Tag: Featured Articles

Finding a Career in Financial Services with ESG Investing by Sarah Adams of VERT Asset Mgmt - photo Jason Goodman on Unsplash

Finding a Career in Financial Services with ESG Investing

By Sarah Adams, Vert Asset Management

Above photo credit: Jason Goodman on Unsplash

Sarah Adams of Vert Asset Mgmt.There’s a conventional attitude toward work that entails leaving everything you do outside of work behind, as though nothing else exists. With this perspective, you are encouraged to fit your family, your morals, yourself, around the job.

I was raised that way. As an elementary school kid, if I had to call my mom at work she’d answer the call in a hushed tone, as though she was receiving an illicit phone call. Her office was not interested that her 10-year-old needed to be picked up from school, let alone that she had kids at all.

These jobs still exist, many of us have worked these jobs. Thankfully, there is another path, and some of us are fortunate enough to be able to take it. These days, it is my passion and interest in environment, social, and governance (ESG) investing that guide my career, not the job itself. Today, I work as Chief Sustainability Officer and co-founder at Vert Asset Management. But getting here wasn’t straightforward, or easy.

I did not study to go into finance. On a lark, I landed a college internship at a brokerage firm during the height of the dotcom boom in the late 90s. My financial services initiation, some would say ‘hazing’, was straight out of movies like Boiler Room. It was fast-paced and exciting to be near a NASDAQ trading desk. But there was an unspoken understanding that I leave my conscience at home. It was clear to me from this early exposure that investments had lost its humanity (if it had any to begin with).

In the field of finance there has long been an expectation that your background and interests should be in math and cold calculations. This is why so many engineers find their way into financial services. However, for those like myself (a history major) who are more interested in context and strategy, there is space in financial services for those roles, but they are more peripheral.

My light bulb moment occurred in 2006 when I was working in the UK at an institutional asset manager. I learned that UK city and county pension funds were required to ask socially responsible questions when searching for new asset managers. Why? Because they represented a large number of disparate beneficiaries who lived and worked in their geographical area, and they invested for the protection of all of these people’s retirement.

Back then, most investment professionals, including my bosses, rejected the notion that investments should take into account “non-financial” issues like environmental, social, and governance risks. Needless to say, things have changed. The 2020 Global Sustainable Investment Alliance (GSIA) report estimates that 35 percent of all professionally managed assets now incorporate sustainability criteria. Seven out of the ten largest pension funds in the world integrate ESG, including Japan’s Government Pension Investment Fund with assets over $1 trillion at the end of 2021.

Is ESG Investing One Way to Attract More Women into Finance?

I’ve tried several times to devise an exit out of finance to work in more creative and collaborative industries. The last time I left, I thought that in order to really roll-up my sleeves and work on corporate accountability, I needed to work in policy and research. It was while I was working at a non-profit on financial reform that I realized that there was just so much information available that investors were not including in the way they look at markets.

There is an entire ecosystem of service providers creating and disseminating non-financial information to markets now including: non-profits like CDP, ESG researchers, accountants like KMPG, PwC and E&Y. In fact, E&Y just launched E&Y Carbon to help companies with carbon accounting and corporate disclosures to the marketplace. There are standard setters working to refine what is meant by non-financial metrics with financial materiality. In 2018, Sustainability Accounting Standards Board (SASB) identified material indicators in 77 industries. They are now part of the International Sustainability Standards Board bringing integrated reporting mainstream.

ESG issues are interdisciplinary. While financial and accounting metrics have become standardized over time and through usage, ESG metrics are still evolving. Many ESG metrics are still considered ‘externalities’ because the market struggles to measure their economic value – things like clean air and well-being are hard to price. But integrating these environmental and social issues into markets is an opportunity for those from non-math fields because it takes an understanding of people and planet to value them.

Research by Professor Brad Barber, a Professor at UC Davis Business School and a member of Vert Asset Management’s Advisory Board, analyzed the absence of women in finance in 2017 by examining the percentage of women who’ve earned the Chartered Financial Analyst designation as a proxy. It was less than 20 percent. Barber concluded that more women would be in financial services if they were encouraged to study STEM subjects – science, technology, engineering, math. This would certainly help. But there are now more non-STEM roles in financial services. Investment management needs financial planners and advisors, researchers, sustainability experts, integrators, and communicators too.

There are increasingly more professional educational choices on sustainable investing to choose from than ever before. The CFA Institute now offers a Certificate in ESG Investing. The College for Financial Planning offers the Chartered SRI Counselor (CSRIC). The standard-setter SASB offers its own Fundamentals of Sustainable Accounting Certificate (FSA).

Flexible and Remote Work a Welcome Change

I found it difficult to get a job with small children at home even after reorientating my career to focus on sustainability. One friend told me bluntly that as a young mother, “you just aren’t attractive to the marketplace.” A well-known sustainability consultancy didn’t hire me because I had not worked directly with corporate sustainability reports before, despite the fact that I have a background in finance and completed two master’s degrees in environment policy and sustainability.

I took the rejection as an opportunity to start my own business consulting with financial advisors on the landscape of philanthropy and impact investing. I called it Values-Based Investing Consulting, borrowing from a concept that was used at the time within financial services to start to orientate investors to investment managers around an emerging set of non-financial criteria.

Entrepreneurship and small businesses often offer more flexible working conditions than bigger firms. But the pandemic has changed all that quite dramatically. Women can now work from home with flexible hours at all sorts of companies.

In 2016, that entrepreneurial spirit led me to co-found Vert Asset Management with my husband Sam Adams. As the Chief Sustainability Officer, I lead on engagement which is three main areas: 1) communicating with the companies we invest in about ESG topics like net-zero goals, 2) building capacity within financial services for ESG disclosures, and 3) creating good business practices as a business ourselves, a Certified B Corp.

If you are interested in the interdisciplinary topics of environmental, social, and governance and how they influence businesses, you might consider a career with ESG. If you have hard time reconciling the person you need to be for your day job versus the person you are outside of work, ESG could be a good fit. If you want to be part of the solution, instead of being part of the problem, again ESG! The traditional requirements of a finance career, i.e., a STEM background and the lack of a personal life, are falling away. There are so many opportunities today at the intersection of finance, business, and sustainability.

 

Article by Sarah Adams, Chief Sustainability Officer and Co-founder at Vert Asset Management. Vert was founded to bridge the gap between financial services, capital markets, and environmental advocacy.

Sarah has a multidisciplinary experience across the finance sector and environmental policy. Before Vert, Sarah started a consultancy educating financial advisors on sustainable and impact investing in the UK and US. Previously, Sarah worked in institutional finance. Additionally, she worked on social finance initiatives for advocacy NGOs in the UK.

Sarah is interested in the development of sustainability education for financial services. She sits on the USSIF Education Committee and is a teacher for the Chartered SRI Counselor (CSRIC). She earned the CFA UK Certificate in ESG Investing and the Sustainability Accounting Standards Board’s FSA Credential. Sarah has a BA in History from UCLA (US), a MSc in Environment and Sustainable Development from University College London (UK), and a MA in Environmental Law from SOAS (UK).

Featured Articles, Impact Investing, Sustainable Business

How to Avoid Greenwashing When Choosing ESG Investments by Lori Keith of Parnassus Investments

How to Avoid Greenwashing When Choosing ESG Investments

By Lori Keith, Parnassus Investments

ESG strategies are rapidly gaining popularity as interest in supporting companies that manage their carbon footprints, invest in their employees, and promote diversity surges. As more and more funds claim the ESG label, how can investors effectively decide which investments are genuine?

Lori Keith of Parnassus Investments

Avoiding Investments that Masquerade as ESG Choices

If you’re seeking to align your financial investments with your values, your decisions about which funds to include in your portfolio take on an additional dimension of complexity. Naturally, you should look for funds that most closely align with your own principles. And, above all, you should take steps to avoid any ESG-labeled fund that does not diligently pursue its stated objectives.

