Category: November 2015 – Women & Investing

Assets Pledged to Fossil Fuel Divestment Surpass $2.6 Trillion

Global Divest-Invest Coalition Announces Major Commitments as World Leaders Gather at UN; Thousands of new commitments represent a 50-fold increase in one year

The movement to divest from fossil fuels and invest in renewable energy and climate solutions has exploded, growing 50-fold in just one year and topping $2.6 trillion in assets under management by institutions and individuals committed to divestment, according to a new analysis released in late September 2015.

More than 400 institutions and 2,000 individuals have pledged to divest from fossil fuels, the report from Arabella Advisors found. These commitments include governments and investors from 43 countries and multiple sectors, including pension funds, health, education, philanthropy, faith, entertainment, climate justice and municipalities.

Recent notable commitments include the Norway Pension Fund, the Canadian Medical Association, the World Council of Churches, the University of California system, the Children’s Investment Fund Foundation, the KR Foundation, Leonardo DiCaprio and the Leonardo DiCaprio Foundation.

“Climate change is severely impacting the health of our planet and all of its inhabitants, and we must transition to a clean energy economy that does not rely on fossil fuels, the main driver of this global problem,” said actor and environmentalist Leonardo DiCaprio, who announced his commitment at the September press conference. “After looking into the growing movement to divest from fossil fuels and invest in climate solutions, I was convinced to make the pledge on behalf of myself and the Leonardo DiCaprio Foundation. Now is the time to divest and invest to let our world leaders know that we, as individuals and institutions, are taking action to address climate change, and we expect them to do their part this December in Paris at the U.N. climate talks.”

Recent financial analyses from HSBC, Citigroup, Mercer, Bank of England and the International Energy Agency all indicate a significant, quantifiable risk to portfolios exposed to fossil fuel assets.

“The Arabella Report shows that more and more investors are reducing their carbon risk today and diversifying their portfolios with the goal to harness the upside in the sustainable clean growth industries of the future,” said Thomas Van Dyck, Managing Director-Financial Advisor of SRI Wealth Management Group. “That underscores what I see every day as a financial advisor–that the demand for fossil-free investment products is increasing.”

“Investing at scale in clean, efficient power offers one of the clearest, no regret choices ever presented to human progress,” said Christiana Figueres, executive secretary of the UNFCCC, in a video statement at a press conference in New York today unveiling the Arabella Advisors report. The United Nations climate chief has been advocating for the shift of investment flows from fossil fuels to climate solutions to meet the $1-trillion-a-year need for clean energy investment – and to create momentum ahead of the upcoming international climate negotiations in Paris this December.

“This shift in investment flows is especially critical for under-served communities and people living in poverty, who are disproportionately affected by the negative impacts of climate change,” said Rev. Lennox Yearwood, Jr., president and CEO of Hip Hop Caucus. “Climate change hits the poor first and worst. It is a racial and economic justice issue that must be addressed with solutions like the Divest-Invest movement to empower these communities, eliminate health disparities and drive the shift to a clean energy economy.”

“If these numbers tell us anything, it’s that the divestment movement is catching fire,” said May Boeve, Executive Director of 350.org. “Since starting on the campuses of a few colleges in the U.S., this movement has struck a chord with people across the world who care about climate change, and convinced some of the largest and most influential institutions in the world to begin pulling their money out of climate destruction. That makes me hopeful for our future, and it’s sending a clear message to world leaders as they head intoParis: It’s time for them to follow suit, and divest our governments from fossil fuel companies too.”

“Pope Francis told us this past June in his encyclical that the earth is a gift from God and that we are responsible for protecting it,” said the Rev. Fletcher Harper, executive director of GreenFaith. “The pace of fossil fuel divestment within faith communities worldwide, combined with the growing commitment to investing in clean energy, particularly for the world’s poor, show that the world’s spiritual and moral leaders grasp the urgency of the climate crisis and are ready to act.”

Divestment strategies vary among participants in the movement. Some have divested from all fossil fuel companies both large and small; others are beginning with coal and/or tar sands. The Arabella Advisors report provides details on commitments made to date.

For more information visit- www.divestinvest.org

NGO Ranks 155 Companies Across 20 Industries Revealing Significant Supply Chain, ESG Risks for Major Brands

Report Identifies Opportunities for Transparency, Social Responsibility Impact

Most U.S. large cap companies are still lagging in efforts to affect positive change with regard to global humanitarian issues, according to research released in September 2015 by a leading non-profit organization, Responsible Sourcing Network (RSN). However, there are also high performers, which are typically in industries where companies collaborate, proving that the right policies and practices yield increased mineral traceability and in-region benefits.

Mining the Disclosures 2015: An Investor Guide to Conflict Minerals Reporting in Year Two is RSN’s deep analysis of U.S. Securities and Exchange Commission (SEC) filings and other publicly available documents. The publication, the second by RSN to compare social performance regarding conflict minerals, ranks 155 individual companies across 20 industry groups.

The report can be downloaded here-
http://www.sourcingnetwork.org/mining-the-disclosures

“The report pioneers performance indicators for investors and stakeholders regarding a companies’ efforts to make positive social impact,” said Patricia Jurewicz, founder and Director of RSN and co-author of the report. “Too often there is a huge gap between what a company says it’s doing to be socially responsible and its real actions.”

Among the Research Findings:

Despite some claims that Section 1502 of the Dodd-Frank Act is a failure and is inherently impossible to implement, leading companies are proving that it’s possible to thoroughly trace the source of raw materials and declare their products “conflict-free.” Most of the original 51 sample companies listed in last year’s report achieved higher scores this year.

The best performers have been subjected to the most public/investor scrutiny, while the worst performers have been subjected to the least scrutiny.

Split industries, such as automobile manufacturers and energy services, show potential for collaboration. Following the model of the IT industry, which founded the conflict-free smelter program (CFSP), low-performing companies can learn how high-scorers in their own industry are successfully tackling this issue.

Traceability and responsible sourcing are a good investment; conflict minerals are only the tip of the iceberg for social and human rights reporting. There is a growing wave of investor and public demand for global supply chain responsibility. Creating strong due diligence systems, adopting transparency practices, and building relationships with suppliers, raw mineral processing facilities, and mining communities are actions that will prove to be a wise investment in the long-term.

[adrotate group=”7″]

Industries with the highest performance rankings largely came from the Information Technology sector, including companies like Intel, Philips, EMC, and Qualcomm. Lower-performing industries were in Oil and Gas, Containers and Packaging, Pharmaceuticals, and Textiles/Apparel.

The report and ranking come at a time of growing evidence that suggest ESG (Environmental, Social, and Governance) factors, when integrated into investment analysis and decision-making, offers investors long-term performance advantages.

Andrew Arriaga, lead author of the report stated, “We talked with leaders at the companies that are coming up with solutions and thinking very seriously about how to source conflict-free from the Democratic Republic of Congo (DRC). Unfortunately, some companies are just not pulling their weight, so we developed performance-oriented indicators to identify which companies could do more.”

Conflict minerals reporting is a central part of a strategy adopted by governments and multiple stakeholders across the globe to help free the minerals trade in the DRC and the broader Great Lakes region of Africa from the grip of armed groups. RSN’s report developed 21 key performance indicators across five measurement areas as a guide for investors and others to properly assess companies’ commitments to social impact. The transparent methodology was designed to encourage higher quality reporting, incentivize companies to support in-region conflict-free certification efforts, and set a precedent for comparing social performance.

Today’s report also confirms that many companies are increasing their due diligence to fully investigate their global supply chains through increased internal efforts, taking advantage of existing frameworks, as well as by utilizing new technologies and outside experts.

“It is one thing to assess supplier risk, and another to act on your findings,” said Jess Kraus, chief executive officer of Source Intelligence, a sponsor of RSN’s research and a leading supply chain investigation resource. “The RSN report is an exhaustive study that highlights how companies can affect change through commitment and the right resources. The tools exist to increase transparency.”

The report can be downloaded here-
http://www.sourcingnetwork.org/mining-the-disclosures

About Responsible Sourcing Network (www.sourcingnetwork.org )

Responsible Sourcing Network is a project of the nonprofit organization As You Sow (www.asyousow.org ). RSN is dedicated to ending human rights abuses associated with the raw materials found in products we use every day. RSN supports stakeholders in leveraging their influence to achieve and measure impact in the areas of conflict minerals and slave labor.

