Spotlight On: Matthew Patsky, CEO, Trillium Asset Management
July 2023 — In an interview with Invest:, Matthew Patsky, CEO of Trillium Asset Management, discussed expanding distribution to Europe, the increasing importance of being “true-to-label” in terms of ESG products and offerings and its push to get data about gender, race and ethnicity released through the SEC.
What have been some major highlights for Trillium in the last 12 months?
Trillium has expanded distribution in Europe and beyond over the last 12 months. The biggest news for us has been our great success in Europe, which is largely driven by increased regulatory oversight, ESG and impact investing. Investing with the integration of ESG concepts has been a huge growth opportunity for the asset industry globally. Much of the product that has been launched has been less than true to the label, which has drawn in regulators. This has put many of the large players, such as BNY Mellon and Goldman Sachs, under scrutiny. There are many asset owners and managers that use sub-advisors for products for managing strategies and they are now recognizing they need to be more robust in their hiring to ensure that everything is true to label. This makes sure it is in alignment with the regulatory framework of the region. The strictest regulatory climate right now is the European Union, so we are seeing tremendous interest there in more “true-to-label” players. The market has rolled over and there is tremendous pressure on asset managers but we are still seeing strong and robust growth.
In the United States, the labeling laws for mutual funds require you to be 80% true-to-label. That makes very little sense. If you were to declare that you were fossil fuel free, by the labeling laws you could be 20% in fossil fuel. They can throw in currencies or gold, or emerging market stocks, which are completely unrelated. That is not really true-to-label. The regulatory framework in the United States is not as robust as in Europe and elsewhere. There are opportunities to make it more robust, which is why you are seeing the SEC doing ESG sweeps and giving fines. They are asking to be shown how a firm does integrated ESG, where they often find out that it is marketing spin and not real. As a result, firms are being caught for not being true-to-label.
How do you construct your portfolios to meet client needs and that have an impact?
We are constructing portfolios predominantly from equity and debt that is publicly traded. There are plenty of opportunities to make a positive impact. People need to keep in mind that when you look across asset classes, it may work differently. It is easy to build a portfolio that has a positive impact by just focusing on bonds that fund green energy or hospitals or education. We do not buy bonds from governments that do not respect the rights of their own people. Therefore, we do not invest in bonds issued by Saudi Arabia, Texas or Florida because of their records on human rights.
What is the state of innovation in the sustainable investment sector?
The focus is on how we effectively manage the process of having a positive impact concerning public equity. It is done through active ownership and coalition building. It has caused a political backlash that is quite comical. We pressed Walt Disney to speak out against the “Don’t Say Gay” bill. We think that companies need to be responsive to their customers, employees, suppliers and the communities they work in. If they see something that is wrong, they should speak out against it. Companies should not be spending money and investing in political campaigns. Many companies are quiet on many issues but they spend money behind the scenes. That should be flipped. We are representing investors that expect companies they invest in to stand up against social injustice.
How do you support oil and gas, which are important industries, while still being sustainable?
We are very involved in talking to the oil, gas and mining industries about their impact. We work with the trade unions and pension plans, so we have a seat at the table. We do everything we can to empower people internally at the biggest companies, whether we own them or not. We want to influence their behavior because that will move a project along when someone is advocating a certain project. We are always there as a willing supporter to push and our coalition is very powerful. We ourselves do not invest in fossil fuels.
What legislation or regulation are you keeping an eye on?
We have been advocating for over a decade to receive information in the EEO-1, which is about diversity and gives us data on gender, race and ethnicity and how they are paid or promoted. This is filed with the U.S. Department of Labor annually by any company with 100 employees or more, and we believe it should be released to the public. The path to get it released is to have the SEC mandate its availability. This way, I don’t have to ask you how you are closing the pay gap; I can see the empirical evidence that it is happening. We want them to tell us how they will close these pay gaps by being transparent. Demonstrating concern for these issues is how you recruit and retain the best talent.
What is your outlook for the firm and the local economy over the next two to three years?
Boston is very insulated from a lot of the volatility in the broader global and U.S. economy because of its major universities. There are 500,000 students who come here annually and that is coupled with biotech and technology foundations as well as a robust financial services sector. This has been a stabilizing force in Boston. I have no fears about a softening economy next year. It will be felt in Europe and in the United States but Boston will probably come through with only minor impact. It is an incredible center for attracting talent and we continue to find it a great place to operate for recruitment and retention of talent. The firm is very well positioned and our recent merger has delivered global distribution. It brings us leads from around the world and that is creating an incredible interest in true-to-label products and offerings. The inquiries continue and next year will likely be even better.
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