Ep 62: How to Align Your Values With Your Investments: Sustainable Investing 101

Today we're talking about something near and dear to my heart, and something I talk to my clients about all the time, and that's sustainable investing.  What is it, why would you want to consider it, what should you consider, why is it trending, and what you need to understand about sustainable investing is all going to be covered today. We are going to dive into the environment, social change, governance, and everything sustainable investing covers. Maybe you're cautious about it, or you're excited about it. All different types of emotions are welcome here. So get ready, I have a lot to talk about today. And, please, don't forget to share this with the people you team up with to make those crucial financial decisions in your life.

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Securities offered through LPL Financial, a member of FINRA/SIPC. Advisory services offered through Advisors' Pride, a SEC registered investment advisor. LPL Financial, Advisors' Pride, Forethought Planning and the guests of Thrive For[e]ward podcast are separate and unaffiliated parties. Lisa Harris and Lisa Harris & Co are not affiliated with Forethought Planning, Advisor's Pride, or LPL Financial. The views expressed here are those of the participants, and not those of Forethought Planning, Advisor's Pride, or LPL financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. LPL Financial and Forethought Planning do not offer legal services.   

Transcript

Shannon Foreman  0:00  
Hello friends welcome to the Thrive For[e]ward podcast on today's episode, we are going to bring it back to something we started talking at the very beginning of our podcast about which is sustainable investing. It is something near and dear to my heart, something I talk to my clients about all the time, and I wanted to really talk about it with you. So actually going to focus on this topic all month long, breaking down just different topics within it, because it's such an overarching big piece. But in our first episode today, we are going to talk about sustainable investing like one on one, what is it? Why would you want to be investing in something like this? What are things that you should consider? What should you be cautious on? Why is it trending? Maybe what should you understand about that trending topic, and so much more. So if you are wondering about what is this aspect of investing that makes impact in the world, thinking about environment, social change, governance, all of these different topics that are hot, and you want to understand a little bit more, maybe you're cautious about it, or you're excited about it. All different types of emotions are welcome here, press play, and continue to share the podcast with your friends, especially if you think that it's impactful. So now on to the good

Shannon Foreman  1:17  
stuff. Hello, friends, welcome to the Thrive Forward podcast, I am talking about sustainable investing, and we're gonna break it up into a couple different episodes in the month of October. And one of those reasons is it is a complex topic, and we've talked about it before on the podcast. However, I wanted to dig in a little bit deeper into some of the areas that we don't always touch on when it comes to sustainable investing. First, I'll give you a quick overview about what the heck is sustainable investing, what does it mean? Why should I consider it? Again, anything that we are talking about is purely for educational purposes, none of this is deemed as a recommendation for something that you should employ in your portfolio, rather to have conversations with your financial advisor, or anyone that you partner with or to do your own research as well. So we'll talk about just kind of intro 101, we'll dig in a little bit deeper, we'll not only talk about like, what does it really mean to be investing sustainable, as well as what are some other things that we should be doing in our lives? besides just where are we putting our money. So on today's episode, we are going to do your one on one refresher to sustainable or sometimes talked about as E F G investing. So my friends, when we start to think about sustainable investing, it can be classified in a couple of different categories. Sometimes people refer to it as sustainable investing, sometimes they talk about it as socially responsible investing ESG investing, and there are a lot of different parts in how we actually get to the strategies that end up in your investment account. So there are the ability for us as advisors, as mutual fund companies, as investors, portfolio managers to literally look at the companies that are inside your portfolio, and see if they align with some of the social issues that are happening right now. For instance, we talk about pay equity. That's a huge topic right now, especially as we come into financial planning, having conversations about female empowerment, pay equity, and making sure that we're closing that gender gap on what a woman makes versus what a man makes. That is a topic that is dealt with. Within the sustainable investing. Climate change is another one diversity within leadership. And so at the leadership level, not just the executive level, but also the board level of each individual company, gender equity, affordable and clean energy, industry, innovation and infrastructure. What type of clean energy are they using? And one topic that we don't always talk about directly is proxy voting. Have you ever got in the mail a packet that says, you get the right to vote on this and this and this? And you're like, what do I get the right to vote? Well, you're usually stock owner in some company, that you get a letter and they are putting forth something to their shareholders that you get to vote on. Most individuals don't actually do that or they execute the right to their proxy vote to their mutual fund company or their financial firm that they work with. So you don't actually get that say, as opposed to when you're utilizing a sustainable investment firm. They're looking at the strategies of what it is that that particular company is focused on. For instance, if if you're looking at clean energy, if you're looking at gender pay equity, and we're looking at a true ESG format, when that portfolio manager goes to vote on proxy, or vote as a short shareholder on your behalf, they're going to ask more indeed, in depth questions, not just related to profit. So this is the opportunity where we get to find out more information on what it means for the company to offer equal pay. What is the consensus of employees within the firm's? So why would we want to know all of this information, right? Shannon, I just want to invest and grow and be able to retire someday, right. And my friend, I totally understand all of that ESG, or sustainable investing allows for us to take a deeper dive into where our money is actually being invested in, how many of you can look at your 401k, or your investments and know exactly what companies you're invested in.