Contact Person:
Patricia Jurewicz, Director, Responsible Sourcing Network
Phone 510.735.8145  / Email- patricia@sourcingnetwork.org

New Web Tool Reveals Fossil Fuel Companies Hidden in Mutual Funds

FossilFreeFunds.org accelerates the transition to a clean energy future

A new website www.FossilFreeFunds.org was unveiled recently by shareholder advocacy nonprofit As You Sow, using Morningstar fund holding data and in collaboration with Fossil Free Indexes (The Carbon Underground 200TM,) the Carbon Tracker Initiative, BrightScope, and HIP investor. This new, free-to-the-public web tool reveals where fossil fuel holdings are hiding in 1,500 of the most-held mutual funds. With this knowledge, consumers can be empowered to find out exactly what their money is invested in. The five major fund families including Fidelity, Vanguard, and TIAA-CREF that control record-keeping at 75 percent of all employer-sponsored retirement plans, valued at $5.6 trillion for 91 million Americans (according to PlanSponsor), do not offer any socially responsibly diversified mutual funds that are free of the 200 largest fossil fuel companies with the most oil, gas, and coal reserves.

Fossil Free Funds is filling this information gap, providing consumer awareness for those who wish to avoid the financial risk of a weak oil industry and the impact of the “carbon bubble.” This tool empowers investors who want to align their investments with their values and avoid supporting any company directly fueling climate change. It is the first-ever, publicly available, no cost site that allows investors to compare mutual funds’ holdings against the 100 largest coal and 100 largest oil/gas companies – known as the “Carbon Underground 200” – as measured by proven reserves. Stripping these companies from one’s portfolio is the minimum requirement of the Divest-Invest pledge (http://divestinvest.org/individual).

For investors wishing to more rigorously define “fossil free,” the easy-to-use platform allows screens for coal, smaller oil/gas companies, service industries (e.g. Halliburton), and fossil-fired utilities. Funds that are clear of investments in a given segment earn a green badge. Funds can earn a maximum of five badges. Out of the 1,500 funds with the highest plan count, only 12 diversified and SRI funds have earned the five badge rating, including Parnassus Endeavor fund (PARWX), Portfolio 21 Global Equity (PORTX), USA Mutuals Barrier (VICEX), Brown Advisory Sustainable Growth (BAWAX), PAX World Growth (PXGAX), Green Century Balanced (GCBLX), Gabelli SRI (SRIGX), and Shelton Green Alpha (NEXTX).

[adrotate group=”7″]

Armed with specific knowledge, investors can sell mutual funds that don’t align with their objectives and reinvest in funds that do, or work with their financial advisors to divest and reinvest. Employees without fossil free alternatives can download a toolkit to help them advocate with their retirement plan administrators to include fossil free investment options. This follows a trend noted by the Morgan Stanley Institute for Sustainable Investing[1], which reported that 71 percent of active individual investors describe themselves as interested in sustainable investing, while nearly 65 percent believe sustainable investing will become more prevalent over the next five years. The survey finds millennials and women at the forefront of sustainable investing. Fossil Free Funds helps consumers get to the bottom of where oil, gas, and coal investments are hiding in their portfolios.

Thousands of foundations and individuals (http://divestinvest.org/individual), with assets totaling over $50 billion, as of September 2014, have already taken the Divest-Invest pledge to de-carbonize their portfolios. This number will increase exponentially, as will be discussed more during an announcement planned for a September 21 Divest-Invest press conference to be held at MSCI Headquarters in New York. But many investors are unaware that they even own fossil fuels, which are often hidden in retirement plans and buried deep inside mutual funds. Many people who have taken the divestment pledge work at U.S. companies that have no fossil free employee-sponsored retirement investment options to fulfill their commitment.

“Since the beginning of the divestment movement, investors have been clamoring for transparency and a way to identify how they can use their portfolios to actively combat climate change,” said Andrew Behar, As You Sow’s CEO. “We developed FossilFreeFunds.org after we realized that our own 401(k) was composed of mutual funds that had major oil, gas, and coal extraction companies – but we had no idea. We figured that if we didn’t know, then probably no one did. This tool gives everyone the power to truly know what they own, so they can own what they own.”

[adrotate group=”7″]

According to Joanna McGinley, Head of Global Alliances and Redistributor Solutions for Morningstar, “With comprehensive fund holdings data, we are able to provide greater transparency and help investors better evaluate the sustainable and ethical effect of their investments.”

FossilFreeFunds.org empowers consumers to know exactly what they own, whether their mutual funds are held directly or through employer-provided 401(k) or 403(b) retirement plans. With this information in hand, investors can decide for themselves if they want to continue owning fossil fuel companies, or if they will divest and reinvest in funds and companies working for a clean energy future.

When investors hold mutual funds that contain fossil fuel extraction companies, fossil-fired utilities, and related service industries, they become owners of companies directly contributing to climate change. The United Nations and 98 percent of the world’s scientists (https://www.ipcc.ch/report/ar5) agree that “business as usual” will lead to catastrophic damage to ecosystems, economies, and global populations, and cause potentially hundreds of millions of climate refugees.

“None of us want to fund the destruction of the planet – here’s an easy tool to make sure you’re not, and to turn you into a champion of solutions,” said Bill McKibben, 350.org co-founder, environmentalist and author.

Insights on Fossil Fuel Free Investing

According to Joanna McGinley, head of global redistributor solutions for Morningstar, “With comprehensive fund holdings data, we are able to provide greater transparency and help investors better evaluate the sustainable and ethical effect of their investments.”

According to Stuart Braman, Founder and Chairman of Fossil Free Indexes, “Fossil Free Funds is a huge step forward for individual investors who want to go fossil free. Until now, it was very cumbersome for investors to assess their exposure to fossil-fuel-reserve-owning companies. We applaud this important step in empowering individual investors who are ready to address the climate risk and stranded asset risk in their portfolios and we expect this will help accelerate the appearance of more fossil free investment opportunities for individual investors. Fossil Free Indexes is proud to do its part in empowering investors by publishing and maintaining The Carbon Underground 200TM, thereby providing the core data to support carbon-responsible investors.”

According to Matthew Patsky, CEO of Trillium Asset Management, “Trillium’s Portfolio 21 Global Equity Fund has been fossil fuel free since its inception in 1999. Our investment management team integrates financial and ESG research to seek high quality growth companies at a reasonable price, working to provide both impact and performance to our investors.”

According to Vidya Nathu, Manager of Advisor Relations at Parnassus Investments, “Over the past few years, university endowments and large investors have been encouraged by students and alumni to divest from investments in fossil-fuel-based companies as part of an effort to halt climate change. Investors and prospective clients have also suggested that Parnassus Investments should address this concern. The Parnassus Endeavor Fund first added the screen in May 2014. After much consideration, the Founder and President of Parnassus Investments Jerome Dodson added the screen to the Parnassus Fund in February 2015.”

According to Julie Fox Gorte, Senior Vice President for Sustainable Investing, Pax World Management LLC, “There are many things investors can do to address the risks created by climate change, especially the risks created by combustion of fossil fuels. One is to avoid fossil fuel stocks. At some point, fossil fuels will be stranded assets; this is already happening to coal, the dirtiest of fossil fuels. Michael Bloomberg recently noted that in his blog, ‘Obama Didn’t Kill Coal, the Market Did.’ Citigroup recently reported that if we are to limit future warming to 2 degrees C, $100 trillion worth of fossil fuel reserves will become stranded assets. This won’t happen overnight, but however it does, investors who are not prepared for it will wish they were.”

According to Leslie Samuelrich, President, Green Century Capital Management, “Green Century has been avoiding the biggest polluters from the start—and we officially made the Balanced Fund fossil fuel free in 2008 to reflect our strong critique of the industry’s role in driving climate change. Since then, the financial reasons to invest fossil fuel free in the sustainable companies and green bonds in the Balanced Fund just keeps growing, as evidenced by our track record of competitive returns. As the first family of fossil fuel free funds, we’re thrilled that this new tool will help investors see what’s under the hood at mutual fund companies, finding authentic funds committed to a clean energy future.”

According to Garvin Jabusch, co-founder of asset management firm Green Alpha Advisors, “Green Alpha’s approach to investing is simple – don’t invest in causes of global systemic risks, notably fossil fuels, and do invest in solutions to those risks. A stock portfolio is a vision for the future, so when investing it is critical to look at holdings and make sure they represent the future you believe is emerging economically, and also that they reflect the world you want to see. Why do we manage NEXTX that way? Because we’ve reached the point in history where it’s obvious that no investment portfolio should contain the causes of our great systemic risks – climate change and resource scarcity – ever again. And, by extension, if the aggregate activities of a company aren’t providing solutions to those risks, no one should invest in its stock, ever again.”