A Practical Framework for Evaluating ESG Funds

Here are some steps you can take to perform effective ESG due diligence and avoid being misled by labels:

  1. Read the prospectus and review the holdings. The prospectus should identify whether all the fund’s holdings are evaluated using ESG metrics, or whether the fund simply employs screens to exclude a few types of companies, such as tobacco or gambling firms, but does not vet each company in the portfolio for broad ESG progress. The prospectus should also reveal whether a fund “considers” ESG or fully integrates ESG criteria into its investment process and portfolio construction. In addition, reviewing the holdings can provide insights about whether the Fund’s portfolio aligns with the claims made by the fund company.
  1. Learn about the fund’s investment philosophy and process. Does the fund have a discernable ESG philosophy, and does the investment process include ESG analysis? Does the team perform their own ESG materiality assessment, or do they rely exclusively on third-party research providers for ESG ratings on companies? Do the portfolio managers and analysts actively buy into the ESG process, and are they truly engaged in assessing material ESG risks and opportunities?
  1. Investigate what the portfolio managers seek to gain by choosing ESG-vetted investments. Do they consider ESG progress an indicator of company quality? Are they seeking to avoid material ESG risks?
  1. Look for markers of stewardship excellence. Does the fund manager disclose their proxy voting decisions, and do these decisions align with their stated ESG values? Does the investment firm encourage positive change in portfolio companies through engagement with senior management? Does the firm maintain memberships in any independent organizations that promote ESG investing, such as Ceres or US SIF?
  1. Consult third-party sources. For example, Morningstar has several ESG rating systems. The Morningstar Commitment Level qualitatively evaluates funds’ commitments to ESG and rates them on a scale ranging from Leader to Low. The Morningstar Sustainability Rating measures how the companies held in portfolios are managing their ESG risk relative to the fund’s Global Category peer group. Funds may also be given carbon scores by Morningstar.

The good news is that there are many more choices for ESG investors than ever before. However, because regulatory standards don’t yet exist, it is important to do your own homework to make sure your financial investments match your values.

 

Article by Lori Keith, the Director of Research at Parnassus Investments and Portfolio Manager of the Parnassus Mid Cap Fund with responsibility for portfolio management for the firm’s Mid Cap strategy. She joined Parnassus Investments in 2005 after serving as a Parnassus research intern. Before joining the firm, Ms. Keith was a Vice President of Investment Banking at Deloitte & Touche Corporate Finance LLC and was a Senior Associate in Robertson Stephens & Company’s investment banking division. Prior to that, she worked in the management consulting practice at Ernst & Young. Ms. Keith received her bachelor’s degree in economics from the University of California, Los Angeles and her master’s degree in business administration from Harvard Business School.

Disclosures

For the current holdings of the the Parnassus Core Equity Fund, the Parnassus Endeavor Fund, the Parnassus Mid Cap Fund, the Parnassus Mid Cap Growth Fund and the Parnassus Fixed Income Fund please visit the fund’s individual holdings web page. Current and future portfolio holdings are subject to change.

The views expressed are subject to change at any time in response to changing circumstances in the markets and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or the Parnassus Funds.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE GUIDELINES – The Fund evaluates financially material ESG factors as part of the investment decision-making process, considering a range of impacts they may have on future revenues, expenses, assets, liabilities, and overall risk. The Fund also utilizes active ownership to encourage more sustainable business policies and practices and greater ESG transparency. Active ownership strategies include proxy voting, dialogue with company management and sponsorship of shareholder resolutions, and public policy advocacy. There is no guarantee that the ESG strategy will be successful.

Mutual fund investing involves risk, and loss of principal is possible. There are no guarantees any investment strategy, including a socially responsible (ESG) investment strategy, will be successful in any market environment.

The Parnassus Funds are underwritten and distributed by Parnassus Funds Distributor, LLC.

US SIF: The Forum for Sustainable and Responsible Investment is the leading voice advancing sustainable investing across all asset classes. Its mission is to rapidly shift investment practices toward sustainability, focusing on long-term investment and the generation of positive social and environmental impacts. Our members, representing $5 trillion in assets under management or advisement, include investment management and advisory firms, mutual fund companies, research firms, financial planners and advisors, broker-dealers, banks, credit unions, community development organizations, non-profit associations, and asset owners.

Ceres is a nonprofit organization transforming the economy to build a just and sustainable future for people and the planet. Ceres works with the most influential capital market leaders to solve the world’s greatest sustainability challenges. Through powerful networks and global collaborations of investors, companies and nonprofits, Ceres drives action and inspires equitable market-based and policy solutions throughout the economy.

Before investing, an investor should carefully consider the investment objectives, risks, charges and expenses of the Funds and should carefully read the prospectus or summary prospectus, which contains this information. A prospectus or summary prospectus can be obtained on the website, www.parnassus.com or by calling (800) 999-3505.

Energy & Climate, Featured Articles, Impact Investing, Sustainable Business

Changing your relationship with Money for Good by Dani Pascarella of OneEleven Financial Wellness.

Changing Your Relationship with Money for Good

By Dani Pascarella, OneEleven Financial Wellness

Above photo: ©Getty Images, courtesy of OneEleven Financial Wellness

Dani Pascalrella - CFP and Founder of OneEleven Financial WellnessThe concept of financial wellness is often associated with managing your money the right way or having a certain net worth. But this definition leaves out something just as important as the numbers – how your finances impact your mental and physical well-being. At OneEleven Financial Wellness, we are changing that by looking at more than just the numbers and taking a holistic approach to personal finance. Our Wealth Coaches help our members change their relationship with money for good and build healthy spending habits.

According to the APA, money is the #1 cause of stress in America. There is a huge need for apps like OneEleven that can help Americans reduce this stress and get to the root cause of why it’s happening. We’re not alone in these beliefs, Well+Good listed financial wellness apps (including OneEleven) as one of top self-care trends for 2022. This year, it’s predicted that financial wellness will continue to expand as we embrace this new convergence of money, psychology, and technology. Now more than ever, people have strategies at their fingertips to learn effective financial habits and take control of their financial situation.

What Motivated Me to Leave Wall Street and Launch OneEleven

My own money story begins with my mother, who at a very young age had to learn how to support herself financially. At age 16, my mom was living completely on her own in New York City. Despite having massive financial struggles in her early years, she was able to become a homeowner and comfortably retire early – all because she was able to reframe her relationship with money.

This isn’t the norm. We live in a world where socioeconomic status often predicts your future. But seeing this kind of financial transformation firsthand and knowing what is possible, I became deeply motivated to help people manage their finances. After graduating college, I started my career on Wall Street in private banking where I ended up managing money for individuals with $25 million or more in the bank.

Working on Wall Street, I became painfully aware of the wealth gap in America and how hard it is to get good financial guidance if you’re not already rich. The type of financial services available to my private banking clients weren’t accessible to people who needed it the most. Even more, important financial topics are not taught in school. Our education system never taught us how to have an emergency fund or spend in a way that is in line with your values.

I felt that the status quo needed to change so I left on a mission to democratize financial wellness in our country by launching OneEleven. The OneEleven Financial Wellness app gives our members access to 1-on-1 private coaching, custom financial plans (that would otherwise cost them thousands of dollars), educational video lessons, and accountability to stay on track to achieve their goals. Our goal is to make financial wellness as accessible as possible. Our memberships are offered by organizations to their employees at little to no cost, as well as directly to individuals on our website.

Money Advice for Women

• Boost your money knowledge.

Learning about personal finance is so powerful. The knowledge will give you a better understanding of your financial situation and also help you increase your confidence when making financial decisions. There are many ways to do this (podcasts, courses, books, coaching, etc.), but what’s important is you find the method that works best for you. At OneEleven, our clients have access to an entire library of short video lessons where they can learn about money topics in just a few minutes per day. They can also work 1-on-1 with their Wealth Coach to apply what they learn to their personal lives.

• Work on your relationship with money.

