ESG Impact

Information as of 9/30/2018

How We Define ESG:
Environmental: Prioritize companies that leverage a key environmental advantage vs. their peers. Significantly lower carbon footprint vs. benchmark.
Social: Emphasize companies that promote societal benefits. Client-driven restrictions on companies involved with controversial products or services.
Governance: Focus on board structure, compensation, shareholder rights, and audit risk.

Strategy Highlights

  • The ESG Impact portfolios are benchmarked to the Russell 2500™ Index.
  • ESG variables are considered from both a divestment and investment perspective, and ESG considerations are integrated into the fundamental analysis process.
  • Portfolios typically demonstrate an 80%+ reduction in carbon emissions vs. the benchmark.
  • Portfolios are actively managed using a bottom-up investment approach and best of breed data for ESG assessment – not 3rd party scoring.
  • Portfolios generally demonstrate growth characteristics at or above those of the Russell 2500™ benchmark, with favorable relative valuations.
  • Portfolios are typically fully invested, generally holding less than 10% cash; the Portfolio Manager does not engage in market timing.
  • Our approach seeks to minimize risk through diversification. Portfolios generally hold between 80 to 120 stocks, with no one stock typically exceeding 5% of a total portfolio.

The objective of the ESG Impact strategy is to consistently outperform the Russell 2500™ Index over a complete market cycle, while emphasizing Environmental, Social, and Goverance characteristics as part of the security selection process. Portfolios are comprised of a combination of SMID cap growth and SMID cap value stocks with attractive ESG profiles, resulting in portfolios with characteristics in-line with those of the Russell 2500™ benchmark. ESG criteria are utilized to identify securities for both divestment and investment.

Click here to view the current ESG Impact Strategy Commentary.

ESG Impact | Annualized Returns as of 9/30/2018

† Not Annualized. Source: Advent APX.

Quarterly Fact Sheet

Download a detailed quarterly strategy fact sheet (pdf).

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Although the statements of fact and data in this report have been obtained from, and are based upon, sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. All opinions included in this report constitute the Firm’s judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. A complete list of all securities recommended by KCM in the preceding year, a full compliant composite disclosure presentation, and the list of composite descriptions are available upon request from KCM at 10829 Olive Blvd., Suite 100. St. Louis, MO, 63141.

Kennedy Capital Management, Inc. (“KCM”) is a Missouri corporation registered as an investment adviser with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Registration with the SEC does not imply any level of skill or training. Clients of the Firm include U.S. corporations, pension and profit sharing funds, colleges and universities, trusts, not-for-profit organizations, foundations, and individuals. KCM claims compliance with the Global Investment Performance Standards (GIPS®).

The ESG Impact Composite contains fully discretionary securities of value and growth companies that have a market capitalization ranging from small cap to midcap. The Investment Manager places an additional emphasis on Environmental, Social, and Governance criteria as part of the portfolio construction and stock selection process. For comparison purposes the composite is measured against the Russell 2500™ Index. The U.S. Dollar is the currency used to express performance.

Performance returns presented Gross of Fees do not reflect the deduction of investment advisory fees. A client’s return will be reduced by the advisory fees as described in the Form ADV Part 2A and other expenses incurred by the account. For example, an annual advisory fee of 1% compounded quarterly over 10 years will reduce a gross 14.44% annual return to a net 13.24% annual return. Form ADV Part 2A is available upon request. The GIPS® are a set of standardized, industry-wide ethical principles that provide investment firms with guidance on calculating and reporting their investment results to prospective clients to ensure fair representation and full disclosure of an investment firm’s performance history. Past performance is not indicative of future results.

The performance figures reported herein are unaudited, may be based upon information obtained via electronic data sources (“feeds”) and may be subject to change. Data feeds from many of KCM clients’ selected custodians are obtained through a third party, and are used to compare custodial data to KCM’s client account records as frequently as daily. Monthly, KCM reviews clients’ account holdings along with cash and share quantities against the custodial statements. In some instances, variances may exist between final audited custodial information and the information KCM obtains via such data feeds. All variances are typically reconciled to the applicable account no later than each month-end.

Composite specific data provided within this presentation has been calculated from accounts that are discretionary as defined in this paragraph. The assets shown are derived only from discretionary accounts. Non-discretionary accounts, as defined by KCM, are accounts that are not included in the composite due to one or any combination of the following criteria: there were significant cash inflows or outflows within the account; the account’s asset level did not meet the minimum requirement to remain in the composite; the account assets are managed by others using our non-discretionary model. The temporary removal of such an account occurs at the beginning of the month and the account re-enters the composite the month after the criteria has been met.

Russell Investment Group is the source and owner of the Russell Index data contained or reflected in this material and all trademarks and copyrights related thereto. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a presentation of Kennedy Capital Management, Inc. Russell Investment Group is not responsible for the formatting or configuration of this material or for any inaccuracy in Kennedy Capital Management’s presentation thereof.

The Russell 2500™ Index measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as “smid” cap. The Russell 2500 Index is a subset of the Russell 3000® Index. It includes approximately 2500 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2500 Index is constructed to provide a comprehensive and unbiased barometer for the small to mid-cap segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small to mid-cap opportunity set.

The Russell 2500™ is used as the benchmark. The Index is unmanaged and represents total returns including reinvestment of dividends. The benchmark is used for comparative purposes only and generally reflects the comparable risk or investment style of the Firm’s strategy. The investment portfolios underlying the Index are different from the investments in the portfolios managed by the Firm. Certain accounts may also use other benchmarks not listed in the Annual Disclosure Presentation. The Independent Verifier’s Report does not cover the benchmark returns included in the Annual Disclosure Presentation.

Christian McDonald, CFA®

Portfolio Manager, Assistant Portfolio Manager, Research Analyst

CHRISTIAN MCDONALD, CFA®, is the Portfolio Manager for the ESG Impact Strategy. Mr. McDonald also serves as the Co-Portfolio Manager for the Small Cap Core Strategy and the Assistant Portfolio Manager for the Micro Cap strategy. In addition, Chris serves as a Research Analyst at KCM, primarily responsible for selecting and monitoring securities within the industrials sector of KCM’s universe. Mr. McDonald joined KCM in November 2005. Prior to joining KCM, Chris spent six years in various finance functions at The Boeing Company.  Mr. McDonald graduated summa cum laude with a B.S. in Finance and Operations Management from Washington University in St. Louis and earned an M.B.A. from the UCLA Anderson School of Business.

Patrick Kelley

Head Equity Trader

PATRICK KELLEY, is the Head Equity Trader and is responsible for overseeing administration, technology, and management issues for the trading department.  Mr. Kelley is responsible for coordinating the trading requirements for all client accounts and supervising the quality of broker executions and services.  Pat also reviews order directions on the results of such monitoring.  Mr. Kelley is the principal Equity Trader for the Small Cap Value, Small Cap Core, ESG Impact, SMID Cap Value, Mid Cap Value, and All Cap Value strategies.  Before joining KCM, Pat was both a listed block trader and an OTC trader for four years with KeyBanc Capital Markets in Cleveland, Ohio.  Mr. Kelley has passed the General Securities Representative, the Uniform Securities Agent State Law, and the Equity Trader Limited Representative examinations. Pat received his B.S.B.A. in Finance and Management Information Systems from Ohio University.