Shannon Foreman  6:17  
It's probably pretty hard for the end user to be able to understand all of that, especially if you are invested in mutual funds. Because if you're a mutual fund, you actually own this pretty basket of stocks and bonds or something that is geared towards a specific end goal, right? Maybe it's a growth strategy, maybe it's an international strategy. There could be emerging markets, there could be all these different, I would loosely say, quote, unquote, goals that a mutual fund might have your owner in that mutual fund, but inside that mutual fund, you have several stocks, or bonds or investment instruments, that that portfolio manager of that mutual fund is making the decisions on ownership for you. That's why you pay a fee to get into them. That's why you pay internal costs associated, because they're doing all the investment work for you. Right? Do you know what they're picking? Do you know what their philosophy is? do understand all of those things. And I think sometimes, we blindly look at what our investments are in either trust or advisor, or trust the mutual fund company, or purely look at returns and how things are growing? versus what is it that we're actually growing in? What are we funding? And as we exit 20 2020, for sure, we've exited, but also exiting 2021, where we've started to have a lot of these conversations around, what are our specific impact, right? From a social perspective, what are impacts to our communities, doesn't mean that we have to have the same beliefs, it doesn't mean that one way is the right way. And it doesn't mean that you have to align with a specific, dare I say political party, to want things to be done and taken care of. For instance, for me, I want a planet for my kids to live on. And I am concerned about how we treat our planet, what isn't important. How are we such a consumer strategy society, that we always have to have the things right, and trust me, I fall into it to you guys, I'm not perfect, and nothing that we will do has a perfect answer. Sustainable investing isn't the only answer to get us to where we want to go. However, if you're going to do just one thing. maybe think about where your concentrated wealth is, and what are the things that you're invested in, and the companies that you're invested in and how they make a difference, right. So for those of you who love using them good old reusable bags, you are protesting for change whatever topic it might be in, you're worried about what companies you purchase from and where you buy, the items that you utilize in your home. You're worried about the impact that the items or companies that you purchase, from have on animals have on our communities have on jobs being created, or maybe you're advocating within your company for a better maternity leave policy and that women might have the same pay structure as a man in an equal position. If that sounds like something that is your jam, then this is probably the right investment vehicle for you to explore not saying that you have to do it. I'm not saying everyone has to do it. I am a firm believer that we should understand how our money flows and what that impact is from the time we Buy something to the time we invest something, I think that it's important for us to understand where our dollars go, and what's been done with them. So that's where sustainable investing does come in. Now you can do this yourself, right? You can look up the company, you can understand, you know, what is the makeup of their company is in line with the things that are important to you. One thing that I would caveat on, just because you invest in sustainable investing, it does not mean it's changing the world, right? I want people to understand that there are so many things in our world that we have to do. And we have to work together for in order for this, you know, change and betterment of our world, a better place for our kids, right? That's what I always say, like, what is the better place for our kids, we can't just do one thing. But we don't have to do like the 80 million, we just all need to be able to work together. And it does feel very overwhelming at some point where you're like, I have to do all of these things to ensure that we've got a better place or do I just absorb and live naturally in my day and blissfully, my rose colored glasses that the reality is, we can't put our rose colored glasses on anymore. And we've got to look at things for what it really is. Our world is warming, whether you want to agree with me or not, I'm happy to have the conversation with you. It's a safe place to be able to discuss, there's no debate needed. In fact, I'm very open to others individ individual opinions as long as you follow it up with a bit of factoid, right. So our world is warming. I can quote a bunch of statistics for you. I can read a bunch of mumbo jumbo, but the reality is it's happening. We're experiencing more extreme weather. We are experiencing more extreme opposition, from all different things, right? We're living in a very polarized world. How do we really come together and have a greater conversation to create change? It's being able to put aside all of the noise. What is it that we're doing? What are the companies that we're working for? What are the impacts that they're going to make? How are they striving to do better? When sustainable investing first started, they said, You know what, we're just going to exclude anyone that isn't even on our same page, right? And, sure, the probably didn't operate very well, right. That's where we started to see, if you wanted to do better and investing in companies that did, quote unquote, good. You had to sacrifice returns. And just like anything else in the industry that I work in, and this wonderful financial industry, things had to evolve, things had to change, we had to look at things and just say, you know what, just like life, we can't just exclude people because they don't believe the same thing that we do. Rather, we have to start looking at what are those impacts? And are they working towards something? What's the progress somebody is making? So rather than just taking it and screening it and saying, x? No, no, we're not going to include you in this club. But or investment, right? Like I'm just talking about kind of like the in crowd and the out crowd.