The majority of Americans live paycheck to paycheck, but oftentimes this is a result of spending habits more than income. That is why a big part of our approach at OneEleven is helping people to develop healthy spending habits and changing their relationship with money so that they can become financially well. The end result of this can look like a couple of things:

  1. You’ve created a spending plan that is aligned with your personal values. Every dollar you spend is getting you closer to the person you want to become.
  2. You saved up an emergency fund with at least 3-6 months of your living expenses. With this financial insurance, you won’t ever have to fear unexpected expenses.
  3. You feel confident about your financial decisions. This can be achieved by taking the time to learn those money topics that weren’t taught in school.
  4. You have a plan for your future, and you are consistently saving towards those goals. When you are funding your future goals and see that number increase, it is motivating and encourages you to stay on track.
  5. You have little to no financial stress!

By creating a realistic spending plan, building healthy money habits, and investing in your future, you can break the regretful spending cycle, avoid debt, and increase your happiness by feeling confident with your financial situation.

• Start Investing Sooner Rather Than Later.

When it comes to investing, the best time to start is now! Sometimes high-interest credit card debt or a lack of savings may take priority, but the sooner you start investing the better.

Statistically, women live longer than men; the average life expectancy at birth is 79 years for women, 72 years for men (PRB). Additionally, women also earn less because of the pay gap. So, this means we have to do a lot more with a lot less.

The solution is compounding and understanding the time value of money. If you want to be a millionaire by age 65, start saving at age 25 by putting $322 away a month. If you wait to start your retirement savings until 35, you’d need to put away $736 to become a millionaire at age 65. That’s more than double the contribution, just because you waited 10 years.

 

Article by Dani Pascarella, CFP®, Founder of OneEleven Financial Wellness 

Dani is a Certified Financial Planner™ and earned a B.A. and M.A. in International Business from the University of Florida and a M.S. in Journalism from Columbia University. She previously worked on Wall Street where she managed money for ultra-high net worth individuals with at least $25 million in investable assets. While working on Wall Street, Dani became painfully aware of the wealth gap in America and left to democratize financial education in our country by launching OneEleven. In her free time, she loves hanging out with her husband and black lab. Her favorite activities include yoga, boxing, and reading biographies.

Featured Articles, Impact Investing, Sustainable Business

Investing in Women, Impacting the World

By Stella Tai, Praxis Mutual Funds

Above: Stella meeting with representatives from SunCulture, an organization connecting rural farmers with solar power.

 

Stella Tai-Praxis Mutual FundsIn my 15-year career working as a woman in impact investing and its various facets geared towards investing in women, I have learned that communities and families benefit greatly when women thrive economically.

In December 2021, I had the privilege of visiting several organizations in Kenya supported through Praxis Mutual Funds’ commitment to community development investing. This was alongside a visit to my family in my birth country, after five years of being away. This article is a personal reflection on how impact and gender lens investing delivers real-world impacts – and how advisors can help their clients understand those impacts.

Impact investment moves capital to where it’s needed most. This often revolutionizes the lives of women and girls. During my visits, I saw what capital was achieving, on the ground among rural women, many of whom were poor, and on small farms using affordable products developed and customized to meet their needs. This solidified the importance of this work in my mind.

Gender lens investing (GLI) is critical in closing global gaps in access to capital and thereby increasing human capital wealth, education and helping countries achieve their full developmental potential. In a more diverse and equal society, everyone benefits.

Project in Kenya

Many rural women in Kenya face specific and unique challenges such as a lack of easy access to clean water and affordable clean energy. When there are appropriate interventions, these women are placed on the fast track to achieving economic milestones that can propel them and their families into the middle or the upper-middle class.

The organizations I visited were not founded with the primary purpose of helping women, but by evaluating the results of these investments through a gender lens, it becomes clear that the positive effects on the lives of women and girls are disproportionately greater.

SunCulture client Mrs. Ndegwa: Local women farmers are able to access solar-powered farming technology because of SunCulture.

SunCulture – This organization focuses on providing energy access through solar home and irrigation systems. About 65 percent of land in sub-Saharan Africa is tilled, plowed, weeded and watered manually. I met with two industrious women farmers whose lives had been transformed by access to energy.

SunCulture off-grid solar panels and tech provide smallholder farms with reliable lighting, water generation and mobile charging
SunCulture off-grid solar panels and technology provides smallholder farms with reliable lighting and mobile charging.

With access to a water pump for their wells, they could irrigate their farms more efficiently and increase productivity. The energy then led to increased yields and higher incomes for their households, which in turn meant that these women could invest in their children’s educations – creating more opportunities for the future of their families.

BioLite cookstoves provide a safe way to cook food - Praxis Mutual Funds
BioLite cookstoves provide a safe way to cook food, charge electronic devices, and generate light for families in Kenya.

BioLite – BioLite developed a clean energy cookstove and home lighting solar system with USB ports for charging devices like cell phones. They aim to bring electricity to the nearly 600 million people in sub-Saharan Africa who are not connected to the national electricity grid and the hundreds of millions more who live with unreliable connections and are plagued by frequent blackouts.

Investors need to appreciate the benefits these stoves offer women specifically. To meet the domestic needs of their families, many rural women often walk hours to fetch water or carry wood for cooking, which can be arduous and takes time away from a girl’s education or a woman’s economic opportunities. These regionally appropriate innovations not only connect the whole families with electricity, but the stoves allow women to cook more safely and redeem precious time to better themselves educationally, economically and socially.

What Does the Future Hold?

Impact investments with a gender lens are projected to increase over the next decade across all asset classes. In recent years, we’ve seen growing demand from investors to take gender into account when considering impact investing.

Additionally, the projected wealth transfer to women is predicted to increase from about $50 trillion in 2015 to $72 trillion, that is two-thirds of the worlds’ wealth, by 20301. Women investors are more likely to demand increased inclusivity, diversity, and values-aligned investing, which may lead to increased consideration of gender in impact investing.

Gender-lens investing is a field that will continue to grow, considering the increased attention and engagement with the 17 UN Sustainable Development Goals (SDGs)*. SDGs relevant to gender include SDG 5 (gender equity), SDG 10 (reduce inequality), SDG 8 (sustainable economic growth) and SDG 7 (sustainable energy).

The SDGs aim to end poverty, protect the planet and ensure prosperity for all. As more investors and investment companies call for alignment with these goals, gender equity and equality will become areas of greater interest for impact investors.

What Can Financial Advisors Do?

Advisors interested in impact investing that incorporates a gender lens should initiate the conversation. They can open the door to a discussion on a client’s gender lens investing goals by engaging with clients on how they can better align their portfolios or a portion of their portfolios with their values.

Secondly, advisors can familiarize themselves with gender lens investing topics and be ready to engage with the clients, especially women, as their percentage of global wealth continues to grow.

Another option for advisors is to encourage the use of donor advised funds that hold immense opportunities for increasing a client’s impact. DAFs are a powerful tool that allows investors interested in aligning their investment portfolios with their values to make charitable contributions while simultaneously getting tax benefits.

Advisors and/or their clients can take part in insight trips and observe how their funds contribute to improvement in the lives of women and girls. This is a great way for younger people to be inspired at the start of their investment journeys and for established investors to confirm the difference their investments are making in the world.

One of my hopes is that, as an industry, we might build greater collaborations around gender lens investing themes. For example, investment firms, both for-profit and non-profit, and other stakeholders such as government entities interested in gender lens investing can collaborate on sharing information, participating in deals, spurring innovation, building systems of educating clients and thereby accelerating greater amounts of capital flowing into this theme.

The cumulative effect of all these efforts will deliver real impact and will also help investors understand the range of possibilities available on the investing spectrum — from 100 percent philanthropic to 100 percent market-rate returns and everything in between.

How Praxis Approaches Community Development Investing 

By committing approximately 1 percent of its funds to Community Development Investing nationally and internationally, Praxis has further deepened its commitment to GLI. This investment is managed by Calvert Impact Capital, a nonprofit investment firm that makes loans to roughly 100 mission-driven organizations worldwide with high impact social and/or environmental focus such as micro-finance, affordable housing and cooperatives.

