Why did we launch ESG Managers™ Portfolios?

Pax World Management LLC and Morningstar Associates believe that investment managers who integrate environmental, social and governance (ESG) factors into investment analysis and decision making may offer material long-term advantages to their investors. However, until now, the only mutual funds following a Sustainable Investing approach have been individual, proprietary funds. Pax and Morningstar Associates believed the time was right for non-proprietary, open architecture asset allocation portfolios comprised of some of the most experienced managers in the Sustainable Investing arena. From this initial thinking the idea of ESG Managers™ Portfolios arose.

What specific roles do Pax World Management LLC and Morningstar Associates play in ESG Managers™ Portfolios?

Pax World is the investment adviser to ESG Managers™ Portfolios. Its responsibilities include subadviser oversight, fund administration and distribution. Morningstar Associates' ongoing responsibilities include asset allocation, manager selection and portfolio construction, and ongoing maintenance and due diligence.

How were the investment managers chosen?

They were selected by Morningstar Associates from the universe of investment managers who follow a Sustainable Investing approach - combining financial analysis with environmental, social and governance (ESG) analysis. Morningstar Associates applied its proven skills and rigorous analysis to produce a small, select list of managers representing some of the best known and most experienced managers in the Sustainable Investing landscape.

Do all the managers use the same ESG criteria?

No, while each of the managers has substantial experience in the field of Sustainable Investing, they vary in their approaches to incorporating ESG criteria. For example, some managers may focus more closely on one set of ESG factors, like environmental factors. By bringing this diverse group of managers with various ESG approaches under one roof, ESG Managers™ Portfolios give investors exposure to a variety of ESG approaches, which enhances the overall diversification of the funds.

Is there evidence to support the claim that ESG factors have financial materiality?

Yes, in fact there is substantial historical evidence. In recent years, a number of respected organizations have released reports suggesting that companies with superior ESG or sustainability performance may be better long-term investments. Some examples include the following:

"Companies that are considered leaders in ESG policies are also leading the pack in stock performance by an average of 25%."

              Goldman Sachs¹

"There is increasing evidence showing that superior performance in managing climate risk is a useful proxy for superior, more strategic corporate management, and therefore for superior financial value and shareholder value-creation."

              RiskMetrics (Innovest)²

"Over a period of seven years, the hypothetical Governance Alpha Fund, which screened for corporate governance risk, outperformed the Russell 1000 benchmark by more than 100 annualized basis points."

              The Corporate Library³

Are ESG Managers™ Portfolios available to individual investors?

Yes, but not directly. They can only be purchased through financial advisors. For more information, call 877.374.7678.

Past performance does not guarantee future results.

¹Goldman Sachs Global Investment Research, "Overview: Introducing GS SUSTAIN," July 2, 2007

²Innovest Strategic Value Advisors, "Carbon Beta and Equity Performance: An Empirical Analysis: Moving from Disclosure to Performance," October 2007

³Rick Marshall, "Investing in Corporate Governance: Corporate Governance and Investment Returns," The Corporate Library, April 6, 2009