As a partner at Beatrice Advisors, a multifamily office, I often see investors presume that, to move the needle on environmental impact, they must opt for private investments that wire impact into their ethos. This kind of investing approach can be described as having high “intentionality” – it’s deliberate, purposeful and offers measurable outcomes.

But whether you’re an individual investor, family office or institutional investor, a rational, well-built portfolio needs to include public securities (both equity and bonds), given their historic, attractive long-term returns and liquidity. Yet public securities are considered to have low “intentionality” because owning or not owning shares or bonds primarily affects a company’s cost of capital, capital markets access, and provides some signaling value, with limited ability to drive values-based goals at the company level. 

So are there ways to make investing in public markets more intentional – and to profit from and increasingly nudge green companies to alter the direction of “brown” ones?  

Let’s start with one unsettling aspect of the impact of investing passively in public securities via ESG metrics and screens: the companies you avoid in your portfolio continue their less beneficial behaviors regardless of your decision to invest. Choosing not to invest in high emitters of greenhouse gases doesn’t make them go away; they continue to exist, and emit GHGs, whether you invest in them or not.

Similarly, if a company sells its worst coal facility, it doesn’t decommission the mine; it sells it to a private operator outside of public markets scrutiny. In some ways, then, investing this way is “greenwashing” your portfolio. Instead of NIMBY, it’s NIMP – not in my portfolio. 

Proponents who subscribe to an ESG exclusionary investment approach will tell you doing so creates market pressure by reducing demand for problematic/offending companies’ shares, increasing their cost of capital and sends signals to management about investor priorities.

But companies can still access capital through other investors or private markets, resulting in a missed opportunity to influence corporate behavior through active ownership. There’s also the risk of pure virtue signaling, without meaningful impact. 

Here’s an example of how ESG exclusionary selection plays out. Consider Travelers Insurance, which produced approximately 2.4 tons of GHG emissions per $1 million of revenue in 2023 and building materials manufacturer Martin Marietta Materials, which emitted 1,430 tons per $1 million revenue. Where is the lowest hanging fruit if one sought to affect GHG emissions? 

If Travelers reduced GHG emissions to zero, it would be the equivalent of just a ~0.1% cut in the emissions of Martin Marietta. Yet prevailing public markets strategy would have you own Travelers and avoid Martin Marietta. It seems logical that the exclusionary ESG investment tends to make brown companies more brown, while green firms really can’t get much greener.

But research by George Serafeim of Harvard Business School, Kelly Shue of Yale School of Management and others suggests that thoughtful engagement with brown companies, backed by meaningful shareholder influence and clear accountability measures, can be more effective than exclusion strategies in driving climate and social progress.

To generate greater intentionality in historically passively-held positions in public securities, a more effective approach may be to invest in brown companies – particularly where there’s a prospect and plan for active influence. This can take the form of strategic engagement with companies via:

• Direct dialogue with management teams on social or climate priorities and implementation plans.
• Proxy voting to support sustainability-focused shareholder resolutions.
• Coalition building with other investors to increase leverage.
• Setting clear milestones and accountability measures for progress.
• Providing constructive feedback and industry best practices.

Effective engagement requires persistent, long-term commitment by you, or your advisors or managers, and should be backed by clear escalation strategies when companies fail to respond adequately. This approach allows investors to maintain economic exposure while actively pushing for positive change.

Another way to invest with more intentionality is to support businesses developing sustainable solutions, by investing in companies focused on renewable energy technologies, energy efficiency solutions, and clean transportation, and/or that cater to narrow wealth-gaps and lack of diverse leadership. If you’re a larger market participant, underwriter or anchor, you can also offer financing for transactional projects that align with your values-based goals.

Depending on the size of your portfolio and the level of your involvement, you can work with nonprofits like As You Sow or the Interfaith Center on Corporate Responsibility to leverage their engagement platforms and expertise. Collaborative shareholder initiatives  amplify individual or corporate investors’ influence through collective action. Plus you can access their research, voting recommendations and ready-made shareholder proposals. You can also use their networks to connect with other like-minded investors to share best practices and work with their proxy voting services to ensure your votes align with initiatives you agree with.

You can also hire managers that will engage with brown companies as part of their fund activities, or via a separately-managed account (typically with at least $1 million to invest), for a bespoke portfolio that drives shareholder engagement through your values-based objectives.

Public securities are a large and rational component of any investment portfolio. For investors seeking more intentional outcomes from their liquid investments, these strategies can make intentionality more of a dimmer than a light switch, with an ability to slide for more impact.