As of 2021, the CIC portfolio had impressive gender impact numbers. Women represented:

  • 70% of the end clients of the borrowers.
  • 53% of the borrower staff.
  • 42% senior leadership in borrower organizations.
  • 43% of the board of directors.

Impact investing through a gender lens is an accelerator to gender equity and equality not only in the United States but globally. If we want to effectively give people the tools they need for economic and educational advancements, focusing on raising the economic power of women is a key step in creating lasting change. That is why at Praxis Mutual Funds, we are committed to making real impacts when it comes to gender equity and why we are passionate about showing advisors the effects of gender lens investing.

 

Article by Stella Tai, Stewardship Investing Impact and Analysis Manager

Stella provides primary leadership for the promotion, integration and development of impact investing and reporting. Before joining Praxis, she was assistant vice president of Lending at FINANTA, a Community Development Financial Institution (CDFI) in Philadelphia. Stella has served on the board of Chariots for Hope, a nonprofit supporting a network of eight children’s homes in Kenya, her country of origin. Connect with Stella on LinkedIn.

Footnote:
[1] “Here’s who will benefit the most from the $59 trillion ‘Great Wealth Transfer’”: Bankrate, Sept. 25, 2018
*  In 2015, the UN announced the Sustainable Development Goals as a call to action for countries, governments, funders, and investors to unite to accomplish 17 global goals. These goals recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests. The UN has provided a framework of specific indicators to measure progress and a timeframe to achieve them by 2030, both of which reinforce the urgency and crucial nature of this work.

About Praxis

Praxis Mutual Funds is a leading faith-based, socially responsible family of mutual funds designed to help people and groups integrate their finances with their values. Praxis is the mutual fund family of Everence Financial, a comprehensive faith-based financial services organization helping individuals, organizations and congregations. To learn more, visit praxismutualfunds.com and everence.com, or call 800-348-7468.

Consider the fund’s investment objectives, risks, charges and expenses carefully before you invest. The fund’s prospectus and summary prospectus contain this and other information. Call 800-977-2947 or visit praxismutualfunds.com for a prospectus, which you should read carefully before you invest.

Praxis Mutual Funds are advised by Everence Capital Management and distributed through Foreside Financial Services, LLC, member FINRA. Investment products offered are not FDIC insured, may lose value, and have no bank guarantee.

Energy & Climate, Featured Articles, Food & Farming, Impact Investing, Sustainable Business

Investing in Water Stewardship by Thomas Schumann and Willem Buiter

Investing in Water Stewardship

By Thomas Schumann and Willem Buiter, Thomas Schumann Capital & Columbia University

Scarcity of fresh, clean water will be a defining issue for the 21st century. It will be a major challenge – for many an existential one – even if climate change is addressed effectively. Further global warming will exacerbate freshwater shortages in much of the world, although increasing evaporation and higher average precipitation will benefit some regions. Reduced snowfall, rising sea levels, increased likelihood and severity of extreme weather events will adversely affect the availability and quality of fresh water in many regions. Freshwater scarcity is one of the key dimensions of water risk confronting businesses in every sector of the economy, as captured in the TSC Water Security Index.

Fresh water is a unique resource. It is essential to life, prosperity, and environmental sustainability. Many see it as a gift from God. It is also a limited, scarce resource. Given enough time it is renewable through nature’s hydrologic cycle, or, more expeditiously, through the expenditure of real resources on recycling through treatment and purification. At any given point in time demand outstrips supply and water must be rationed.  Every community faces the challenge of designing a rationing mechanism that is efficient, environmentally sustainable, and just. Markets for physical water and for water rights must play a key role in ensuring efficient and environmentally sustainable water use. The government must ensure an equitable and sustainable allocation of water.

Water is also a private good that can be allocated efficiently using the market mechanism. First, it is “rival in use” (you can’t drink, what I am drinking). Second, it is in many cases quite easily “excludable”: the cost of preventing “free” water consumption is often low. Excludability requires that water consumption is observable and that property rights in water can be enforced. There are issues with the definition and enforcement of surface water rights, that can become acute when a river is shared by two or more nations. Groundwater rights can encounter common access problems. All these issues are surmountable. Water can be priced.

Thomas Schumann Water Security Investor on Fintech.TV
FINTECH TV The Impact:  In this episode Thomas Schumann, a sustainability pioneer and the only expert for Water Security investment and financial products, discusses why the climate crisis is a water crisis, lack of water risk assessment, the global effect of the water crisis and much more.

It will not be possible to achieve a fair, efficient, and sustainable allocation of fresh water unless water is priced in all its uses to reflect its opportunity cost and scarcity value, including any negative environmental externalities.

Making sure that the true social marginal cost of delivering fresh, clean water is charged for agricultural water use is key. Globally, agriculture irrigation accounts for 70% of all freshwater withdrawals. The figure is over 40% in many OECD countries, including the USA.

Agricultural water is frequently provided for free or at heavily subsidized prices. Making farmers pay the full social marginal cost of water will raise the cost of agricultural products, including food and other essentials. This will disproportionately impact low-income households. The government should address these equity issues through income support using fiscal instruments, like a universal basic income.

Household water consumption likewise is often priced well below its social marginal cost. Raising household water prices inflicts hardship on low-income households. Again, fiscal support for low-income households must be forthcoming to address this fairness issue. A second-best solution would be to use a “block tariff”, making the social minimum volume of water available at a low price (or free of charge) but charging the full social marginal cost for water use above the social minimum volume.

The physical integration of water markets is far from complete. In California, agricultural water district rates in June 2021 ranged from $200 – $500 per acre-foot in the southern end of the Central Valley to less than $1.00 per acre-foot in some districts in the northern part of the state. Cross-border freshwater scarcity differences can be even more dramatic – compare the water-abundant UK or the Netherlands to the water-deprived nations in the Middle East and North Africa (MENA).

Transformative projects are underway to deepen integration of physical water markets and reduce interregional price differences in an environmentally sustainable manner. Two examples are sponsored by Thomas Schumann Capital. One is SkyH2O’s Atmospheric Water Generation (AWG), based on a proprietary technology which extracts clean fresh water from the atmosphere. Productive capacity can be located close to the ultimate customers. Two key drivers of financial viability are atmospheric humidity and the cost of energy. The second pathbreaking initiative is Project Greenland which aims to bring the abundant high-quality fresh water contained in the polar icecaps to markets in the MENA region. Its Iceberg Management and Water Extraction Program identifies appropriate free-floating North Atlantic icebergs which are towed to an operational location in the west of Scotland where the ice and water are processed for further transportation to the ultimate MENA consumers.

The higher water prices that are necessary and unavoidable will serve environmental sustainability by discouraging wasteful water usage; they will also boost the financial viability of innovative private sector projects like the two sponsored by Thomas Schumann.

As the integration of the physical water markets progresses, deeper and more competitive spot markets for water rights have developed. Notable examples can be found in California and in Australia. The trading of long-term leases and forward contracts has prompted the creation of a water rights futures market in California. Other water rights derivatives markets are imminent. Properly regulated and supervised these markets for water rights as an asset can improve the intertemporal allocation of water. The water century is here now.

 

Article by Thomas Schumann, Thomas Schumann Capital and Willem Buiter, Columbia University

BIOGRAPHIES:

Thomas Schumann is the founder of Thomas Schumann Capital. He is a sustainability pioneer and expert for Water Security investment and financial products. His birthplace, Frankfurt am Main, Germany’s financial capital, and the 2015 world’s most sustainable city according to the Sustainable Cities Index inspired his path. Thomas’ MTP (Massive Transformative Purpose) is Agenda 2030, “Transforming our World”, specifically United Nations Sustainable Development Goal 6 “Water Security” and 13 “Climate Action”.