Shannon Foreman  13:32  
They started to evolve to say, here are the different categories that we want to focus on. And started to look at environmental social change and governance and governance, Bini, the structure of the company, how the company is operated. The rules and regulations within that Corporation, social change being the things that are the people of the organization are the people and impact of whatever that organization does, right? client privacy, that's a big topic. And I think from an element of like polarization and we say, I've heard this way too many times like sustainable investing is only for liberal progressive people and the reality is not not the case. You can love the planet and have different political views right? You can want privacy for your data and not be in that state right you can want social change and adaptation for police departments and equal pay and hat like it is not a this or that it could be a both and and I firmly believe in order for us to take change, we have to look at both of those things. So I want to I don't want you to think that it's just got to be all of this thing together, right? Like you either say it or you don't either commit to it or you don't. It is taking a step forward to understanding so that socialists Change bucket not only includes, as I mentioned privacy policy, right? Like, what does the company do with your data? Do they go sell it to somebody else? What do they do for equal pay? I don't think we should argue on that topic, right? Everyone should be able to be paid the same if they're doing the same work, that no matter gender, or gender, you know, identity, right? We can even start to talk about some of those things. And how do we ensure that if somebody has equal pay no matter what their gender identity is, and then we start to think about the overall client experience, or the client experience being the end user of whatever product they're producing? And the other piece might be product or service, I should say, the other piece is, what's the employee experience? Have you ever worked for a company that you're like, Oh, I hate going to work. It isn't valuable. We're not doing anything. There's no purpose, they're not hearing me. I don't feel heard. I just feel like I come and I check a box and I get a paycheck. And maybe I'm not even getting a good paycheck. Where do I go? That and then maybe you take an employee satisfaction survey, and you express all of those interests. So we're, as a sustainable or ESG investing, they're starting to look at all of those pieces. What is the true employee satisfaction, as somebody that runs their own business, employee turnover is something that I don't ever really want to have, right? Because there's so many different impacts. And when we look at big corporations, and like the turnkey of always, having somebody starting in there always been a training session, I remember starting out as an advisor, like are the same people still advisors that I started with in my first like cohort class, or that I started with in my licensing classes, not everybody still is. And that turn and burn strategy that we have. As a, I'll beg to differ consumer capitalist type of society. And I'm not saying capitalist type of society is a bad thing, please don't put me in a box. I'm just saying this GO GO GO grow, grow, grow, type of society, can turn and burn our staff. And so we're starting to look at those pieces of things within an ESG portfolio. And then the E or the environmental part of it is going to be what is that impact of any product or service that we're having on the environment? Is it making good? What is the disposable impact? If we are, you know, call it green, quote unquote, green, green company, and we use electronics? How do we dispose of that, right? I had a client asked me, you know, I'm all for electronic electronic vehicles. But there's a battery that has to be disposed at some point in time. Where does that battery get disposed at? And we have to think through the entire process, just because it's one way or another doesn't mean that it doesn't have an impact, right? What happens if a windmill broke? What happens if solar panel breaks? Like how do we recycle, reuse, reduce some of those impacts to Because ultimately, I really do think we all want the same thing. We all want a world to live in. We all want to be treated equally. And we want to make sure no one is screwing anybody over. And I think that that's where we start to look at these topics. And sometimes people are saying like, well, it's just this way or the highway and i i don't believe in that. I always will believe in not but but I will believe in and, and together, right? We can do things differently. So rather than separate and set aside, we use the welcoming version, this and right, we can have both things. Now, we can't continue to see our planet subside. If we don't have a place to live, and a planet to live on, then none of the other strategies I talked about on this podcast about retirement planning, about tax savings, about giving donations, behavioral finance, all the other things I talked about in the past, they mean nothing if we don't have a planet to live on. And that's where we really got to start to look deeply inside. Do you want a planet to live on? Do you want your kids, your grandkids, this other community to have somewhere to live? Then let's start to think about those impacts. And those impacts aren't just where we shop, how we dispose of our garbage, all of those things. It's also like what are the companies that we're investing in? Are they supporting the same behaviors that we want to be able to see, are they building up the next generation and making things possible for the next generation? How are they being held accountable to what it is that they say they want to do?

