Creating Impact with Our Next Generation of Sustainability Leaders

The Sustainable Innovation MBA (SI-MBA) at the University of Vermont focuses on the development of the next generation of business leaders who will build, disrupt, innovate and reinvent enterprises to move us to a more sustainable world (www.uvm.edu/si-mba).

FIS Group, in conjunction with our affiliated companies, Piedmont Investment Advisors and Aapryl invited five students from the University of Vermont’s SI-MBA program to spend several months with us this year, analyzing and recommending Environmental, Social and Governance (ESG) initiatives as our organization continues to integrate ESG criteria across our business.

One of the key implementation challenges ESG integration faces within the financial services industry is standardization. Without a consistent measurement for Environmental, Social and Governance factors, each investment management firm in the financial markets who has applied ESG criteria to their investment process has generally done so with their own definitions and criteria. 

Although this may sound attractive from a sales and marketing perspective, when an asset manager says they apply “proprietary” analytics when managing to ESG, in fact what they are doing is creating a miscellany of various approaches for investors to understand and apply to their own investment decisions.

FIS Group and the University of Vermont recognize that for investors to apply ESG criteria to their investment decision making process, there needs to be some standardization which can be uniformly applied and analyzed. As a manager of emerging managers, we believe academia will be a leader in achieving this goal and inviting a school like the University of Vermont whose curriculum has been designed from the bottom-up to make sustainability and innovation the core of every course the school teaches, was an opportunity we did not want to pass up. 

As a result, FIS Group hosted the University of Vermont’s SI-MBA capstone Practicum Project course in which five students engaged in application-based problem solving during their final three months of the program (mid-May to early-August). The Practicum Project was a full-time, hands-on, three-month experiential engagement with a focus on addressing the real-world challenges and opportunities associated with sustainable innovation and entrepreneurship.

FIS Group was honored to host a practicum project for the 2019 graduating class. In the broadest terms possible, the purpose of the practicum was to help FIS Group and Piedmont Investment Advisors further integrate Environmental, Social and Governance considerations into their investment strategies, and better understand developments coming out of academia that can assist our business in being a leader in sustainable investing.  We were excited to have five students kick the tires with our organization and help us and the University of Vermont coordinate future research initiatives to further the goal of standardization. 

With this purpose in mind the team focused on developing strategies for our asset management units which FIS Group’s acquisition of Piedmont Investment Advisors in August 2018 had operated independently of each other (FIS Group which is primarily a manager of emerging managers business and Piedmont Investment Advisors, an asset manager focusing on direct equity and fixed income investment strategies).

The goals of the practicum, developed as a part of the project process, were divided into four different parts. The first goal was writing a robust Investment Policy Statement (IPS) for FIS group from the lens of the MBA students which was tackled by Maura Kalil.  Ryan Forman tackled the second goal, performing market research for Piedmont to where the demand for ESG related products was, what the size of the market was and who was already providing services in that space.

The third goal, tackled by Alyssa Stankiewicz and Andrew Mallory, was developing a scoring system for Piedmont to ensure their ESG product offering was outperforming their benchmark. Finally, Noelle Nyirenda took on the goal of enhancing an ESG strategy for FIS Group’s manager of managers business.

Drafting the IPS, which serves as a contract between an investor and their investment manager, was an iterative process that was driven by the United Nations Principles for Responsible Investing (PRI). Market research involved a literature review of demand and supply statistics and available ESG funds. One major finding from this review was that ESG in the Fixed Income asset class lags Equity, and that Equity Funds make up 77% of the eVestment database.

Public equity markets have been the primary focus for impact investors and asset managers as they set their strategic investment goals pertaining to their mission or value related investments. Fixed income has been slower to move to a major player in terms of impact opportunities, despite being a cornerstone of traditional asset allocation models. 

Developing a scoring system involved researching different methods for integrating sustainability data into the portfolio optimization process and designing four different scoring systems. The process to develop an ESG strategy was begun by creating a responsible investment policy based on the PRI and identifying milestones to drive implementation of that policy.

The report and practicum concluded by making recommendations to FIS Group for its different units based on the work done over the course of the summer. We look forward to continuing our work with the University of Vermont and watching these young professionals move forward in their careers as leaders in sustainability. Please feel free to contact us with any questions.