Willem Buiter is an independent economic advisor and speaker. He is currently an Adjunct Professor of International and Public Affairs at Columbia University and an Adjunct Senior Fellow at the Council on Foreign Relations. He was Global Chief Economist at Citigroup from 2010 to 2018 and a Special Economic Advisor at Citigroup from 2018 to 2019. Previously, he was Chief Economist and Special Counselor to the President of the European Bank for Reconstruction and Development and an original member of the Monetary Policy Committee of the Bank of England. He was the Juan T. Trippe Professor of International Economics at Yale University and has also held professorships at the London School of Economics and Cambridge University. He is the author of 78 refereed articles in professional journals and seven books.” He is an advisor/consultant to Thomas Schumann Capital.

Energy & Climate, Featured Articles, Impact Investing, Sustainable Business

The Role Investors Play in Addressing Global Water Challenges by Suleyman Saleem Calvert Research and Mgmt

The Role Investors Play in Addressing Global Water Challenges

By Suleyman Saleem, Calvert Research and Management

(Above photo credit: Getty Images, courtesy of Calvert Research and Management)

 

Suleyman Saleen Calvert Research and MgmtResponsible investors seek the potential for long-term value creation and positive impact throughout the global capital markets. In doing so, asset managers like Calvert Research and Management look to invest in companies and other issuers that balance the needs of financial and nonfinancial stakeholders as well as demonstrate a commitment to the global commons and to the rights of individuals and communities. Climate change has been a key investment strategy focus, as more investors subscribe to the overwhelming conclusion of climate scientists that the Earth’s climate is warming, and human activity is the primary driver of this warming.

Amid all of the key factors related to climate change, water stands out as the most nuanced – it is both a symptom and a cure. Higher atmospheric temperatures are one of the primary culprits of climate change, causing the expansion of sea water and melting of polar ice, which are projected to raise global sea levels by 0.26-0.77 meters by 2100 in a 1.5-degree scenario and even higher in a 2-degree scenario (note: we are currently on a path above 2 degrees).

In certain regions, water scarcity will likely continue to emerge as a threat to daily life. Different regions face different problems such as access to clean drinking water and adequate wastewater treatment in more agricultural regions and infrastructure and water distribution challenges in cities. Similarly, companies face their own water-related challenges based on what they produce and where they are located. But water also has some of the greatest potential to mitigate the effects of climate change by decarbonizing power generation, industry and transport – which, in total, comprise over 65% of global greenhouse gas emissions.

This naturally leads to the question of the role companies and investors can play. Companies that are leaders in water efficiency and water reuse practices as well as companies offering innovative solutions to global water challenges may be in position to outperform their competition over the long term. Investors can play their parts by allocating capital to companies equipped to meet these challenges. We believe that driving capital to responsible companies in the water industry will drive more investment in solutions to global water challenges.

Ways to Look at Water

The reality of water scarcity is that stewardship is a financially material issue for many industries. Water is essential for natural resource inputs along manufacturing supply chains; negative impacts on scarce water resources can influence a company’s social license to operate and can impact consumer preferences.

A multipronged approach to investing in water is needed to actively address global water challenges as well as to ultimately balance the risk and opportunity. Our ESG research framework identifies water as a scarce resource for the vast majority of the industries that comprise the global economy, with a particular focus on companies that limit their own usage or that of others.

Four key areas of focus are:

  • Water utilities and distributors: Responsibly deliver and provide clean water at affordable rates, which we view as essential for economic growth and development.
  • Water technology: Have proven or emerging technologies that test, monitor or improve the quality of water, or address the efficient use of water, helping reduce consumption globally.
  • Water infrastructure: Are addressing the growing and urgent need to invest in the rehabilitation of aging infrastructure or expand infrastructure in order to deliver clean water to communities and drive economic growth.
  • Solution providers: Are leading their peers in water efficiency and reuse practices in the most water-intensive industries, effectively reducing overall water demand.

Companies that are low in water intensity and have implemented closed-loop systems, such as those in health care and technology services, may be in better short- and long-term positions to limit water usage. Our approach to solution providers is grounded in understanding the impacts of technology, infrastructure and services limiting the use of our most precious natural resources.

Within this universe of companies, it’s also important to consider water usage leaders that provide solutions to other issues. Companies mining metals such as copper and lithium are critical to electrification but often operate in water-stressed regions such as South America and Southeast Asia.  Instead of avoiding companies exposed to those regions, we have found many of these companies understand their geographic predicaments and have responded by implementing groundbreaking desalinization and solution mining techniques that close the loop.

Finally, responsible investors can play a role in water stewardship efforts through engagement. One critical need is for better disclosure on industry-specific water impacts. Industries’ impacts on their local watersheds vary. Some industries consume vast amounts of water, while other industries’ water impacts come from the conditions of water discharge. Understanding the specific impacts of a company on the environment and the communities it operates in is dependent on better company disclosure. Active engagement directly with company management is one way to advocate for more transparency and consistency of this information.

 

Article by Suleyman Saleem, Vice President and ESG senior research analyst for Calvert Research and Management, which specializes in responsible and sustainable investing across global capital markets. He is responsible for environmental, social and governance (ESG) research coverage of the industrials and materials sectors. He joined Calvert in 2019.

Suley began his career in the investment management industry in 2010. Before joining Calvert, he was a senior equity research associate at BMO Capital Markets and Susquehanna Financial Group. Previously, he was a research analyst at Episteme Capital Partners.

Suley earned a B.A. in economics and history from the University of Pennsylvania

 

The views expressed are those of Suleyman Saleem and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Calvert disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Calvert are based on many factors, may not be relied upon as an indication of trading intent.

Investing involves risk including the risk of loss. There is no guarantee that any investment strategy, including those with an ESG focus, will work under all market conditions. Investors should evaluate their ability to invest for the long-term, especially during periods of downturn in the market.

Calvert Research and Management is part of Morgan Stanley Investment Management, the asset management division of Morgan Stanley.

Energy & Climate, Featured Articles, Impact Investing, Sustainable Business

We Cant Afford Polluted Water by Gloria Reuben Waterkeeper Alliance

We Can’t Afford Polluted Water

By Gloria Reuben, Waterkeeper Alliance

(Above photo credit: Unsplash – Tim Mossholder)

Gloria Reuben Waterkeeper AllianceFor far too long, protections for clean water and other environmental regulations have been framed as an impediment to a strong economy. When in reality, the opposite is true. Water is the foundation of a stable and growing economy and thriving communities. Protecting everyone’s right to clean water is a moral obligation. And it’s also a financial necessity. We simply can’t afford polluted water.

Defending our shared resources from pollution means that businesses and municipalities need to invest in smart water management strategies which hinge on reliable infrastructure, policy, and regulation. Thankfully, there has been great progress with the signing of a $1 trillion infrastructure bill last November. However, the $55 billion set aside for drinking water, wastewater, and stormwater projects doesn’t fully address the U.S. Environmental Protection Agency’s (EPA) projections of more than $800 billion in combined funding needs. The short-term costs are daunting, yet they pale in comparison to the long-term costs of pollution and cleanups, not to mention the countless lost opportunities therein.

As an example, there are over 1,300 Superfund remedial sites in the United States. According to a 2015 EPA report, over 50 million Americans live within three miles of a Superfund site. Nonetheless, the program has been relatively successful and helped right a lot of wrongs by cleaning up and remediating a lot of toxic sites. For signs of progress, look no further than to the Whole Foods supermarket on the shores of the Gowanus Canal in Brooklyn, or to the herd of American bison roaming the Rocky Mountain Arsenal in Denver. Both of these Superfund sites prove that cleanups work. But surely, preventing these areas from becoming toxic wastelands that require billions of dollars in cleanup would have been the more sound investment.

Until somewhat recently, these remediation projects were funded by a trust paid for from a tax on gasoline. Since 2000, however, the American taxpayer has largely been responsible for the $21 billion in costs. And that is just for the cleanup. It says nothing to the deleterious effects these toxic sites have on property value or, more importantly, people’s health outcomes and the related costs. According to researchers at Kansas State University, freshwater pollution from nitrogen and phosphorus alone costs taxpayers over $4 billion a year.