According to R. Paul Herman, CEO of HIP Investor, “How can investors reduce future risk? By eliminating exposure to polluting energy (oil, gas, coal) and investing in clean, renewable energy. FossilFreeFunds.org is an essential tool for investors, advisers, fund managers and 401k plans to reduce future risk, enhance future return potential, and build a better world free of fossil free energy,” says R. Paul Herman, CEO of HIP Investor, which rated several thousand stock and bond holdings of the mutual funds in As You Sow’s 401(k) plan. “It’s your money — so you need to keep mutual fund managers accountable to your future, or switch fund managers who see the world as you do. Reducing exposure to fossil-fuel producers can strengthen your portfolio.”

According to Timothy Yee, President of Green Retirement, Inc., “Most working people’s savings are in their retirement plans. It is, therefore, of utmost importance that companies that sponsor these plans should observe prudence in choosing and monitoring the investment line up that they offer. Fiduciary responsibility dictates that all risks need to be evaluated and the potential financial downside that fossil fuel investments hold should be considered. It is entirely reasonable to include fossil fuel free choices in an organization’s retirement plan. Experience has shown us that a completely fossil fuel free investment menu for retirement plans can also be adopted.”

According to Vanessa Green, Director of Divest-Invest Individual, “This is the game-changing tool individual investors have been waiting for. Fossil Free Funds will enable people across the economic spectrum to cut financial ties with fossil fuel companies that prioritize their own short-term gains over our health, safety, and security and deepen the climate crisis. Now, average working Americans have more power to avoid the risks of stranded fossil fuel assets and influence the very structures and systems that drive an economy – the markets.”

According to Ben Cohen co-founder of Ben & Jerry’s Ice Cream, “The majority of people are carbon complicit and they don’t even know it. Now is the time to take the divestment pledge and move your money away from the fossil fuel companies that are destroying our future. Fossil Free Funds is a game-changer – it enables the majority of people who are invested in mutual funds to know what they own so they can commit to shifting capital and accelerating the transition to a clean energy future.”

For more information go to- www.fossilfreefunds.org

CONTACT: Andrew Montes, (510) 735-8144, amontes@asyousow.org

As You Sow is a nonprofit organization that promotes environmental and social corporate responsibility through shareholder advocacy, coalition building, and innovative legal strategies. For more information visit www.asyousow.org

Article Note:

[1] Click here

Thornburg Investment Management Launches Better World International Fund

Firm’s Premier ESG Offering Focused on ‘Sustainable Investing’

Thornburg Investment Management (TIM) launched the Thornburg Better World International Fund (Ticker symbols: TBWAX, TBWIX, TBWCX), effective September 30, 2015. The primary investment objective is long-term capital appreciation, and the fund is designed to seek a high level of risk-adjusted returns by investing in high-quality, attractively priced companies making a positive impact on the world.

The Thornburg Better World International Fund is managed by Rolf Kelly, CFA,

managing director, who was portfolio manager of TIM’s Socially Screened International Equity Strategy (SMA). Introducing the new fund, Brian McMahon, Thornburg CEO and CIO, said, “The Better World International Fund is a natural extension of our culture of caring and community commitment since our founding in 1982. At Thornburg, we recognize the growing demand for environmental, social, and governance (ESG) investing disciplines, and our new offering enjoys the support of our entire investment team to find opportunities that make positive ESG impacts while still focusing on competitive financial returns.”

The Thornburg Better World International Fund pursues sustainable investing opportunities, an approach that TIM believes can lead to solid long-term performance. Evaluation of individual company sustainability can include environmental impact, level of “carbon footprint,” senior management diversity, history of regulatory actions against it, board independence, capital allocation decisions, relationships with communities and customers, product safety, labor and employee development practices, relationships with vendors, workplace safety, and regulatory compliance, among others.

[adrotate group=”7″]

“The new Fund offers an edge within the ESG space by applying our distinct

sustainable investing approach, which integrates ESG into our traditional global generalist research structure,” says Kelly. “We believe companies with a high degree of sustainability, or with signs of improvement along these lines, are better positioned to outperform in the long run.

“We expect investors in the Better World International Fund will share a mindset and desire to achieve long-term outperformance within the parameters of our ESG and sustainable investing research,” Kelly added.

Portfolio composition is focused on 30-60 value-oriented international companies carefully vetted with the support of the entire Thornburg investment team.

For more information about the fund, please visit www.thornburg.com .

Thornburg Investment Management is a privately owned global investment firm that offers a range of solutions for retail and institutional investors. TIM is driven by its mission to help clients reach their long-term financial goals through fundamental research and active portfolio management. Founded in 1982 and headquartered in Santa Fe, New Mexico, TIM manages approximately $60 billion (as of June 30, 2015) across eight equity and 11 bond mutual funds, separate accounts for high net worth investors and institutional accounts, and five UCITS for non-U.S. investors.

Before investing, carefully consider the Funds’ investment goals, risks, charges, and expenses. For a prospectus or summary prospectus containing this and other information, visit www.thornburg.com . Read it carefully before investing.

Investments carry risks, including possible loss of principal. Additional risks may be associated with investments outside the United States, especially in emerging markets, including currency fluctuations, illiquidity, volatility, and political and economic risks. Investments in small- and mid-capitalization companies may increase the risk of greater price fluctuations. Investments in the Fund are not FDIC insured, nor are they bank deposits or guaranteed by a bank or any other entity.

Thornburg funds are distributed by Thornburg Securities Corporation.

Company Contact: Rebecca Carrier

Phone: 505-467-5345 or email- rcarrier@thornburg.com

The Definitive Directory for Social Investment – InvestWithValues.com

InvestWithValues.com is the leading gateway for the sustainable, responsible and impact investing community with its free educational resource directory and news center.

To meet the growing demand for information on social and impact investment opportunities, leading global resources, relevant content, investment professionals, Brian Kaminer, a consultant and experienced impact investor, created a website to guide investors seeking to align their money and values.

Positioned as “The Investor’s Gateway to Positive Change,” www.InvestWithValues.com features a directory of over 300 resources (http://investwithvalues.com/directory)  a news center and four public discussion forums. Content is focused on the core topics of Local Banking, Community Investing, Sustainable and Responsible Investing, and Impact Investing.

A “Getting Started” directory with select listings in each of the core topics is a great starting point for first time visitors. For people interested in more deeply exploring the opportunities, the full directory offers simple navigation to hundreds of robust resources and organizations across numerous topics.

The News Center (http://investwithvalues.com/news-center) provides easy and central access to valuable content that directly corresponds with topics shared throughout the website.  The News Center includes a Featured News section of select articles, and a Recent News section that displays the most current content with an interactive topic menu. News partners, including GreenMoney Journal, are leading content providers.

The Online Forums are devoted to the possibilities of aligning money and values. Registered site members (signup is free) can initiate or contribute to a discussion, ask a question, share their views, and tap into the collective wisdom and experience of each forum’s participants.

[adrotate group=”7″]

Former Managing Director of TIAA-CREF, Scott Budde, said that “It is the only site that organizes the world of investing with values in a way that is helpful to newcomers and professionals alike.” Katherine Collins, founder of Honeybee Capital and author of The Nature of  Investing, praised Invest with Values as a “Dream come true – all your impact investing tools in one handy place!”

Invest with Values is supported by a growing community of promotional partners and sponsors, including RSF Social Finance, Trillium Asset Management, and Calvert Foundation.

The website was profiled on Forbes.  Brian Kaminer and the website were recently featured in  SUCCESS Magazine (http://www.success.com/article/is-your-money-working-for-you)

About the Resource:

Invest with Values is a free educational investing tool, directory, forum, news center and resource site that helps connect related investment areas including local banking, community investing, impact investing, and socially responsible investing.

The resource was originally created in 2012 as the Money and Impact Investing

Directory by its parent company, Talgra (http://talgra.com) , a Certified B Corporation.

For media inquiries, please contact Brian Kaminer at 914-230-0741 or via email at brian@talgra.com

The Predictive and Curative Power of ES+G

by Elsie Maio, Founder of Humanity, Inc and SoulBranding Institute

Elsie Maio, Founder of Humanity, Inc and SoulBranding InstituteAs if on cue, the bad news on Volkswagen exploded at deadline for this article. Its harsh flash illuminates the state of the art of ES+G analysis – that is, the practice of profiling the risk to investors of a company’s posture and practices on environmental, social and governance issues (ES+G). And, it’s a topical jumping off point to explore where this evolving ‘artform’ can go.