Shannon Foreman  19:59  
Hey, friends, I just wanted to take a pause on today's episode, I know that there's a lot that we are unpacking around sustainable investing, if it is making you a bit cross eyed, but you're still interested in it, and you're like, geez, Shannon, I really do want to be able to do something around this, but I don't think that I have the capacity to be able to do it myself. I think that's something important that we need to understand, right? What is our capacity, when is it important for us to lean on others for this might be the space that they really excel in. And you know what we're here to support you, why not schedule your 30 minute complimentary wealth assessment with us today, simply go and express interest by visiting our website at forethought. planning.com, backslash wealth assessment today, and schedule that, don't delay. Don't sit back in that chair and say, maybe someday I'll get to it, or I'll add it to my to do list. Just go right now. Go to forethought. planning.com, backslash wealth assessment, and schedule your time today. Now back to more on sustainable investing. So that's kind of like this overarching sustainable investing. Why? Why would I want to look at something like this, Shannon? Do I have to sacrifice rate of return in order to do good? Well, there's risk with with every single type of investment, especially when we start to talk about the economy and growing in a fleet inflation and all these other things that can play a part. So you have to really personally assess whether this might be right for you. Now, there are going to be things that don't provide huge up swings. In in value, most ESG sustainable investing aren't gonna have oil in their portfolios, which don't provide these, you know, tandem big swings, when we see oil prices go up or down, we also see those market fluctuations as well. So that can provide pretty big swings. For for what it is that we're being invested in now, there are also risks associated with ESG and sustainable investing, regulations, things that might change, supply and demand, how are we going to be able to have these companies be able to execute on the things that they're talking about? Perhaps are we looking at, in order to do these things, your taxes have to change? What are those social movements looking like? How do we what is the financial impact. So just like any investment strategy, you need to assess whether or not it is good for you. And you need to diversify yourself as well, just like I talked about, in what I'll refer to as conventional investing, you should still have a diversified portfolio that diversified portfolios, kind of like different types of pie, I like to correlate things to food all the time. And frankly, I really like pie. So when you look at different asset classes, that's actually 92% of your overall success. Whereas 3% of your success is luck. And that's what everybody wants. I was at an event recently, and this woman came up to me and she was like, I want you to tell me all of the things that I can be invested in to like, take risk, because my husband's really big on risk. And we're interviewing advisors right now. And all of them just want us to be like, see, I was like, Yeah, I get that. And also, I just met you. So I'm not gonna give you advice on the fly. And you need to think about not just taking risk, because that return might not actually correlate, right. Like, we don't always talk about the bad stuff, we start talking about the good stuff, right? Oh, I really score big on this one stock. Yet, did you? Or what was the time that you lost before that? I think we need to start to think about some of those things. And that's the same thing when it comes to ESG, or sustainable or Sri investing is making sure that you have those different pie items or different flavors within your portfolio, and you're not just concentrated in one area trying to take on this great return that you're going to get or get rich quick, right? It's not a it's not a strategy for creating immense amount of wealth right away. In fact, that strategy doesn't really exist for most individuals.