Hudson-River-NY-Waterkeeper-Alliance
Hudson River, New York; Waterkeeper Alliance

When it was passed 50 years ago, the Clean Water Act was intended to solve a lot of these problems. However, it continues to be weakened by a lack of enforcement and is often skirted by polluters. A common refrain is that it’s too expensive to be compliant, and that these types of environmental regulations are akin to red tape choking out business. But, what’s rarely mentioned are the lost opportunities related to the businesses that will never be created on account of pollution. Industries like tourism, recreation, agriculture, fishing, and more rely on clean water.

Towns and cities should be tripping over themselves to have the cleanest water and be as environmentally friendly as possible. It would attract more business, as well as more people. That is what is happening in Buffalo, New York, where tens of millions of dollars were spent as part of the Great Lakes Restoration Initiative. Since that time, the city has seen a huge uptick in water-based recreation, along with several new residential buildings and commercial developments, including a brewery. They are even seeing some population growth. Needless to say, people don’t want to live in a polluted place.

Businesses, too, can benefit from investing in clean water and the environment, as corporate stewardship can be a powerful recruiting tool. According to an IBM survey from 2021, over 70 percent of job seekers hope to work for an environmentally sustainable company. Conversely, a reputation built for years can be wiped away immediately if the company is seen as jeopardizing people’s right to clean water.

When viewed through the lens of environmental justice, it is almost impossible to calculate the costs of pollution. That’s because contaminated water and toxic waste are not just bad for one’s health, they are also bad for one’s potential. It’s difficult to precisely quantify the opportunities lost to a life hampered by pollution. However, it’s easy to say that a young child drinking unsafe water and breathing polluted air will have a harder time growing up to become a leader in science, or discover a life-saving medicine. In this way, pollution not only robs the individual of their own fulfillment, it also robs the rest of us from the contributions that they could have made.

Knowing all of this, we must view environmental regulations and other forms of stewardship as crucial to a strong and just economy. Infrastructure must be vigorously funded as an investment that will help American citizens and their businesses. Furthermore, laws protecting the environment should also be seen as protecting our bottom line. A fully enforced Clean Water Act, as an example, won’t hurt businesses. On the contrary, these types of laws may very well end up fostering all sorts of new job creation, while also saving the taxpayer a lot of money.

A healthy economy and a healthy environment are not mutually exclusive. In fact, both will thrive when they work in concert. Our economy, and nearly every aspect of our lives, need clean water to thrive and blossom. We can continue to ignore this vital connection…. But it will cost us.

Article by Gloria Reuben, president of Waterkeeper Alliance, an organization that strengthens and grows a global network of grassroots leaders protecting everyone’s right to clean water.

  

Growing up in Toronto, Canada, Gloria Reuben distinctly remembers when it was forbidden to wade into Lake Ontario because of toxicity and high bacteria levels — it’s an experience a young child may not fully comprehend but can never forget. Now, decades later, she lives a few minutes from the mighty Atlantic Ocean and is filled with gratitude every time she visits its shores for its cleansing presence, primal rhythm, and healing power. Whether day or night, each visit to the water anchors Gloria in her commitment to do whatever she can to protect drinkable, swimmable, fishable waterways for generations to come.

As president of Waterkeeper Alliance, Gloria represents more than 350 Waterkeeper groups on six continents and amplifies our organizational vision for drinkable, fishable, swimmable water. The Waterkeeper movement’s clean water warriors are on the front lines of our global water crisis, fighting for the future of the planet, the world’s great water sources, and the communities surrounding them.

An actress and social activist, Reuben served as a Trustee with Waterkeeper Alliance from 2007 to 2010, before becoming an advisor to Vice President Al Gore’s environmental organization, The Climate Reality Project. Reuben previously served on the Advisory Council of the National Wildlife Federation and the Leadership Council for the Natural Resources Defense Council.

In addition to her life’s work as an environmental champion, Reuben is an actress, singer, and published author whose credits in television include ER, Raising the Bar, Marvel TV’s Cloak & Dagger, City on a Hill, and Mr. Robot. She has also starred in films, including Lincoln, Admission, and Reasonable Doubt. In 2007, Gloria won the Lucille Lortel Award for Outstanding Lead Actress for her portrayal of Condoleezza Rice in David Hare’s play, Stuff Happens. Gloria’s first nonfiction book, My Brothers’ Keeper. Two Brothers. Loved. and Lost, was published in November 2019.

 

Note to Reader: This is GreenMoney’s third article from Waterkeeper Alliance, here is their 2020 article by Mary Beth Postman on The Future of Water.

Energy & Climate, Featured Articles, Food & Farming, Impact Investing, Sustainable Business

Navigating the Canals of Water Investing by Garvin Jabusch and Betsy Moszeter Green Alpha Advisors

Navigating the Canals of Water Investing

By Garvin Jabusch and Betsy Moszeter, Green Alpha Advisors

Garvin Jabusch and Betsy Moszeter of Green Alpha AdvisorsWater is elemental. Crucial for life as we know it. Finite in supply—particularly fresh water—it is chronically degraded by pesticides, herbicides, fossil fuels operations, discarded plastics, and countless other contaminants. Add it all up and it seems like the perfect combination of inelastic demand and diminishing supply. In fact, 2.2 billion people around the world do not have safely-managed drinking water services and 4.2 billion people don’t have safely-managed sanitation services. In the U.S. alone, fully one in six gallons of the fresh water we produce is wasted through old, leaky, deteriorating infrastructure, equaling 6 billion gallons of treated water wasted every single day before it has a chance to be consumed or otherwise put to productive use.

The easy math: we need more, and better access to, safe fresh water. It seems very straightforward to invest in freshwater solutions and enjoy the returns. But, invest in what, exactly?

Time to Do Your Homework

Key to deciding what to invest in is discerning what not to invest in, or, at least, what is more or less likely to give us the market exposures we had in mind. So, tonight’s homework assignment: scour the list of water-themed ETFs available on any given brokerage platform. Look at the underlying holdings. You will find companies that produce water infrastructure…but almost none of it is for recycled or recyclable water projects. You will see companies in water ETFs’ 10 Largest Holdings lists that have little water exposure at all, such as a firm that garners only six percent of its revenues from water testing and 94 percent from entirely different industries and activities. Keep looking, and you will find water utilities with no sustainability, stewardship, or other related efforts behind their sale of water. They are in charge of the earth’s most precious resource while failing to demonstrate good stewardship of it. In fact, many water-themed ETFs hold utilities that derive a material portion of their revenue from selling water to fracking companies.

As is so often the case in ESG investing, it pays to do your homework, and to know that your fund manager is doing theirs, too.

The Value of Water: A Growing, Global Risk by The World Economic Forum (WEF) highlighted the critical need for investors to take action on the water shortage. This striking report outlines a comprehensive list of risks and opportunities related to freshwater scarcity across all industries globally. In fact, according to WEF’s analysis, water scarcity will not just slow economic growth and exacerbate social inequalities, but is one of the greatest risks to global stability. Activities like selling water for use in fracking fluid will not decrease our economy’s freshwater risks.

The Value of Water report concludes that:  Water security has increased in importance for investors; private sector actors have a vital role to play in securing water supplies through investments in infrastructure and technology solutions; a growing number of opportunities exist to invest in water-related projects that have positive environmental and social outcomes.

It is time for investors to pay attention and consider where their money can do the greatest good when it comes to one of our most precious resources: fresh water. Advisors should resist the temptation to “blanket” buy a water fund or ETF and call it good enough. Rather, in order to navigate the complex and increasingly urgent issue of freshwater scarcity, they should consider if what they buy are genuine, significant, sustainable water solutions that help to mitigate and to assist in adapting to the real-world problems confronting us. This is important in terms of sending market signals that only true solutions have value, and in increasing our probabilities of competitive investment returns. Inadequate or false solutions will not ultimately hold value.

