Tag: Impact Investing

Above image – ©metamorworks, istockphoto

As a woman who is passionate about gender equity and fighting climate change, the last year has been a roller coaster. Russia’s invasion of Ukraine and the resulting energy crisis in Europe has led to a renewed global emphasis on oil and gas production, and despite the billions of dollars allocated to renewable energy infrastructure in the Inflation Reduction Act passed by congress in August, the transition to a carbon neutral economy seems further out of reach than it did just a year ago. In my opinion, the reversal of Roe v. Wade set women in the United States back decades, and around the world, progress towards equal rights for women has slowed.

As an investor who cares about the social and environmental impacts of my financial decisions and as an employee at LongView Asset Management – an advisory firm that helps clients align their investments with their values – I’ve felt the anxiety of watching the market slide into its worst year since the financial crisis of 2008. ESG investments underperformed the broader market due to many sustainable funds’ heavy reliance on technology stocks and exclusion of fossil fuel stocks, which have soared in value as the world scrambles to secure near-term energy resources.

Over the last year, sustainable investing also weathered attacks from all sides of the ideological spectrum, with environmentalists calling out the financial industry for greenwashing, while right-wing politicians in a growing number of states denounce ESG investing as “woke capitalism” and pursue legislation aimed at boycotting financial institutions accused of undermining the fossil fuel industry.

Despite all the chaos, I feel strongly that now is a critical moment for women to take control of their finances and the direction of ESG investing.

I entered the field after working as an environmental journalist, where I saw how much of a difference it makes to local communities and ecosystems when a company cleans up its act. I decided to pursue a career where I can help make this the norm. LongView is a certified B Corp, which means we’ve made a legally binding commitment to consider people and the planet in addition to profit, and we’ve gone through an exhaustive assessment to prove that our policies and practices are in line with our mission as a sustainable investment firm. The majority of our clients are women, and I know first-hand that women are eager to use their money to drive positive change.

Women are at the forefront of the movement towards a new kind of capitalism – one where companies don’t simply focus on maximizing profits for shareholders, but consider their impacts on all stakeholders, including the environment, their workers, and the communities in which they operate.

This interest is reflected in the workplace and in the way we invest.

Companies where women hold top leadership roles tend to meet higher environmental, social, and governance standards than their industry peers.

When it comes to investing, women have helped fuel the explosion of ESG into the mainstream. In one recent report, 79 percent of women said they want their investments to reflect their values. Another survey found that women are almost twice as likely as men to say it is extremely important that the companies they invest in incorporate environmental, social and governance factors into decisions and policies.

Women have historically been underinvested compared to men, however interest in investing among women has risen by 50 percent since the start of the pandemic.

With women expected to gain control over much of the $30 trillion in baby-boomer wealth over the next decade, the growth potential for the ESG industry is huge.

Given these trends, it’s unlikely that sustainable investing will be a passing fad. Still, the industry is facing some serious growing pains.

While federal and foreign regulators try to pass new rules to raise reporting standards, right-wing lawmakers have thrown sustainable investing into the fray of America’s culture wars.

In the last year, Republican state treasurers collectively pulled more than $1 billion from Blackrock – the world’s largest investment company – and blacklisted other major financial institutions including JP Morgan, Chase and Goldman Sachs due to company policies that allegedly harm the fossil fuel industry.

In 2021, Texas became the first state to pass laws that stop local agencies from doing business with banks that offer ESG funds or policies – a move that caused the five biggest lenders in the US to pull out of the state, ultimately costing local agencies an estimated $303-$532 million in additional interest. Since Texas’ decision, twelve other states have followed suit with legislation that attempts to outlaw aspects of sustainable investing.

On a brighter note, the US Securities and Exchange Commission, European Financial Reporting Advisory Group, and the International Financial Reporting Standards Foundation all proposed new rules in 2022 to standardize reporting on greenhouse gas emissions by companies and reduce confusion and mislabeling in the investment industry through detailed disclosure on ESG strategies and ranking systems used in funds.

The three regulatory bodies expect to finalize their proposals within the next 12 months.