Summary

On one hand, the apparent ethical gap that harbored VW’s reported ‘crime of emissions’ is a question of Governance. And this particular governance lapse will likely have a material impact on VW’s bottom line as well as its long term performance in the marketplace for its products, for talent and capital.

And yes, even though ‘nobody saw this one coming’, according to industry insider Bahar Gidwani, co-founder and CEO of CSR Hub, the system did work. His specialty firm and others did send a warning flare with below-average rankings for certain of VW’s governance-related behaviors.

“Our system has strong scores for 11 of the 12 factors we track (for Volkswagen). The only weak score was a below average rating for “Board,” said Bahar. “This indicated that the company’s board structure and practices were not as well thought out and organized as they could be.”

Olga Emelianova, who leads MSCI’s ESG Research North America told me they had “flagged aggressive accounting practices, leadership turmoil…and in May 2015, Volkswagen was excluded from MSCI ACWI ESG Index.”

So this signal event in the auto industry, along with other long-standing evidence across companies and sectors, support the wisdom of supplementing traditional financial analysis with ES+G data. There is no question that ES+G factors have a material, measurable impact on company performance and are necessary to understand both the upside potential and the risk profile of companies. In my view, it is high time the mainstream investment community formally incorporate them.

[adrotate group=”7″]

But let’s be clear, this new set of indicators may be necessary but it is not sufficient for the demands of the day: Knowing the source of vulnerabilities and advantages does not address them. They are symptoms. Cures are something else again, which I’ll discuss in the second part of this article.

Perhaps, as Gidwani suspects, the Volkswagen incident is isolated, and does not reflect the culture of the company. If so, there is something to learn here about rigorously tending the soul of an organization, in all its nooks and crannies. If instead, the unspoken code was ‘performance above all’ then the VW debacle presents a bold challenge to the old-timey excuse, “culture is too hard to manage.” The truth is, today, if you don’t cultivate your culture, it may well cultivate (bury) you.

Leaders know this. You will recognize them as the ones who are experimenting with frameworks and accessible, malleable technology. They use it to crowd-source employee values, build and nurture a positive, high-integrity, high-innovation talent base of thousands of employees, and empower them to create their own high-performance goals that fuel corporate KPIs. We’ve had the privilege to work with some of them.

In short, ES+G can help diagnose investment opportunities and risks. It’s up to company leaders to disseminate the ‘cure’.

Note to reader: As Elsie Maio finished this article, she was asked to be a guest on Marketplace Morning Report. Listen to her comments on VW with host David Brancoccio here- http://www.marketplace.org/shows/marketplace-morning-report/marketplace-morning-report-monday-october-12-2015

So, what is the state of the investment community’s capability to use ES+G? And how does that relate to business managers’ adapting to the challenges of the day?

A Fast-Developing Investment Tool: ES+G Capability

On the surface, you’d think that more information about what affects corporate performance is automatically a good thing, yes? After all, it’s demonstrated now that decisions management makes that affect environmental resources, the wellbeing of its labor force – whether those on contract around the world or near to home – and ethical behaviors, do materially hurt or help the bottom line. So yes, in that sense, reporting on ESG factors – as indicators of risk or opportunity – is a good thing for investors who are evaluating their options.

And Hazel Henderson, the renowned futurist, economist, and consultant on sustainable development, places ‘the new metrics’ of ES+G alongside the great levers of policy change, in her latest contribution to the UNEP’s Inquiry Global Report on Financial System Reform. She states “Today, public and NGO pressure on companies and governments has forced reforms… and continues to transform finance along with all the new metrics forcing formerly “externalized” social costs back on to financial balance sheets.”

Indeed, the harkening call of the 2015 CSR Investing Summit came from Kevin Parker, CEO of Sustainable Insight Capital Management: “What was moral has become material.”

With that claim and data to back it up, Kevin and other experts shut the door on any lingering debate from last year’s Summit over the relevance of ‘sustainable’ corporate behaviors to company performance. The conversation at this conference deftly slipped from the elective morality of ‘social responsibility’ to the stark legality of fiduciary responsibility, and back again. It suited everybody’s purpose to bask in the quantified certainty of ‘materiality.’

But the effort it takes to actually elicit adequate volumes of such quality data, collect it, turn it into useable information and apply it to investment analysis is like building a sub-industry itself. And that in fact is what’s happening. Different insiders alternately say this capability is in ‘embryonic’ stages, or three- to four-years away from being sufficiently mature.

“The whole education and research track is developing in front of our eyes,” said John Streur, CEO of Calvert Investments.

A sample of this mini-industry enthusiastically populated this summer’s CSR Investing Summit in New York, which was sponsored by ThomsonReuters, Deloitte, Calvert and other principal firms in the investment community. It included a wide range of functions – specialized investment-analysis, research, legal advisory, communications and other support firms from North America and Europe. They touted the capabilities of established tools and introduced offerings, including new indices against which to measure risk arising from ES+G company behaviors.

The ability to develop indices, I learned, is a special challenge in this emerging field. It depends on the availability of adequate data to compare one with the other. Until recently, the flow of that information depended on the companies’ self-reporting – collecting and releasing it – via the burgeoning sub-business of CSR- and ‘sustainability’- communications and reporting.

Increasingly, however technology innovations such as that developed by San Francisco-based TruValue Labs is pulling data from a rich supply of secondary sources, as well as from bespoke data clusters that it gleans by trawling the Internet several times a day and digesting bits of information that are not formally reported.

Sharing the dais, and the sentiment, with these functional support specialists were the asset owners, managers, and financial advisors who attested to the validity of the approach itself. They retold how they had anticipated the timing of pitfalls like ‘the demise of coal,’ or Monday-morning-quarterbacked how ESG information would have foretold other risks and opportunities, had that information been available. Others identified the ESG factors that marked their unique approach to investing, such as one financial advisor who screens to include companies for clients’ portfolios that meet her ‘minimum 3 women on the board’ guideline, having correlated such diversity with superior company performance.

Demonstrating a less tangible, but nonetheless massive impact, one advisor talked about the high cost of management distraction when an ES+G issue hits the fan: “The CEO of a Fortune 50 company said it was the most significant issue they had to deal with in two years, when his company was outed for [operations deep in the supply chain that contradicted its specific claims as a sustainable brand].”

ESG Fever vs The Larger Need

At the same time, ES+G capability itself is not the only development that’s called for.

First, the apparent fervor to develop the functionality of ES+G, in data collection, analysis and other added value offerings, raised a couple of flags for me. Its momentum has the potential to draw attention and resources away from the basic need to hone in and refine our understanding of the material impacts and their root causes in the companies being studied.  Potentially distracting and somewhat self-absorbed – not unlike ‘sustainability’ over the past few years.

For example, corporate communications and technology around ES+G are essential, but like shiny toys, these functions can easily balloon into hungry ecosystems that become an end in themselves. The danger is they will distract both the investing public and corporate management teams from their real purpose: to help business operations align in a substantive way with our changing world.

Second, several voices returned the conversation to the fundamental challenge facing business: to adapt to gross exogenous forces on the horizon. These include: the transfer of US wealth to women and millennials whose priorities differ from traditional wealth holders; the precipitous inequity in wealth distribution; the immediate constraints on operations and whole communities of shortages of natural resources such as water; impending challenges to the ecosystem on the broadest scale from climate change; and others.

These ‘bigger picture’ voices at the CSR Investing Summit saw the move to develop ES+G capacity as just one of several necessary, simultaneous actions to help decision-makers align their companies with the new realities of our world. They cited the need to lobby the stock exchanges around the world to include requirements for listing, and to directly engage policy makers, corporate decision-makers and the grassroots investor community as well.

They cited historical precedents for coordination among change agents, to challenge business as usual. “It will take the NGOs floating between the whale and the boat,” together with simultaneous pressure of the buying public, investors and on policy leaders. Calvert’s John Streur cites constructive engagement with companies by the investment community as crucial to moving company management along the curve of their own and the planet’s sustainability. We agree.

Third, a walk on the darker side. Ironically, more information about a company’s exposure to ES+G issues can produce knee-jerk responses that miss the point, or worse. For example, any information predictive of company risk or reward can be used simply to generate short-term financial gains. And in another vein, the leadership of companies could easily react to the release of unfavorable rankings and ratings of their company performance on ES+G criteria with counter-productive, traditional responses.