Never Stop Questioning for a Better Future

Clearly one purchases a mutual fund or ETF because they have faith in their professional manager, and because they may not have the time or inclination to do the research and pick stocks to determine what the constituents of a portfolio should be. However, before buying a fund, performing a small amount of homework on the largest holdings list can go a long way to ensure the fund’s investment committee has the same vision of the future as you and/or your clients. Where investments are made – where capital flows – defines what the economy is, so it is imperative to invest assets in the future we want to see unfold. By looking at the largest holdings list, an investor can do quick research on those few companies to evaluate what each is doing to earn their revenues. What a company gets paid to do is tantamount to the company’s reasons for existing.

Investors should ask: Is there a clear market need for the product/service they are delivering? Does this investment solve that problem? How do we know if the solution works? Is the solution scalable and sustainable? How high quality is the management team’s track record with similar activities? Are they aligned financially to succeed – meaning are their incentives linked directly to performance of that investment over time? This kind of inquiry can help an investor understand exactly what a company does to earn its money.

Water scarcity is a pressing global issue that is not going away, and is, in fact, getting appreciably worse by the day. But—investable solutions exist. By engaging in some prudent research, we can ensure that our money flows toward solutions seeking to create a better and brighter future.

 

Article by Garvin Jabusch, Chief Investment Officer for Green Alpha Advisors and Betsy Moszeter, Chief Distribution and Sales Officer and a Portfolio Manager Green Alpha Advisors.

BIOGRAPHIES:

Garvin Jabusch is the Chief Investment Officer for Green Alpha Advisors, where he leads investment research; conducts macroeconomic, scientific, and technological analysis; and develops and communicates the Next Economy investment approach.

Garvin previously worked at Forward Management, LLC where he managed the Sierra Club Stock Fund and the Sierra Club Equity Income Fund. Prior to that he was Vice President of Strategic Services at Morgan Stanley, where he contributed to such projects as the integration of European acquisitions and the sale of Morgan Stanley Online. He also served as a product manager at Morgan Stanley Online, managing the launches of wireless trading and after-hours trading for the firm’s clients. After-hours trading on MarketXT marked the first time retail investors in the U.S. had the opportunity to trade in the after-close markets. His other experience includes research and analysis, trading and mutual fund sales. Earlier, Garvin studied in the Ph.D. program in physical anthropology and archeology for five years at the University of Utah. Garvin was a field Director for the American Expedition to Petra, Jordan for two excavation seasons, and served as archeologist and crew chief at many sites in the American West. Other jobs held by Garvin have included EMT and whitewater rafting guide.

Betsy Moszeter is the Chief Distribution and Sales Officer, and a Portfolio Manager for Green Alpha Advisors. She serves as the lead analyst on a portion of Green Alpha’s investable universe and is the lead PM on Green Alpha’s portfolio strategies that overtly focus on diversity and social inclusion issues in addition to the sustainability and innovations on which all Green Alpha portfolios are centered.

She first became acquainted with Green Alpha through her work at First Affirmative Financial Network, LLC. As a core part of her job, Betsy became familiar with many sustainability-oriented investment options and was particularly impressed by Green Alpha’s rigorous research approach. As the SVP and a Managing Member of First Affirmative, Betsy was responsible for building the firm’s third-party platform business and institutional account investment capabilities. Prior to First Affirmative, Betsy was the Chief Operating Officer and Chief Compliance Officer of TAMRO Capital Partners, LLC in Alexandria, VA. She participated in all aspects of the firm’s growth from $200 million to $2 billion, growing the business to include five mutual funds, a collective investment trust fund (CIT), institutional accounts, and separate accounts for high-net-worth clients, as well as separately managed wrap accounts and UMA programs where TAMRO served as an asset manager. She began her investment management career at Harbor Capital Management in Boston, MA, where she did everything from portfolio administration to new client due diligence meetings, attribution analysis, earnings calls, trading support, and FX communications.

Energy & Climate, Featured Articles, Food & Farming, Impact Investing, Sustainable Business

How Crypto Currency is Bringing Ownership to the People.

How Crypto Currency is Bringing Ownership to the People

By David Weinstein, Dana Investment Advisors

David Weinstein of Dana Investment Advisors.2Many of us were sitting around the dinner table at Thanksgiving or Christmas and someone youngish started talking about blockchain cryptography. They probably called it something different though: “crypto,” “bitcoin,” maybe something about a “doge”-coin? Breathless talk of massive returns may have followed. A cult leader would be impressed by the level of evangelism.

Inevitably a wiser individual asks some variation of the question: “But what is it and why do I need it?”

“It’s digital gold.”

“It’s replacing the U.S. dollar.”

“It’s a tool for the decentralization of corrupt centralized power structures in a post-capitalist world.”

Ok. Blockchain cryptography (a.k.a. crypto) may be some or none of those things, but here’s why I think it matters – a lot.

Blockchain Cryptography Brings Ownership to the People

Blockchain cryptography can put an explicit PRICE – a value – on nearly any asset. It can do this because the combination of blockchain databases and cryptography enables the creation of tokens (like bitcoin, but there are thousands more) that embed inalienable rights. These tokens are secure, tradeable 24/7/365, and most importantly, verifiably OWNED.

When you put an explicit price on something it starts to matter in a very different way. Suddenly you own something worth X dollars and you can sell (or buy) it at will. Ownership is the ultimate incentive and the simplest explanation for crypto’s explosive growth and adoption (now a $2 trillion asset class). It brings ownership to the People.

Economic systems have evolved to proliferate asset ownership and blockchain cryptography is the latest revolution. We’ve transitioned from medieval titles and landed gentry to 20th century home ownership to 401ks and ETFs – and now to digital tokens. Each step along the way brought the possibility of ownership closer to the People.

What if Uber paid its drivers in Uber tokens that were the equivalent of Uber stock? What if they did the same for customer loyalty points? Remember, these Uber tokens would have a verifiable dollar value (the equivalent of Uber’s stock price). Would drivers eschew working for Lyft when they became owners of Uber? Would customers immediately see the value in heretofore nebulous loyalty points when paid in Uber tokens, and isn’t this a great incentive for them to use Uber instead of Lyft or DoorDash ?

During its latest earnings call, Starbucks talked about tokenizing its “Stars” loyalty program. How many other loyalty programs would benefit from an easily valued and tradeable token? Credit cards, hotels, airlines and retailers come to mind. No more logging in to an opaque rewards system and hoping that you have enough points for that flight to Ireland, or that hotel in Orlando. No more lingering suspicions that you were taken advantage of. The price is the price – just go check it on Coinbase (note: this hasn’t happened yet).

Not happy with the value of your American Express tokens? Go trade them for Chase tokens on an exchange in an instant. Accrued a bunch of Hilton tokens but need to stay at a Hyatt? Trade them for Hyatt tokens. Simply want to cash out? You can do it in an instant. If Marriott tokenized its rewards wouldn’t Hilton have to follow? What customer wouldn’t want such an easily verifiable value proposition?

A simple framework to think about blockchain-based tokenization is to imagine that most major assets traded on exchanges like stocks. Your house, your car, your ownership stake in a private business. The price is clear, the fees are low, and the transaction hassle is minimal. Jettison the realtors, auto dealerships and other middlemen.

Blockchain Cryptography Is Eating Financial Markets

Financial markets facilitate the ownership, transfer and pricing of assets in a secure manner. Blockchain technology and cryptography are tailor-made for this purpose.

We’ve built a labyrinth of financial markets with countless entrenched participants – banks, exchanges, governmental entities, payment networks, complicated remittance networks, countless intermediaries and the list goes on. We generally did this for the right reasons, to ensure trust, provide liquidity (i.e. good pricing), expand asset ownership and grow innovative economies – to make everyone better off.

Blockchain cryptography will do most of this financial market stuff better – i.e. more efficiently and for a broader group of people.

