“When you think about ESG principles, think about the long-term impact on the business, whether it’s environmental, equity and inclusion, or all the other aspects of ESG,” McDonagh said. Those goals are becoming increasingly relevant to MassMutual’s institutional clients, who are interested in learning more about the company’s ESG commitments both as a company and as a financial solutions provider, he said. Top themes include climate change and achieving net-zero carbon emissions, as well as diversity, equity and inclusion.
reciprocity at its core
For MassMutual, a 171-year-old life insurance company with customers, members and participating policyholders, mutuality is a core value, McDonagh said. “When you have relationships that can stretch decades into the future, you want to make sure your business and the promises you make endure not just today and tomorrow, but well into the future.”
“The other element of reciprocity is coming together collectively to help each other for long-term financial well-being,” he said. “There is an inherent fit between reciprocity and sustainability because both are geared towards long-term excellence.”
That mindset informs the company’s approach to sustainability, McDonagh said, which includes goals related to environmental protection, social responsibility and good corporate governance. MassMutual has incorporated these ESG principles into its investment portfolio and throughout its operations.
Many institutional clients today are looking to align common interests with their industry partners, he stressed. “Are these alignments of interests built on shared ESG principles? Are these complementary ESG goals and targets within the investment portfolio? And do they deliver long-term value?”
Go a sustainable way
While MassMutual has long focused on ways to reduce its environmental impact, it recently accelerated its action by committing to achieve net-zero greenhouse gas emissions from its operations by 2030. To that end, a new Boston office that opened last year is LEED Platinum® certified under the US Green Building Council’s Leadership in Energy and Environmental Design program. More than 90% of the company’s corporate facilities (by square foot) are LEED certified, including its Springfield headquarters, built in 1927 and extensively upgraded, McDonagh said.
In addition, MassMutual is a signatory to the United Nations-supported Principles for Responsible Investment, and 97% of the general investment account it maintains for clients is managed by PRI signatories. In 2021, the company committed to achieving net-zero greenhouse gas emissions across its portfolio by 2050, McDonagh noted. “In doing so, we not only demonstrated our commitment, but also made progress towards our goals,” he said.
“All of these steps align with our core intentions about how we think about having a positive impact on the environment,” said McDonagh.
For its entire investment portfolio, MassMutual follows a framework that its portfolio managers use to assess opportunities across the investment portfolio. The framework takes an engagement-centric approach, with MassMutual actively engaging with companies and investment partners on their ESG-related activities and policies.
In terms of social responsibility, MassMutual has committed $100 million in impact investment capital aimed at advancing racial justice and economic opportunity: $50 million of this commitment will be allocated to the MM Catalyst Fundwhich supports entrepreneurs in Massachusetts, including Black owned, founded or owned, technology and sustainability-focused businesses.
Transparent goals and measures
Institutional investors who prioritize mutual commitment to ESG goals with their industry partners must exercise due diligence to assess their partners’ ESG processes and outcomes, McDonagh said. “To do this, it must be checked whether the actions of a company are in line with the publicly communicated goals.”
“By having this conversation and doing this research, you can understand if there is a match of interests,” he said. “You want partners with whom you not only align interests in terms of business and financial goals, but also in terms of sustainability and ESG principles.”
As institutional clients pay closer attention to how industry providers are achieving their stated ESG goals, transparency is key. “Companies need to be clear about what their intentions and goals are. But it’s not just about the claims companies make. What action are they taking?” he said.
MassMutual released its first sustainability report earlier this year. “We have continued to seek to evolve the way we provide the marketplace and our clients with information about where we stand on ESG and what actions we are taking,” said McDonagh. “As we’ve evolved, it’s been about constantly looking at ways we can make a more positive impact, and how we can get that information into the hands of those who care in the most effective way.”
It’s a journey
Interests increasingly overlap. Sustainable thinking is an essential part of running a successful business — or finding investment opportunities — in today’s marketplace, McDonagh said. “ESG principles, to my mind, are no different than how you run a business. They are embedded in the way you run a business.”
“It’s a journey — it’s not a destination.” It comes down to how companies “move toward those destinations,” he said. “For a company to be truly successful, it is about managing its assets, its mission and its relationships with customers [and] its ESG principles.”