Gidwani illustrates with Volkswagen-gate, “Once performance (market share, revenue, profit) becomes paramount and the primary source of rewards and approval, other things recede into the background. VW needs to make a change in its reward and compensation culture more than it needs another layer of supervision or a new management team.”

In fact, traditional restructuring and more stringent controls are likely to be counter productive. (It’s tempting to point here to the current heightened expectations and “conduct risk” initiatives spilling over the errant banking industry.) In the uncharted waters of global business today, controls dampen the spirit of discovery and innovation needed to find a new course.

With no precedents to fix a course in today’s fluid business environment, the individual has to turn to inner reference points to generate innovative solutions. And so, cultivating in employees such values-based inner beacons as discernment, wisdom, cooperation, integrity, courage, innovation is a promising choice for management. We can’t legislate or regulate those qualities. Instead, with the aid of flexible technology and seasoned expertise, the exceptional organizations are learning how to celebrate and nurture these inclinations in thousands of employees at a time, while linking them to business strategy and outcomes.

So in this manner, ES+G capabilities could help companies to discover material possibilities. Perhaps the investment community will decide to train its strategic lens on ES+G factors closely enough to reveal a path of thriving transformation for all.

Article by Elsie Maio, who is a consultant and guide to business leaders seeking alpha + impact, she’s a thought-leader in sustainable marketing, alumna of McKinsey & Company and founder of Humanity, Inc/SoulBranding Institute. Contact her at- elsiemaio@soulbranding.com

Responsible Investing Provides Career Opportunities for Women in Finance

by Nancy Reyes,
Founder & CEO of RI Strategy Consulting (and formerly with Parnassus Investments)

Nancy Reyes

I recently attended the PRI in Person conference on the Principles for Responsible Investment held in London last September and came away quite impressed. While I came away with plenty of new information to digest, and more than a bit overwhelmed, the reoccurring theme that stood out was not the title of any specific session, it was the number of women in attendance at the conference — 40 percent of the delegates and 35 percent of the speakers were females. Compared to financial service industry events such as Schwab IMPACT, the Morningstar Investment Conference, IMCA, FPA and NAPFA conferences, events focused on responsible investing continue to have a much higher female participation rate. Another example of this is the upcoming SRI Conference on Sustainable, Responsible, Impact Investing, which has historically had a ratio of females to males that is close to 50-50. This year I’ve been informed that they have more women on the agenda than ever before. I thought to share this observation because it highlights two trends that are beneficial to the investment industry.

The first trend is that responsible investing is attracting females in greater numbers than have historically been represented by the financial services industry. The same job titles and responsibilities that come with traditional finance jobs are available in the field of responsible investing (securities analysts, fund managers, commercial and private bankers, investment advisors, financial planners, consultants, marketers), so why is it that responsible investing has a greater number of women represented within its ranks?

One reason is that the mentality that created responsible investment companies, which file shareholder resolutions, educate the public, and work with nonprofits, is more supportive of promoting women in the workforce. A key to long-term career success is staying power, so an industry that is especially supportive of working mothers will facilitate their success in that industry. The Financial Women of San Francisco has long recognized the importance for women in finance to network with other accomplished women and to be recognized for their achievements.

In case you missed it, Joe Keefe, President and CEO of Pax World, was honored in mid-September by the Financial Times with his inclusion on their published list of “top feminist men.” These men are recognized for helping women succeed in business and beyond. A peer of his, Jerome Dodson, President of Parnassus Investments and Portfolio Manager of the Parnassus Endeavor Fund, has long touted the benefits of investing in companies that are good places to work for women, referencing Working Mother magazine’s list of 100 Best Companies as a source of ideas for new investments. Notable features of the 100 companies on Working Mother’s 2015 list is that they provide new moms with an average of eight weeks of fully paid maternity leave, three quarters of their employees use flextime, and almost half of all new hires last year were women.

Another reason is that self-selection may lower the number of men who are traditionally drawn to finance to be drawn to a career in responsible investing. A field that is dedicated to building a sustainable and equitable global economy appeals to those interested in making the world a better place, and while that’s by no means the sole interest of women, the values orientation can seem too “soft” for someone who fits the Wall Street stereotype. To expand the conversation of investing beyond the sole focus of providing the best returns runs counter to tradition. Those dedicated to responsible investing are comfortable with being untraditional.

I can distinctly remember how I felt when I first learned about SRI while working as an intern for the Santa Cruz Community Credit Union. An economics degree at UC Santa Cruz required the completion of an internship, and while many of my peers served as interns at banks and wirehouses, I seized the opportunity to familiarize myself with the local credit union. While doing some research on how to align personal values with personal finances I came across the Calvert Funds. I was shocked to have never before heard of socially responsible investing (after all, this was 1999 and Calvert has been established in 1976) and I was delighted that such a concept existed. It made perfect sense to me that the power of finance should be used as a catalyst for good, and I immediately made up my mind that this was the type of finance I wanted to practice. Fifteen years later I’m pleased to share that my instinct was correct.

This brings me to the second trend that was highlighted at the 2015 PRI in Person conference — the expansion of responsible investing. I won’t reiterate the numbers that are well known by now, but it’s worth repeating that more than one of every six dollars under professional management in the United States is applying some form of sustainable, responsible and/or impact investing strategy. What is equally significant is that the growth in responsible investment assets is not just attributed to a select number of managers growing their assets, but is a result of new products and new firms entering the field. What this means for women (and men) is that there are now more jobs than ever that offer the opportunity to utilize skills once reserved for traditional finance, and at the same time incorporate social and environmental values previously reserved for nonprofit or volunteer work.

For all genders, there are more opportunities to work in the field of responsible investing. However, speaking as a woman, I appreciate the unique environment that has been created by the evolving interests of investors and asset managers to utilize finance as a means of social good.

Article by Nancy Reyes, Founder & CEO of RI Strategy Consulting

Nancy currently serves on the Board of Directors for USSIF. USSIF is the US membership association for professionals, firms, institutions and organizations engaged in sustainable, responsible, and impact investing.

Prior to going off on her own, Nancy was the Director of Advisor Relations at Parnassus Investments from 2005 to 2015. She managed fund distribution via the wirehouse, RIA, bank trust and independent broker dealer channels.

She has over fifteen years of experience in the field of responsible investing, holds the Series 6, 26, 63 and 65 securities licenses, and received a bachelor’s degree in economics from the University of California, Santa Cruz.

Nancy is an active member of the Financial Women’s Association of San Francisco, the oldest financial women’s organization in the country, helps run the Bay Area Social Investment Forum, and has served on the board of Spark SF, a nonprofit organization that addresses social, political and economic issues by working with grassroots women’s groups worldwide.

Why Investing in Women Pays Off

Green Century Capital Management
By Leslie Samuelrich,
President of Green Century Capital Management

Leslie Samuelrich

What do the studies demonstrating the value of having women in leadership positions mean for those of us in the field of impact investing? For starters, it is helpful data to concretely back up what many of us already know from our experience – women can be strong leaders, communicators, problem-solvers and staff managers who can help a company not only survive, but thrive.

Secondly, the data can help us make our firms – from the small shop to wire houses interested in SRI – into the most successful ventures possible as we create real opportunities for women to advance. When we hire women, proactively support them in advancing and highlight their achievements internally and externally, we not only help ourselves and them, but become an example that can provide a way forward for others. At Green Century, I follow in the footsteps of previous female presidents and into a culture that is influenced by having more than the token woman or two on staff (we’re at 80 percent now). While it’s not a prerequisite, it is certainly easier to understand why women should be leading and more authentic to move others to do so if you are “walking the walk”.

Third, the information can provide the kind of data that might help change the companies in which we invest. The Wall Street Journal reported that “highly diverse companies appear to excel financially” so if a leader is looking for data to back up her preferred path, she needs to search no further[1]. When Green Century analyzed its funds this summer, we found that the percentage of female directors and executives in the companies held by the Green Century Equity Fund and Balanced Fund handily surpassed the global average percentages of women on boards of directors and women in leadership positions. Women in leadership comprise 18.35 percent and 15.54 percent of the companies in the Green Century Equity Fund and the Green Century Balanced Fund, respectively, compared to a global average of 12.9 percent. The percentage of women on the boards of directors are 19.71 percent and 20.35 percent for the companies in the Green Century Equity Fund and the Green Century Balanced Fund, respectively. The global average of women on the boards of directors is 12.4 percent[2].

