You can invest to make a positive impact on the world. These kinds of investments are called “socially responsible investing” or “environmental, social, governance” or even “impact investing.” Laura and Saul talk about what these kinds of investments include and why people choose them.
Transcript:
Laura: Many clients ask us about socially responsible investing now sometimes called ESG: investing, environmental, social, governance being the categories. And even now morphing to another name called impact investing, which is about having an impact on our world in areas such as to sustainability, gender equality, supply chain, which would be child labor concerns, and of course, corporate accountability is top of mind for many people. So socially responsible investing emphasizes all those areas, and our clients have been asking us for socially responsible alternatives for the last 20 years that our business has been in existence. So we’ve got a lot of experience with this, and we know a lot about these kinds of investments.
Saul: I have a young daughter, so this type of investing is very important to me as I think about what type of world we’re going to be leaving for her, our kids, as well as our grandkids. Now, I realize investing is not exciting for everyone, but I must say that socially responsible investing truly is exciting. ESG, as Laura mentioned, environmental, social and governance. So I’ll talk just briefly about some of the investment tools that we really get excited about.
Saul: On the environmental side, we have a fund that looks at companies that are doing work specifically with water: so technologies for clean water, efficient uses of water, and water distribution. On the social side, we work with a bond company that is lending money for really impactful projects. So just in Minneapolis they helped to fund a low-income housing project. They are working to fund YMCAs and libraries. So really projects that there really are benefit to communities.
Saul: And on the governance side, we work with a fund that looks all across the world and picks out the companies that are really paying attention to female and gender equality, both in upper management and on their boards. And research has shown that when you get more diversity in these positions of power, often times these companies perform better.
Laura: When we talk to clients about socially responsible investing, we do say that there is a cost trade off that the data is hard to tease out. But our best estimate is that socially responsible investing costs about a quarter of a percent more per year because socially responsible investing needs to look at not just is an investment a good investment, might it make you money, is it proper for risk management, but also does it have a chief officer of sustainability? How is it doing in terms of women in leadership positions and other gender areas?
Laura: And so these extra steps do create an additional cost, but we think it’s a small cost because we’ve been doing this so long and in such volume that we’ve been able to really pair those costs back. And again, our clients are getting a return equal to those of non-socially responsible portfolios. If you’re interested in socially responsible investing, there are lots of good alternatives for you.
Laura, the founder of LWP, is a Senior Wealth Manager, Chief Investment Officer and Shareholder. She has a master’s degree in tax and is an excellent listener. While she is a sophisticated financial planner with experience in complex issues, her priority is ensuring a financial plan works for people.