Shannon Foreman  24:29  
I sometimes I want to say like, you're more likely to get hit by lightning than you are to win the lottery, or strike it really big, right? And that's where we've got to be careful when we start to think about any investment strategy. However, if you do feel like you want to create things that align with causes that are really important to you, and that is something that maybe you should consider sustainable investing for. I want to caution anyone saying that it is The way to do good, right? I think it's a way to create impact. And I think we create impact in lots of different ways in our lives. And if that's one way that you want to create some sort of impact, I think, like any investment strategy, you can't just give up that control to someone else, you need to stay educated, or allow that person to continue to educate you on the things that are happening, like, why are we making the decisions that we're making to be invested in these types of portfolios? How do they align with the things that are important to me. So that is the general like bucket of sustainable investing. So just to recap with you, and again, we're going to dig into some of the very specific areas of sustainable investing on a couple other episodes, and we're going to talk on what are the other things that maybe we can do to create impact in our lives, besides just the investments that we are invested in. But as a recap, there are lots of different ways that you can identify ESG investing. ESG stands for environmental, social, and governance, those are the different categories of focus, when it comes to an investment strategy in that space. There is also socially responsible investing and sustainable investing, they all take a little bit of a different category, they're either going to, like I talked about some of that old school mentality of just saying, nope, if you don't belong to this criteria, we're not including you, or the criteria of You know what, we see that you're doing good. So we're going to include you in this space. And then there are other areas where they might be filtered for different types of specialty of focus in different areas. So there are a lot of different ways to do those things. If any of that stuff sounds like something you want to do yourself more power to you. If you are very curious in understanding what this is, but you're like, I don't have the time or patience to even deal with that. That's where you start to bring in a professional and have the conversations about what that looks like. Is this something that you do or specialize in? And I would caution you, there are so much conversation around Sri, sustainable, environmental, all of the things lately, especially since 2020. We need to caution ourselves and have a good understanding of the individuals that we're working with. And the companies that we're working with, because a lot of people are saying that they do this, but they're just slapping a bandaid on it and kind of doing it. It's called greenwashing as opposed to companies that are really dedicated to making change and have been leaders in this industry and space for a long time. So please be cautious with with whoever you partner with, please be cautious of the investment strategies and do not be afraid to ask questions. This is something that you are interested in advocating for for yourself and your wealth picture and you do not have a partnership are ready we would love to be able to assist you in your wealth management and investment management as well. You can simply just go to forethought. planning.com backslash wealth assessment, and schedule your 30 minute complimentary complimentary Good Lord, can I speak today, your complimentary 30 minute session with me. And we will move forward in that process and find out if we would be a good fit for each other and tell you a little bit more about what we do. But also find out really what is it that you need from us. This isn't all about us. It's your financial plan. It's your desires, it's what is important to you. So you become the heart of everything that we talk about and how we do. And we don't have a cookie cutter approach. We do it completely based on each one of our clients and create a service system for each one of our clients that is very much Customized just for you. So if this is something you want you've been waiting on, don't wait any longer. Go to forethought planning comm backslash wealth assessment and schedule today. Now

Shannon Foreman  29:16  
don't be afraid to subscribe to our podcast to continue with this series. Listen to this episode again. In case you're like Whoa, that made me just go back and listen to our previous episodes on sustainable investing. I encourage you we will also have on our blog, resources and things that you can explore around sustainable investing. And of course, we are here to help you make an impact not only in your life, but in your family's life and your communities life. As always, my dear friends, you are completely worthy of belief responsible and impactful. Well the views expressed here Are those of the participants and not those of forethought planning advisors pide, or LPL? Financial all investing involves risk including loss of principle. No strategy assures success or protects against loss securities are offered through LPL. Financial and member of FINRA and SIPC advisory services offered through advisors pride and sec registered investment advisor LPL Financial Advisors pride forethought planning and the guests of the Thrive Forward podcast are separate and unaffiliated parties

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