But, we also need to go beyond the numbers. We need to dig deeper when we are reviewing companies or engaging with them around an issue or potential shareholder resolution, asking how they attract and retain women. For example, do they have flexible work time, is there an informal or formal mentorship program for women, how many women stay after they have some kind of caregiving responsibility. In other words, the numbers matter, but so do the policies, culture and details. In her recent New York Times opinion piece, New America Foundation President Anne-Marie Slaughter outlines how, although the U.S. has “unlocked” the talent of its women at the high school and college levels, the ranks of those women still thin significantly as they rise toward the top, from more than 50 percent at entry level to 10 to 20 percent in senior management. Slaughter writes that “far too many discover that what was once a manageable and enjoyable work-family balance can no longer be sustained — regardless of ambition, confidence or even a partner who shares tasks equally.” She continues to drill down to a core problem that affects women, businesses and our society: “Many women who started out with all the ambition in the world find themselves in a place they never expected to be. They do not choose to leave their jobs; they are shut out by the refusal of their bosses to make it possible for them to fit their family life and their work life together[3].

[adrotate group=”7″]

At my prior job, at what would be easily considered a progressive organization with strong women leaders, there was no precedent or policy for parents to be able to work at home when I started there. The culture put a priority on office “face time” and included a heavy critique of “clockers.” But, with pick-up responsibilities for my daughter many afternoons, I embodied a clocker from the first day, even if it meant that I walked out of a phone call or meeting at 3PM. But, we were doing such exciting work on corporate responsibility that I dug in to try to make the situation work. Sometimes it was just about getting creative – getting the best Blackberry, using video conferencing, scheduling West Coast calls after bed time – although many times it was not, pitting me against the executive director who had never had a working mom in the number two spot. But, over time and with a supportive board, which was 50 percent female, the organization has adopted the accommodations they made for me as policy. The result? An international organization that has tripled its budget and retained much of its top female leadership as they became mothers, and is a living example of how promoting women is good for growth.

Women-of-GCentury
Green Century’s Erin Gray, President Leslie Samuelrich and board member Wendy Wendlandt (L to R)

On the other hand, it would seem that with all the information on the value of women in leadership, articles like this should be superfluous. Smart and strategic business leaders would have read these studies and already implemented plans that significantly increased the number of women in leadership and management. What is standing in the way of change that creates a good bottom line for business and the public?

While information is important to create changes, recent studies (with more data, ironically) show that facts don’t really change anyone’s mind. Brendan Nyhan, a professor of political science at Dartmouth, who has looked at this issue since 2000, says that our beliefs change if there is “no immediate threat to our understanding of the world.”[4] So, if hiring and promoting women – and investing in companies that do so – fits into your world view, you will espouse this idea and might act on it quickly. So, many of you already have been nodding your heads — and that’s because you already believed or were disposed to think that promoting more women helps the bottom-line.

But, the roadblocks come up when that “change contradicts something we’ve long held as important.” If one has come to consciously or subconsciously believe that men are just better at being in charge (maybe it started in grade school with dozens of female teachers working for the male principal or is now demonstrated by a team of mostly male senior VPs), it can be more difficult to accept the fact that women also can lead effectively. As the leader of a firm deeply committed to creating change (Green Century is the only U.S. mutual fund company owned by environmental non-profits), I found Nyhan’s analysis and conclusions fascinating and potentially applicable to promoting women in investing. In the end, he asserts that the message “can’t change unless the perceived consensus among figures we see as opinion and thought leaders changes first.” If he is correct, then we must attack this challenge together as men and women united across political lines.[5]

And that means we must keep pushing. Pushing our firms, pushing our peers, pushing our boards and pushing the companies in which we invest. We also need to support company, state and federal policies that back the ideals with concrete support.

We need to go beyond the facts, tell the stories of the rising saleswomen as well as IBM’s* CEO Ginnie Rometty who led IBM’s growth strategy by getting the company into the cloud computing and analytics businesses and Mondelez International’s* CEO Irene Rosenfeld who has a long and successful history of bringing a consumer focus and innovation to building businesses.

Finally, we need to use the time-tested and social media-proven power of peer pressure. That’s right, what makes people take an action almost more than any well-written ad, is knowing that their “neighbor” has taken the plunge. After all the elaborate bells and whistles that we spend on pushing ideas, could it really break down to “keeping up with the Joneses”?

And if that is even at least partially correct, why not start right now? While my firm has a female majority on the board and on staff, I’m sure we still will need to make more changes in time. Green Century is ready to sign up. What do you say – are you with me, neighbor?

Article by Leslie Samuelrich, President of Green Century Capital Management, the investment advisor to the Green Century Funds. Green Century is the first family of responsible and diversified fossil fuel free funds and is the only U.S. mutual fund founded and owned by environmental advocacy organizations. She leads the firm’s current and emerging investment strategies, business development, and impact investing program. She is a frequent speaker on fossil fuel free investing and impact investing and serves as the firm’s primary media spokesperson. Leslie also currently serves on the Advisory Boards of the Business Ethics Network and the Intentional Endowments Network.

Article Notes:

[1] http://blogs.wsj.com/atwork/2015/01/20/new-report-finds-a-diversity-dividend-at-work/

[2] Source: Green Century Capital Management as of June 30, 2015

[3] http://www.nytimes.com/2015/09/20/opinion/sunday/a-toxic-work-world.html

[4] http://www.newyorker.com/science/maria-konnikova/i-dont-want-to-be-right

[5] http://www.newyorker.com/science/maria-konnikova/i-dont-want-to-be-right

* As of June 30, 2015, International Business Machines Corporation and Mondelez International, Inc. comprised 0.67% and 2.09% and 0.00% and 0.93% of the Green Century Balanced Fund and the Green Century Equity Fund, respectively. References to specific securities, which will change due to ongoing management of the Funds, should not be construed as a recommendation by the Funds, their administrator, or their distributor.

Stocks will fluctuate in response to factors that may affect a single company, industry, sector, or the market as a whole and may perform worse than the market. Bonds are subject to risks including interest rate, credit, and inflation. The Funds’ environmental criteria limit the investments available to the Funds compared to mutual funds that do not use environmental criteria.

Past performance does not guarantee future results.

This information has been prepared from resources believed to be reliable. The views expressed are as of the date of this writing and are those of the Advisor to the Funds.

You should carefully consider the Funds’ investment objectives, risks, charges and expenses before investing. To obtain a Prospectus that contains this and other information about the Funds, please visit www.greencentury.com or email info@greencentury.com  or call 1-800-93-GREEN. Please read the Prospectus carefully before investing.

The Green Century Funds are distributed by UMB Distribution Services, LLC. 9/15

Fixing a Flaw in the Financial Sector

Boston Common Asset MgmtBoston Common Asset Mgmt
by Geeta Aiyer,
president & founder of
Boston Common Asset Mgmt

Geeta Aiyer

For much of my life, I have found myself inadvertently combining two elements that don’t always sit naturally together. For example, trying to balance the demands of parenthood alongside the demands of work, or bringing my Indian roots together with US culture to ensure my children enjoy the richness of each, and in my professional work, bringing sustainability into the world of investment.

Combining two ideas can be difficult at first, but it can also lead to great things. Take for example, Boston Common, the sustainable investment firm I founded in 2002. For more than a decade Boston Common has sought to both make money and make a difference, and has helped not only produce benchmark-beating returns but also significant corporate change in areas such as reduction of carbon emissions, action on child labor and protection of the Amazon.

In this article I want to explore two other elements that haven’t always sat together but can and should: women and investment management.

The Finance Sector Falls Behind

Women have made great strides in the world of work in recent decades. Since the 1970s, more than 42 million[1] women have been added to the workforce in the U.S. (that’s about the same as the entire population of Argentina!), and they now make up 49 percent of the workforce[2][3].  They make up 33 percent of lawyers, 37 percent of doctors[4] and more than half of all accountants[5]. Yet one profession lags well behind – finance.

When I entered the world of finance in the mid-1980s, there were scant few women in investment management. Most of the women I encountered were in secretarial, administrative, or client services roles, rather than the investment management and decision-making positions.  And, unfortunately, this remains the case today. For though women make up 54 percent[6] of financial services workforce, they hold just 16 percent of executive and board level positions. The situation is even worse in fund management where just 10 percent of fund managers are women, and assets managed exclusively by women account for just two percent of the total under management![7]

 A Profession Where Women Succeed

The lack of women in investment management is baffling, because it is a profession where women have much to offer, and one where they can and often do succeed. There is a growing body of evidence to show that women as investment managers perform just as well as men, perhaps better over the long term.

