or be ill-prepared for emerging regulation. One current example that could have implications is how to regulate AI,” she said.
As for the additional three tools, Macindoe said that proxy voting is “one of the most important and certainly the most common way that shareholders communicate directly with boards of directors.” She said the Parnassus takes the responsibility of proxy voting seriously, and voted over 1,800 ballot items at companies in their funds last year.
Parnassus also uses shareholder proposals as a tool to directly ask companies and their shareholders about the materiality of a sustainability related issue at a company. Last year, as an example, the firm filed a proposal on paid sick leave for a rail company.
Finally, through industry advocacy, Parnassus works alongside other investors to further their clients’ interests and understand the material risks to companies.
Investing for the long-term
Macindoe said Parnassus is a household name in sustainability and investing. In her current role as the managing director of sustainable investment strategy, she works closely with the research team to evaluate the sustainability characteristics of companies in the investable universe to uncover new opportunities.
Equally as important, Macindoe helps assess the companies that Parnassus is already invested in to make sure they continue to support the fund’s investment thesis. “To ensure they’re delivering value over the long term for our clients,” she added.
Parnassus has set a net-zero goal for all its fund assets by 2050. Macindoe said that investing in climate solutions is critical because climate change is one of the most pressing risks to the financial system. That means investing in companies, for example, that are working to reduce greenhouse gas emissions and to reduce the release of harmful pollutants into the air.
“At Parnassus, we take our rights and responsibilities as long-term shareholders very seriously to ensure the companies we invest in don’t sacrifice long-term objectives for short-term gains,” Macindoe said.
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