On September 30th, 2014, Brown Advisory launched the Sustainable Core and the Tax-Exempt Sustainable Fixed Income Strategies. As we celebrate their 10-year anniversaries, we reflect on the journey, achievements, and future prospects of these strategies and cornerstone approach linking sustainable investment research with fixed income.
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The Genesis and Evolution of the Strategies
The creation of these strategies was driven by our clients, as we actively respond to their needs and collaborate with them on investment solutions. We believe that a sustainable and flexible approach to fixed income can offer investors access to a more attractive stream of income and risk adjusted returns. Brown Advisory has a long history of working with clients with an interest in positive sustainable outcomes alongside strong financial returns. The evolving landscape of sustainable investing, coupled with the need for a more integrated approach, led to the creation of these strategies. Over the past decade, these strategies have demonstrated that strong performance and sustainability can go hand in hand.
The success of these strategies is attributed to the dedicated team behind them. The team has grown significantly, with specialized analysts in corporate credit, securitized, and municipal sectors. This growth has enabled a more rigorous and informed investment process, ensuring that sustainability is integrated into the fundamental research process at every step.
Performance
Since inception, the Sustainable Core Fixed Income Strategy and the Tax-Exempt Sustainable Fixed Income Strategy have delivered meaningful performance, demonstrating that integrating sustainable investing does not require a trade-off with financial returns. The Sustainable Core strategy’s focus on high-quality bonds and rigorous credit analysis and the Tax-Exempt Sustainable Fixed Income strategy’s emphasis on municipal bonds with strong credit profiles and sustainable attributes have been key drivers of their respective performance.
Both strategies have also shown resilience during market downturns, thanks to their bottom-up, research-driven approach and focus on downside protection through using scenario analysis to understand potential risks and opportunities.
Investment Philosophy and Process
Both strategies are grounded in a unified investment philosophy that emphasizes the integration of fundamental and sustainable investment research. This approach aims to uncover, assess, and identify sustainable drivers that have a meaningful influence on financial performance. The investment process involves a complex balance of factors, focusing on bottom-up analysis to model cash flows, duration, valuations, and an issuer’s ability to pay, alongside the evaluation of sustainable investment risks and opportunities.
The Brown Advisory Sustainable Core Fixed Income portfolio is made up primarily of bonds that have an identifiable ‘sustainable driver’, which is defined as an investment that is deriving improved financial outcomes or a competitive advantage through sustainability-related activities. Similarly, the Tax-Exempt Sustainable Fixed Income portfolio focuses on municipal bonds that support essential services and infrastructure, contributing to a more inclusive and sustainable economy. 
Source FactSet as of 08/31/2024. All returns greater than one year are annualized. Past performance is not indicative of future results. The composite performance shown above reflects the Brown Advisory Sustainable Core and Tax-Exempt Sustainable Fixed Income Composites, managed by Brown Advisory Institutional. Brown Advisory Institutional is a GIPS compliant firm and is a division of Brown Advisory LLC. Please see the Brown Advisory Sustainable Core and Tax-Exempt Sustainable Fixed Income Composite GIPS Reports at the end of this presentation.
Looking Toward the Future
Over the past ten years, the investable universe for these strategies has expanded and the decade has been marked by significant events, from the global pandemic to geopolitical tensions and technological advancements. These experiences have reinforced the importance of a bottom-up, research-driven approach and a long-term investment perspective. The team has remained nimble, adapting to new economic realities and sustainability challenges. Enhanced data sources, better transparency, and deeper engagement with issuers have all contributed to more informed investment decisions. Looking ahead, the team is excited about the opportunities and potential for active managers to aim to generate alpha and provide capital preservation for clients.
As we celebrate this milestone, we are proud of the progress and growth of the Managed Sustainable Fixed Income platform. The journey over the past ten years has validated our approach, and we look forward to the future with optimism and excitement.
Thank you for your support,
The Sustainable Fixed Income Portfolio Management and Investment Teams
Past performance is not indicative of future results. Please see the end of this presentation for a GIPS Report, important disclosures and a complete list of terms and definitions.
Disclosures
Past performance may not be a reliable guide to future performance and investors may not get back the amount invested. All investments involve risk. The value of the investment and the income from it will vary. There is no guarantee that the initial investment will be returned.