For example, a 2009 Vanguard study of nearly three million Individual Retirement Account (IRA) investors found that during the 2007 – 2008 financial crisis, accounts led by women lost on average 13 percent while accounts led by men lost 16 percent over the same time.[8]

In the UK – which celebrates green investment with Good Money Week[9] – research shows that despite running just two percent of all funds, women managed 20 percent of the top performers.

In Hedge funds, research shows women-led hedge funds gaining 9.1 percent between January 2000 and May 2009, compared to just 5.8 percent for the composite Hedge Fund Index over the same time. Similarly, the Women in Alternative Investments Hedge Fund Index returned 6.0 percent from January 2007 to June 2012, while the HFRX Hedge Fund Index fell 1.1 percent over the same time.

Adding Value With Gender Diversity

Just as having a diversified portfolio is important, so too is having a diverse team.  However, it needs to be more than a token effort, as evidence indicates that until women make up about a quarter of a senior executive team, there is no statistically significant link between gender diversity and performance. According to McKinsey & Co., for every 10 percent increase in gender diversity over this threshold, an increase of 0.3 percent in earnings before taxes (EBIT) margin is observed.[10]

To run the risk of stereotyping, many of the attributes women tend to bring to investment can result in better outcomes. For example, women’s investment styles tend to be less optimistic about portfolio performance than men’s. This means they may take fewer risks and avoid overloading on a particular stock. As we emerge from a financial crisis brought about by behavior such as overloading and poor risk management, an approach geared more towards long-term risk management is needed more than ever.
We Need to Improve the Pipeline…

Part of the problem is education. In the early 1980s when I embarked upon an MBA, about quarter of my class were women.[11] Thirty years later about 37 percent of MBAs in the US are awarded to women. While this is an improvement over my time, it has not improved at a fast enough rate. Importantly, even fewer women specialize in finance – less than 17 percent of CFA charter holders in the US are women and the picture isn’t much brighter elsewhere with similar statistics in Australia and the UK.[12]

… And the Pay Incentives

Another part of the problem lies in the wage gap. Even when men and women work in the same field and have similar levels of experience, women still tend to earn less than men. For example, of the 22 industries hiring MBA graduates last year, 17 had lower rates of pay for women. The gap was most noticeable in finance, with similarly skilled and educated women earning nearly $22,000 less than men. What this means is that not only is an MBA a bigger financial risk for women than for men, but through a lack of parity, finance is losing valuable and talented women to other industries.

Including and Empowering Women Makes Sense for All Society

But closing the gender and wage gaps doesn’t just make sense for the financial sector; it also makes sense for the wider world. Recent research from McKinsey & Company estimates that raising the female labor force participation rates globally to match male levels, for instance, could add $12 trillion over the next decade, which is like adding the equivalent of the combined GDPs of Germany, the UK and Japan to the global economy![13] Surely, this is enough of a carrot to drive renewed efforts towards participation and parity!

Article by Geeta Aiyer, CFA, President and Founder of Boston Common Asset Management (www.bostoncommonasset.com), combines training and experience in finance with passion for the environment and social justice. Under Geeta’s leadership, Boston Common, with $2.2 billion in assets under management (as of 6/30/2015), has built a strong investment record and substantially improved the policies and practices of portfolio companies through shareowner engagement since the firm’s inception in 2003.

Geeta previously served as the President of Walden Asset Management, and has worked at both the United States Trust Company of Boston and Cambridge Associates, Inc. In addition, Geeta has founded two previous companies, Walden Capital Management and East India Spice, as well as an NGO, Direct Action for Women Now (DAWN) Worldwide. DAWN’s mission is to end gender-based violence, and promote gender equality.

Geeta was honored with the Joan Bavaria Award (2015), the SRI Service Award (2013) at the SRI Conference (Sustainable, Responsible, Impact Investing) and the Women’s Venture Fund’s Highest Leaf Award (2010). Boston Common received a Human Rights Award (2013) from the Political Asylum Immigration Representation Project (PAIR) and was named one of the top 100 women-led firms in Massachusetts (2013, 2014).

Geeta was elected to the Advisory Board of the UN-supported Principles for Responsible Investment Initiative (PRI). She also serves on the Board of Directors of the Sierra Club Foundation, Earthworks, and YW Boston. An activist in her personal life, Geeta attended the Keystone Pipeline Rally in 2013 and engages for peace, immigration reform and chemical safety. She has an MBA from Harvard University, and BA (Hons) and MA degrees from Delhi University, India.

FOOTNOTES:

[1] http://www.huffingtonpost.com/mehroz-baig/women-in-the-workforce-wh_b_4462455.html

[2] https://en.wikipedia.org/wiki/List_of_countries_and_dependencies_by_population

[3] From Mellody Hobson, Women & the future of investing – Greenmoney Journal April 2015 https://greenmoney.com/april-2015/women/

[4] Morningstar Research Report – Fund Managers by Gender, June 2015 http://corporate.morningstar.com/US/documents/ResearchPapers/Fund-Managers-by-Gender.pdf

[5] http://www.huffingtonpost.com/mehroz-baig/women-in-the-workforce-wh_b_4462455.html

[6] The Atlantic – the real reason why women are leaving wall street –  http://www.theatlantic.com/business/archive/2013/09/the-real-reason-why-women-are-leaving-wall-street/279379/

[7] http://www.telegraph.co.uk/finance/personalfinance/investing/funds/11794066/25-managers-that-beat-the-market-over-a-decade-and-how-women-out-performed-men.html

[8] ThinkAdvisor: 7 Reasons Women make better money managers than men.   June 2015

[9] www.goodmoneyweek.com

[10] McKinsey and Co, ‘Why Diversity Matters’ http://www.mckinsey.com/Insights/Organization/Why_diversity_matters Published Feb 2015 – Covers 366 public companies across a range of industries in the United Kingdom, Canada, the United States, and Latin America. (As mentioned in BCAM Boardroom diversity engagement plan)

[11] http://www.forbes.com/sites/hbsworkingknowledge/2013/03/06/the-case-of-women-mbas-at-harvard-business-school/

[12] http://corporate.morningstar.com/US/documents/ResearchPapers/Fund-Managers-by-Gender.pdf

[13] https://www.imf.org/external/pubs/ft/sdn/2013/sdn1310.pdf and  http://www.mckinsey.com/insights/growth/how_advancing_womens_equality_can_add_12_trillion_to_global_growth?cid=mckwomen-eml-alt-mgi-mck-oth-1509

Investing With Her

TriLinc Global, LLC

By Gloria Nelund,
Chairman & CEO of TriLinc Global, LLC

 

Gloria Nelund

In 2001, at the age of 40, I became the CEO of Deutsche Bank’s $50B North America Private Wealth Management division, where among 200 executives across the Bank, I was the only woman. As I had done for the majority of my career on Wall Street, I found myself focusing on finding underlying commonalities with my male counterparts – shared values, a strong work ethic, judiciousness – rather than on gender differences that separated us. I worked hard, loved my job, and was rewarded well for my success. So, when asked about how I overcame gender inequity in the workplace, I have to honestly say, that with one exception early on in my career, I never really experienced it. That being said, the facts are that until very recently, in the finance industry, you would find very few women in executive positions, and there were generally big differences in pay for men and women.

I find the new trends in finance encouraging, and I believe that the boundaries historically faced by women in finance, will soon be a part of our past. Women in the US have made substantial economic gains as a result of increased access to education, widening income generation opportunities and significant policy developments that have reshaped the trajectory for women in society. Today, approximately 60 percent of all college graduates are women,[1] and, upon graduating from college, women now tend to out-earn men – according to some estimates – by eight percent.[2]

Never in our history has the time been so ripe and the opportunity so great for women to chart their own destinies, lead the way, and be the flag bearers – both with their professions and their pocketbooks – of a new era of capitalism.

We often hear about the inter-generational wealth transfer on the horizon as the largest wealth transfer in history (widely cited to be ~$41T). What is often less talked about, however, is the amount of wealth women stand to gain within the next four decades. Around 70 percent of the generational wealth transfer – a resounding $28.7T – will be transferred to women.[3]

It’s not just that women are coming into wealth. Women are increasingly creating wealth of their own. In one study by the Task Force for Talent Innovation, 63 percent of women respondents said they were the source of their household’s assets.[4] This vibrant growth in personal and inherited wealth is leading to a seismic shift in our financial landscape. By 2030, two-thirds of all private wealth in the US will be held by women; within just over a decade, women will control more aggregate wealth in the US than men.[5]

This rise in wealth has consequently led to the emergence of a more aspirational and sophisticated woman investor. Women no longer serve as the passive bystanders of their household’s accounting and finances but rather are transforming into active managers of their household’s wealth.[6] An estimated 66 percent of women today serve as the primary driver and influencer of their family’s wealth management.[7]

Despite the apparent emergence of the woman investor, the financial services industry – wealth managers, planners and advisors – has not yet evolved to meet the needs of this new investor group.

