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The Importance of Goals-based (and Values-based) Liability Indices: Applied to Impact and Green Investing
By Arun Muralidhar, Roland van den Brink, Patrick Groenendijk & Ronald van der Wouden
Investors are creating portfolios that align with their specific goals and values. We posit that goals and values should be translated into Goals-based Liability Indices (“GLIdes”). GLIdes can be used to achieve goals, benchmark the asset portfolio, and improve governance.They allow Boards to measure progress to their overall (or multiple) goal(s) and also the relative risks of their investment policies and implementation. We first introduce the GLIdes concept as an extension of the Investible Liability Index developed in the early 2000s. The paper also shows how GLIdes can be applied broadly, and specifically to goals such as “green” investing or impact/sustainable investing. For some goals/values, GLIdes can be created using existing instruments. For others, new instruments will need to be created much like Retirement Security Bonds were created to be the relative safe asset for retirement investing. The paper shows how investors might set a clear path to achieve dynamic, long-term goals (e.g., Net Zero compliance), through clear GLIde paths, offering a transparent and auditable process.
Source @SSRN