Going forward into 2023, there are still many hurdles for ESG investors to overcome. The potential for continued underperformance of sustainable investments, a general economic slowdown, and new attacks from the right could all dampen the appetite for ESG investing in the short term.

For women, I see the debate around ESG as an opportunity for us to reflect on the outcomes we want to achieve and the investment strategies that would best align with our goals.

In the past, divestment has largely dominated the ESG conversation. This exclusionary approach screens out bad actors while investing more heavily in companies and industries that meet high social and environmental standards. More recently investors have also focused on ESG metrics to manage risk and boost performance.

As we head into 2023, a new generation of investors are pursuing positive change by filing and voting on shareholder resolutions and engaging directly with company management around specific issues. In 2022, shareholders filed a record number of proposals related to social and environmental concerns.

ESG issues are women’s issues – we not only want to protect the environment, but we also want to invest in companies that treat their workers with dignity, that protect women in the workplace at every step in the supply chain, and that adopt policies that increase diversity in leadership. By leveraging our power as shareholders, we can push companies to adopt policies that bring us closer to gender equity and carbon neutrality.

At a time when progress on issues that women care about seems to be backsliding, shareholder engagement is one way forward-and it’s gaining momentum. Despite the trials we are likely to face in 2023, this is a silver lining.

Article by Leah Cantor, Sustainability Associate at Longview Asset Management LLC, a registered investment advisor in Santa Fe, New Mexico, that focuses on socially and environmentally responsible investing for individuals and organizations. Leah led the firm in becoming a certified B Corporation in 2018 and is responsible for helping the firm continually improve on its sustainability commitments. Prior to pursuing a sustainable business career, Leah worked as an environmental journalist. She is a passionate believer in money as a tool for positive change.

Above – Cameron with her kids for Working Mother magazine. Courtesy of Cameron Barsness

Our care, sincerity, reliability, and competence show clients who we are—and achieve results.

Compared to just two years ago, clients are far more aware of ESG as an investment approach. This includes awareness that ESG is, to some, a controversial topic. For example, many clients are aware of the term “greenwashing” — and are asking questions about how to avoid it.

Part of our role as advisors is to dig into investment opportunities to ensure we understand the mandates and how they match up with clients’ goals for a more sustainable future. Then, we have conversations with clients about how they can be part of a forward-looking push toward a better planet and society in five, 10 and 20 years.

None of this works without trust. Trust enables mutual understanding—between clients and advisors and within couples and families. As I think back on my 17-year career and look forward to 2023 and beyond, I see more than ever that trust is the touchstone.

Trust & Vulnerability

A book that’s made a profound impact on me as an advisor is Charles Feltman’s The Thin Book of Trust. “Trust is choosing to risk making something you value vulnerable to another person’s actions,” Feltman writes.

What could be a better definition of the trust we require as advisors? Feltman goes on to say that trust is built — or eroded — in four different categories: care, sincerity, reliability, and competence.

I am struck by how important these four categories are to our work as advisors, leaders and investors. At a time when trust in government, news media, science, elections, police and companies is eroded, people are yearning to experience trust.

I’ve learned to think in terms of Feltman’s four categories as I seek to be my authentic self. That’s how I can best serve clients.

Care

Feltman defines care as “the assessment that you have the other person’s interests in mind as well as your own when you make decisions and take actions.”

One might argue that in our business care is a fiduciary standard. But we have to communicate care on an emotional level.

First of all, we do so by listening. The worst thing we can do as advisors is assume we know what a client is asking by answering the question we hoped they asked, rather than simply answering the question they really asked.

Second, we share ourselves. Early in my career, I watched as clients shared many intimate details about their families, their struggles, and their dreams. This sharing wasn’t reciprocated by advisors, which I interpreted to mean sharing would somehow make me NOT trustworthy.

But what I’ve learned through my career is sharing about my challenges in raising children, marriage and family forms a deeper connection.

For example, I can never hide the fact that I am first and foremost a mother and that experience has shaped me in profound ways. I cannot decouple my business self from my mom self (or my daughter self). These aspects will forever be intertwined and will deeply shape my view of the world.

Sincerity

Feltman calls sincerity “the assessment that you are honest, that you say what you mean and mean what you say; you can be believed and taken seriously.”