The modern woman investor is increasingly forming her investment decisions based on her own financial acumen rather than the expertise of a financial professional. Almost 70 percent of women in the US do not currently retain the services of a financial advisor – and for women under forty this figure is closer to 75 percent.[8] Perhaps most concerning to the financial services industry is that these numbers are declining. While 48 percent of women engaged the services of a financial advisor in 2008, only 31 percent do so today.[9]

With fewer and fewer women utilizing traditional financial planning services, the financial services industry is missing out on a sizable market opportunity – by some estimates of over $5T. With so much money left on the table, this begs the question, why has this industry been so slow to engage women? One institutional challenge may be the lack of female representation in financial services – only 30 percent of all financial advisors in the US are women. Yet when asked whether women prefer to work with men or women financial advisors, of those who stated a gender preference, over 70 percent selected women.[10]

If the financial services industry hopes to stay current amidst a shifting landscape, in addition to attracting and retaining more women financial advisors, it must also reposition its service and product offerings to attract the new female investor. This will require an overhaul of business as usual in an effort to create stronger alignment with the investor and gain a better understanding of what women investors need. For many women, it is the ability to assert their financial independence, grow their wealth and provide long-term planning for themselves and their families.[11] For most firms and financial advisors, this will involve adopting a new philosophy and approach toward women investors – and a change from investing for her to investing with her.

Investing with her requires an advisor who takes the time to get to know her…her personality, her lifestyle, her values, her goals, her priorities, and who can patiently communicate on her terms. Also, it may require an advisor to step out of their comfort zone of traditional investment products to find investments that are aligned with her values. In addition to return on investment, 76 percent of women believe that investments should incorporate a social and environmental lens.[12] Women are also more likely to involve ESG and sustainability screens in their investment decision-making, and want to invest their wealth in a way that will help them advance the causes and issues they care about.[13] Financial advisors who help their clients align their investment goals with their personal goals are 41 percent more likely to build satisfactory and lasting relationships.[14]

One tangible way we’ve seen this investment philosophy play out is through the addition of alternative investment products. According to a study by MainStay Investments, a US-based investment management firm, 60 percent of women responded that they expected alternatives to become a core part of their investment portfolio over the next five to 10 years, and 27 percent of women indicated they were already allocating investments to alternatives, compared to 20 percent of men.[15] When asked why, women responded that alternative asset allocation gives them the opportunity to invest with their values, as well as diversify their portfolio, generate income and grow their capital.

My firm, TriLinc Global, an impact investment management firm with over $100M in Assets Under Management (AUM), is responding to this notion that women, and yes – many men too – want to invest in a way that reflects their values. Our products seek to align investors’ values with their investments so that they don’t have to make an either/or choice. We provide retail investors the opportunity to access specialty products that generate income while pursuing positive impact in communities across the globe.

This sort of investment approach is still nascent in the financial services industry but it is gaining traction, especially as new entrants such as women and millennial investors come into the fold. It is time for the financial services industry to recognize that the investor profile is changing and start to adapt to this new investor’s needs through the development of tailored service and product offerings that align values with investment. Whether we’re fund managers, financial advisors, or brokerage houses, it is time to stop investing for her and begin investing with her.

Article by Gloria S. Nelund is Chairman and Chief Executive Officer of TriLinc Global (http://www.trilincglobal.com) and is Chairman, Chief Executive Officer, and President of the TriLinc Global Impact Fund (http://trilincglobalimpactfund.com). Prior to founding TriLinc Global LLC in 2008, Ms. Nelund spent her career as a high level executive in the international Asset Management Industry. Most recently, Ms. Nelund served as Head of the U.S. Private Wealth Management Division at Deutsche Bank, the world’s fifth largest financial institution. In this capacity, Ms. Nelund held fiduciary responsibility for more than $50 billion in investment assets, including more than $20 billion in emerging markets and credit instruments. In addition to this role, Ms. Nelund served as the only female member of the Global Private Wealth Management Executive Committee. Ms. Nelund had served as the Managing Director of Scudder Kemper Investments, prior to its purchase by Deutsche Bank.

Prior to her tenure at Deutsche Bank, Ms. Nelund spent sixteen years as an executive at Bank of America /Security Pacific Bank, most notably as President and CEO of BofA Capital Management, Inc., an investment management subsidiary managing $35 billion in assets for both retail and institutional investors. In addition to managing fixed-income and equity mutual funds in both the U.S. and internationally, Ms. Nelund’s division was responsible for managing assets on behalf of public funds, common trust funds and corporate funds. Ms. Nelund also spent five years as Manager of Worldwide Sales and Marketing of BofA Global Asset Management and three years as CEO of InterCash Capital Advisors, Inc., a $15 billion investment management subsidiary of Security Pacific Bank.

Ms. Nelund has been a pioneer in the development of Social Impact products for institutional and high net worth investors. While at Scudder, she supported the development and growth of one of the industry’s first socially responsible investment (SRI) products. In addition, Ms. Nelund was instrumental in making Deutsche Bank a major institutional supporter of microcredit, creating multiple programs for Private Wealth Management clients.

FOOTNOTES:

[1] “Degrees of Equality.” Economist. September 13, 2011. http://www.economist.com/blogs/dailychart/2011/09/female-graduation-rates

[2] Rouso, Matthew. “Childless Women In Their Twenties Out-Earn Men. So?” Forbes. February 24, 2014. http://www.forbes.com/sites/realspin/2014/02/24/childless-women-in-their-twenties-out-earn-men-so/

[3] 3P Contributor. “Women Rule: Why the Future of Social, Sustainable and Impact Investing is in Female Hands.” TriplePundit. April 30, 2015. http://www.triplepundit.com/2015/04/women-rule-future-social-sustainable-impact-investing-female-hands/

[4] Hewlett, Sylvia Ann, and Moffitt, Andrea Turner, and Marshall, Melinda. “Harnessing the Power of the Purse.” Sisters Capital. Extracted September 2015.

[5] 3P Contributor. “Women Rule: Why the Future of Social, Sustainable and Impact Investing is in Female Hands.” TriplePundit. April 30, 2015. http://www.triplepundit.com/2015/04/women-rule-future-social-sustainable-impact-investing-female-hands/

[6] Hewlett, Sylvia Ann, and Moffitt, Andrea Turner, and Marshall, Melinda. “Harnessing the Power of the Purse.” Sisters Capital. Extracted September 2015.

[7] Ibid.

[8] Ibid.

[9] Fairley, Juliette. “Number Of Women Using Financial Advisors Is Declining.” FA Magazine. July 16, 2014. http://www.fa-mag.com/news/number-of-women-using-financial-advisors-is-declining-18618.html

[10] “Female Financial Advisers Sought as Boomers Need Planning.” Bloomberg News. November 17, 2014.

http://www.bloomberg.com/news/articles/2014-11-18/female-financial-advisers-sought-as-boomers-need-planning

[11] Sykes, Samantha. “Wealth Planning For Women: An Insider’s Look At Where To Start.” Forbes. May 22, 2015. http://www.forbes.com/sites/rbcwealthmanagement/2015/05/22/financial-planning-for-women-an-insiders-look-at-where-to-start/

[12] “Sustainable Insights.” Morgan Stanley. February 2015. https://www.morganstanley.com/what-we-do/institute-for-sustainable-investing/a>

[13] Hewlett, Sylvia Ann, and Moffitt, Andrea Turner with Marshall, Melinda. “Harnessing the Power of the Purse.” Sisters Capital. Extracted September 2015.

[14] Ibid.

[15] Tasman-Jones, Jessica. “Female Investors More Interested In Alternative Assets Than Men Are.” Campden FB. August 21, 2014. http://www.campdenfb.com/article/female-investors-more-interested-alternative-assets-men-are

Signup to receive GreenMoney's monthly eJournal

Privacy Policy
Copyright © GreenMoney Journal 2024

Website design & development by BrandNature

Global Events Calendar

View All Events

february

05febAll Day06Sustainability Expo - London

10febAll Day12GreenBiz25 Conference - Phoenix

11febAll Day14BIOFACH 2025: Trendsetters for the Organic Community - Nuremberg

X