The views expressed are those of the author and Brown Advisory as of the date referenced and are subject to change at any time based on market or other conditions. These views are not intended to be and should not be relied upon as investment advice and are not intended to be a forecast of future events or a guarantee of future results. The information provided in this material is not intended to be and should not be considered to be a recommendation or suggestion to engage in or refrain from a particular course of action or to make or hold a particular investment or pursue a particular investment strategy, including whether or not to buy, sell, or hold any of the securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. To the extent specific securities are mentioned, they have been selected by the author on an objective basis to illustrate views expressed in the commentary and do not represent all of the securities purchased, sold or recommended for advisory clients. The information contained herein has been prepared from sources believed reliable but is not guaranteed by us as to its timeliness or accuracy, and is not a complete summary or statement of all available data. This piece is intended solely for our clients and prospective clients, is for informational purposes only, and is not individually tailored for or directed to any particular client or prospective client.
The views expressed are those of the author and Brown Advisory as of the date referenced and are subject to change at any time based on market or other conditions. These views are not intended to be and should not be relied upon as investment advice and are not intended to be a forecast of future events or a guarantee of future results. The information provided in this material is not intended to be and should not be considered to be a recommendation or suggestion to engage in or refrain from a particular course of action or to make or hold a particular investment or pursue a particular investment strategy, including whether or not to buy, sell, or hold any of the securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. To the extent specific securities are mentioned, they have been selected by the author on an objective basis to illustrate views expressed in the commentary and do not represent all of the securities purchased, sold or recommended for advisory clients. The information contained herein has been prepared from sources believed reliable but is not guaranteed by us as to its timeliness or accuracy, and is not a complete summary or statement of all available data. This piece is intended solely for our clients and prospective clients, is for informational purposes only, and is not individually tailored for or directed to any particular client or prospective client.
The information provided in this material is not intended to be and should not be considered to be a recommendation or suggestion to engage in or refrain from a particular course of action or to make or hold a particular investment or pursue a particular investment strategy, including whether or not to buy, sell, or hold any of the securities or issuers mentioned. It should not be assumed that investments in such securities or issuers have been or will be profitable. References to specific securities or issuers are to illustrate views expressed in the commentary and do not represent all of the securities purchased, sold or recommended for advisory clients.
Sustainable investment considerations are one of multiple informational inputs into the investment process, alongside data on traditional financial factors, and so are not the sole driver of decision-making. Sustainable investment analysis may not be performed for every holding in every strategy. Sustainable investment considerations that are material will vary by investment style, sector/industry, market trends and client objectives. Certain strategies seek to identify companies that we believe may be desirable based on our analysis of sustainable investment related risks and opportunities, but investors may differ in their views. As a result, these strategies may invest in companies that do not reflect the beliefs and values of any particular investor. Certain strategies may also invest in companies that would otherwise be excluded from other funds that focus on sustainable investment risks. Security selection will be impacted by the combined focus on sustainable investment research assessments and fundamental research assessments including the return forecasts. These strategies incorporate data from third parties in its research process but does not make investment decisions based on third-party data alone.
The Bloomberg U.S. Aggregate Bond Index is an unmanaged, market-value-weighted Index composed of taxable U.S. investment-grade, fixed rate bond market securities, including government, government agency, corporate, asset-backed, and mortgage-backed securities between one and 10 years.
The Bloomberg 1-10 Year Blend Municipal Bond Index consists of a broad selection of investment-grade general obligation bonds, revenue bonds, insured bonds (including all insured bonds with a Aaa/AAA rating), and prerefunded bonds with maturities of at least 1 year and less than 10 years. It is an unmanaged index representative of the tax-exempt bond market.
FactSet® is a registered trademark of FactSet ® Research Systems, Inc.
“Bloomberg®” and the Bloomberg indices used in this presentation are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the Index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by Brown Advisory. Bloomberg is not affiliated with Brown Advisory, and Bloomberg does not approve, endorse, review, or recommend the Brown Advisory Sustainable Core strategy. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to the Brown Advisory Sustainable Core strategy.
Factset® is a registered trademark of Factset Research Systems, Inc.