Beyond basic honesty, the need here is to “walk the talk.” Clients need to believe that you believe in and do what you tell them to do.

If you recommend certain investments or investment styles, I believe it is important to invest in a similar fashion (of course, there will be variably due to suitability and income/asset level thresholds). As I sit with clients, I always want to be able to say that I, too, own that investment or would invest my own money in the fund. 

Reliability

“The assessment that you meet the commitments you make, that you keep your promises” is how Feltman approaches reliability.

We all know how client meetings go. We feverishly take notes, talk about the follow-up items and then leave that meeting going directly to the next meeting or task at hand. Circling back to follow up items discussed in a meeting can be a challenge — but one that must be met.

Say when and how you can complete something. It is better to commit to a date further in the future than to be quiet and hope that clients aren’t noticing if deadlines are not being met.

Perhaps most importantly (and maybe hardest) is to say when you don’t know how and when you will get back to the client with the information. In fact, what clients will remember longer is the “reliability piece,” not that you didn’t know the answer in the moment.

Competence

Competence, writes Feltman, is “the assessment that you have the ability to do what you are doing or propose to do.”

When you are young in your career, it’s not experience but education that garners clients’ trust in your competence. That is the very reason, at 24 — and just two months into my first job — I dove quickly into the CFP® process. I finished my education component and passed the CFP® exam before my two-year anniversary at my firm — long before I’d fulfilled the three-year experience requirement.

To build competence, I also leaned into my weak spots. When I first started in the field, I hated reading the Wall Street Journal. But my then-boss said it was requirement to be more conversant in meetings and become a better writer.

So, for Christmas I asked for the Wall Street Journal (paper version) from my dad. For years, I diligently read it on the bus to work. Yes, I was that person trying to fold and unfold a newspaper on a crowded bus (sometimes standing up). But I learned a lot — and I became a better, more confident writer because of it. Over the years, my newspaper of choice has changed, but the one thing that hasn’t is my need to read publications and stories outside of my wheelhouse.

Another key aspect of competence is captured by a comment my business partner often makes: “It’s really important to know what you don’t know.”

I remember clearly one very difficult meeting with a client talking about investment returns and thoughts on future market movements. She asked, pointedly, “Why do you guys always have all the answers?”

In that moment, I realized that in an effort to be confident and inspire trust, we inadvertently eroded trust. I stopped the conversation and said, “You’re right. And we don’t. The honest truth is that our job is to do our best to digest information about trends, economics and future possibilities, and help communicate that to clients. The reality is it’s all our best educated guess. So perhaps the most honest answer is that we don’t know for sure.”

It was uncomfortable, to say that least. But it was also disarming. The conversation became more open and less defensive, just with the admission of vulnerability.

Closing Thought

To serve clients well, we must gain their trust. We then nurture and maintain that trust by delivering outstanding client experiences in pursuit of client objectives, including sustainability and impact. To do so, we need to be our authentic selves.

Article by Cameron Barsness, CFP®, principal at Seattle-based financial advisory firm Kutcher Benner Barsness & Stevens, Inc. In her work as a primary financial planner to many clients, Cam is drawn to the financial coaching aspect of the business. She leads conversations around values, goals and the integration of these facets into clients’ investment portfolios and broader financial lives. These conversations often lead to strategies around charitable giving, impact investing and environmental, social and governance (ESG) issues. Cam then develops tax-advantaged giving plans and, together with the firm’s investment committee, identifies suitable investments.

Cam joined the firm in 2006 as an Associate and became a shareholder and Principal in 2015. In addition to her work with clients, she serves as the firm’s Chief Compliance Officer and, with her human resources hat on, its Chief Happiness Officer.

In the local community, Cam is active in the Seattle Philanthropic Advisors Network (SPAN). She is also a regular participant in Seattle Mothers in Finance events. In the national financial advisor community, Cam volunteers with the CFP® WIN (Women’s Initiative) mentor program to help other female CFP® certificants and candidates to gain confidence and navigate their careers in finance.

Cam and her husband Erik live in Renton with their daughter Reece and sons Thymer and Ollie. She is a competitive athlete at her core and is happiest when outside hiking, camping or soaking up the summer sun.