Why shouldn’t I be able to trade stocks any time I want – early morning, midnight, on the weekends? The world doesn’t stop. The reality is that trading during non-market hours is sort of available now. You just need a bunch of money, a close relationship with an investment bank, and the willingness to pay a hefty commission. Crypto markets have traded 24/7/365 for several years and, while not perfect, have largely done the job they were designed for.

Why does a worker in the U.S. pay a 5% fee to wire money home to a different country? Why do payment networks charge 3x (or more) their domestic fees to process cross-border transactions?

Legacy financial markets are messy. Different participants use different technologies. Systems don’t “talk” to one another very easily. Everyone has their own database of record and reconciling those databases is half of the problem (and the reason transaction settlement often takes days).

With blockchain cryptography, the blockchain is the database, cryptography is the security, and the token is native to the digital world and therefore easily transferable as “bits.” Moving digital money or assets will be cheap, fast and painless.

The “eating” of markets will be a gradual process and it doesn’t mean that J.P. Morgan or Mastercard is going out of business. It will, however, create opportunities for crypto-forward companies.

The Future of Investing in Crypto-Related Markets

Companies building crypto-related businesses are already issuing tokens instead of traditional stock and many of these tokens have rights to cash flow and/or governance. These crypto companies are very different from the current crop of public equities. They are often early stage, internationally-based and/or creating entirely new and disruptive business models.

With tokens, almost any investor can access opportunities that until now were primarily the domain of venture capital or private equity. This is happening at the individual level and increasingly will be available through institutional investment strategies (my firm, Dana Investment Advisors, is beginning to offer separate accounts for crypto-tokens). Venture capital has been the most lucrative asset class of the last few decades but blockchain-based tokens could take that mantle in the decade to come.

With great potential, however, comes greater risk. Crypto’s trajectory as an asset class will be full of twists, turns, dips and peaks. The reality today is that many tokens, even some of the most valuable, are probably worth close to nothing. The ecosystem remains a hotbed for get-rich-quick schemes and outright fraud. Future regulation is uncertain and will have a significant impact.

Notwithstanding, there are valuable businesses being built in blockchain infrastructure, finance, commerce, gaming and entertainment – and more are on the way. It strikes me as rare to be living through the creation of an asset class as innovative and potentially widespread as crypto-tokens. It’s definitely worth your attention.

 

Article by David Weinstein, JD, Senior Vice President, and Portfolio Manager. David joined Dana Investment Advisors in May 2013. He is the Lead Portfolio Manager for Dana’s Unconstrained Strategy and co-Portfolio Manager of Dana’s Social ESG, Catholic ESG and Large Cap Equity Strategies.

He graduated from the University of Notre Dame with an Honors Program degree in Political Science in 2005. David graduated cum laude from the University of Pittsburgh School of Law in 2008 and served as Managing Editor of the Law Review. He returned to Notre Dame and received his MBA in Investments in 2012, graduating magna cum laude.

 

Note to Reader: This article is the exclusive opinion of the writer and not necessarily those of the GreenMoney Journal, greenmoney.com or its ownership.

Featured Articles, Impact Investing

How Millennials Can Make an Impact With Their Money by Lana Khabarova of SustainFi

How Millennials Can Make an Impact with Their Money

By Lana Khabarova, SustainFi

Lana Khabarova of SustainFiMore than any other group, millennials are keen to make an impact with their money. According to a 2021 survey by Morgan Stanley, 99 percent of millennials surveyed were interested in sustainable investing, an all-time high. Interest in sustainability persisted despite the COVID-19 pandemic and climate change is the key focus. The emergence of environmental, social, and governance (ESG) investing is also growing, though the acronym ESG is still largely relevant only to institutional investors and unknown among many retail investors.

In spite of this interest in sustainable finance, confusion about sustainable investing prevails. First, many investors – as many as 70 percent, according to Morgan Stanley – continue to believe that there is a trade-off between “green” investing and returns, despite ample evidence to the contrary. Second, many financial institutions and fintech startups, including brokers, robo-advisors, and banks, have caught on to the ESG trend and launched new products. However, having so many sustainable, socially responsible, or green products is very confusing, especially when the differences between them are not clearly explained. One of our goals at SustainFi is to demystify sustainable and ESG investing for retail investors.

So what can millennials do to make more of an impact with their finances? They should start by looking at how they invest their savings and which financial institutions they have relationships with.

What Can Millennials Do to Invest Sustainably?

• Funds and Stocks

First, many millennials say that they care a lot about climate change and try to be more sustainable in everyday life. For example, they go on a plant-based diet or get solar panels or buy electric cars. Yet many of them don’t know how their 401(k) or IRA is invested. By default, many 401(k)s are in target-date mutual funds that invest in fossil fuels, which may conflict with the 401(k)-holder’s goal to be more sustainable.

So, millennials (and other groups!) who want to be more sustainable should take a look at how their money is invested. It’s easy to look up the holdings of mutual funds or exchange-traded funds (ETFs). For those investors who don’t want to own fossil fuel stocks at all, there is a fund screener called Fossil Free Funds.

We are also seeing a lot of interest in investing in clean energy and cleantech, which probably started with Tesla’s meteoric rise. Indeed, investing in “good” sectors may be more impactful than simply avoiding “bad” sectors. There are multiple funds that invest in renewables, such as the iShares Global Clean Energy ETFs, though many investors prefer picking individual stocks.

Other options include environmental, social, and governance (ESG) mutual funds, which add social and governance metrics to the investment selection process. Although there has been a lot of controversy about how ESG metrics are calculated and whether they even matter, ESG funds have been very popular among institutional investors. They are also finding their way to retail investors through robo-advisor portfolios.

• Robo-Advisors

Robo-advisors are automated financial advisors that rely on algorithms to create portfolios suitable for investors’ goals, such as risk tolerance and years left until retirement. There are now over ten robo-advisors marketing sustainable, socially responsible, ESG or impact portfolio options. Most of these portfolios invest in ESG funds from asset managers like BlackRock.

It’s an easy way for beginners to get started with sustainable investing, and it’s good to see so many options. Robo-advisors offering ESG portfolios include Betterment (which has three impact portfolios), Wealthfront, Acorns, Personal Capital, and many more. Even mainstream financial institutions like E*TRADE and Goldman Sachs Marcus Invest have sustainable offerings. Fossil-fuel-free options are also available.

• Greener Crypto

Second, investing in crypto, though risky, has been incredibly popular among all demographic groups of late, though millennials and Gen Z members dominate. At the same time, most popular cryptos including Bitcoin, Ethereum, and Dogecoin, are very energy-intensive to mine, so owning a lot of these cryptos is not exactly climate-friendly. Even if crypto mining is powered by renewables, it means that renewable energy is not being used for some other purpose (like heating homes.) So millennials who are focused on sustainability should know the difference between energy-intensive cryptos like Bitcoin and Dogecoin, and ones that are not energy-intensive, like Cardano and Nano. Some crypto investors are even buying carbon offsets to offset the carbon footprint of their crypto wallets.

• Neobanks

Third, we are seeing an explosion of green neobanks that target millennials who care what their money is funding. Traditional financial institutions have always funded the oil and gas industry. “Greener” fintechs have emerged as a response to that.

The best-known green neobank, Aspiration, has been around for years, but 2021 saw the launches of Ando Money, Climate First, and Atmos Financial. All of these promise to not use deposits to fund fossil fuels and some will even invest your money in green projects. Aspiration has recently launched a credit card that plants trees when customers spend, too.

Now, switching banks is not very convenient and a lot of people will never go down that route no matter what. Many startups are still working on things like customer service, but the offerings are definitely improving. Customers can get perks like high APYs and cash back. As a bonus, many of these institutions are also certified B Corps or members of the Global Alliance for Banking on Values (GABV).

As millennials’ interest in sustainability and climate change has grown, there are more green finance options than ever before. Pretty much anyone can find investments or banking options that suit their values and help them make an impact.

 

Article by Lana Khabarova is the Founder of SustainFi, a personal finance site that connects investors who want to make an impact with the right products and services.

Energy & Climate, Featured Articles, Impact Investing, Sustainable Business

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