YourStake, YourStory

Revalue is a values-driven investment firm founded in 2013 by Angela Barbash, an experienced investment advisor with over 20 years of service. The firm's mission is to assist individuals in aligning their finances with their values by divesting from the extractive economy and investing in the regenerative economy.

Revalue focuses on providing investment options in the public markets that support impact-oriented communities and organizations. They work closely with clients to identify their desired impacts and narrow down their investment preferences, including the type of organizations, investment structures, and specific impact areas such as community development, renewable energy, or local businesses.

Taking a partnership approach, Revalue offers proactive due diligence on investment opportunities. They maintain a data room where clients can access information on funds, community investment funds, and other vetted investments. Additionally, Revalue encourages clients to scout for direct investments in their communities, such as local businesses or projects. The firm provides guidance and support in evaluating these opportunities to ensure they align with the client's investment policy statement and risk tolerance.

Revalue's approach to values-driven investing goes beyond traditional financial metrics. They prioritize qualitative factors and impact metrics, allowing clients to invest in line with their values and contribute to the transition from the extractive economy to the regenerative economy.

With a team of eight employee-owners, Revalue has experienced significant growth and serves a diverse client community, including accredited high net worth investors, institutional investors, and non-accredited wealth builders. Over the past decade, they have educated thousands of individuals, and currently have nearly 200 clients in their community.

Revalue's success in aligning finances with values has inspired other advisors in the industry. To support this growing interest, Revalue recommends starting with a small group of highly motivated clients to beta test their approach and gain valuable experience. They also emphasize the importance of joining peer-to-peer learning communities within the industry to share due diligence efforts and learn from one another.

In conclusion, Revalue is a pioneering values-driven investment firm that assists clients in aligning their finances with their values. Through a partnership approach, they help clients divest from the extractive economy and invest in the regenerative economy. By prioritizing impact metrics and qualitative factors, Revalue enables clients to make investments that reflect their values and contribute to positive change in their communities.

Revalue assists clients in divesting from public markets and investing in impact-oriented opportunities in the private community markets. They believe in aligning clients' finances with their values and helping them make a positive impact through their investments.

When clients express interest in divestment and reinvestment into regenerative finance and the local economy, Revalue starts by assessing their risk tolerance and building an investment policy statement (IPS). The IPS helps identify the appropriate percentage of the portfolio that can be allocated to impact investments, ensuring clients are comfortable with the level of risk involved.

Revalue offers two tracks for clients to explore. Some clients already have knowledge about divestment and impact investing and come to Revalue specifically for their expertise in these areas. Others may have personal finance questions and needs and are looking for a values-aligned advisor. For the latter group, the concept of divestment may be new, and Revalue educates them on the possibilities and benefits.

The next step is to narrow down the scope of the impact investments based on the clients' preferences. Revalue helps clients target the specific impacts they want to have, such as investing in solar energy or supporting local food systems. This process helps clients navigate the vast array of offerings in the private markets and makes it more manageable.

Revalue has a partnership approach with their clients. They proactively look for investment opportunities like community investment funds and CDFI notes, which they include in their data rooms for clients to review. On the other hand, clients are encouraged to be scouts for direct investments, such as local businesses or projects in their communities. Revalue provides guidance and due diligence support to ensure that these investments align with the clients' IPS parameters.

Revalue's approach to impact investing in the private community markets differs from the traditional focus on quarterly earnings and benchmarking against the S&P 500. They take a more qualitative approach, considering the broader impacts and outcomes of the investments. This approach allows clients to make investments that align with their values and contribute to the transition from an extractive economy to a regenerative one.

For advisors interested in incorporating impact-oriented opportunities in the private community markets, Revalue suggests starting with a beta group of highly motivated clients. This group can help test the process and provide valuable feedback. Revalue also recommends joining peer-to-peer learning communities like Rad Planners or attending conferences like ESG for Impact to connect with other advisors and share due diligence efforts.

Overall, Revalue's mission is to assist clients in divesting from public markets and investing in impact-oriented opportunities in the private community markets. They believe in the power of aligning finances with values and are dedicated to helping clients make a positive impact through their investments.

Revalue, as highlighted in the podcast episode, places great emphasis on assessing clients' risk tolerance and developing an investment policy statement (IPS) to guide their impact investments. This approach ensures that clients' values and financial goals are aligned and that their investments are tailored to their specific needs.

When clients express interest in divesting and investing in impact-oriented communities, Revalue begins by assessing their risk tolerance. This assessment goes beyond just their financial ability to take risks and also considers their emotional risk tolerance. By understanding clients' risk tolerance, Revalue can determine the appropriate allocation of their portfolio towards impact investments.

The next step in the process is the development of an investment policy statement. This statement outlines the percentage of the overall portfolio that is suitable for impact investments and sets the direction for the client's investment strategy. In some cases, the IPS may also serve as a destination point, outlining the desired composition of the portfolio in the future.

Revalue recognizes that impact investments in the private markets can be overwhelming due to the diverse range of offerings and the lack of organization in this space. To address this, Revalue takes a partnership approach with its clients. They proactively search for investment opportunities such as community investment funds and CDFI notes, which they then make available to their clients. On the other hand, clients are encouraged to act as scouts for direct investments, such as local businesses or projects in their communities. Revalue provides guidance and due diligence support to clients as they explore these opportunities.

Throughout the process, Revalue acknowledges that knowledge and savviness about investing are not determined by wealth or income. They approach each client with an open mind, recognizing that clients may come from diverse backgrounds and levels of financial literacy. Education and a learning journey are key components of Revalue's approach, ensuring that clients have a solid understanding of impact investing and are empowered to make informed decisions.

Overall, Revalue's emphasis on assessing risk tolerance and developing an investment policy statement reflects their commitment to aligning clients' values with their financial goals. By tailoring impact investments to each client's unique needs and providing ongoing support and education, Revalue aims to empower clients to make meaningful and impactful investment choices.

Welcome to the latest episode of "Your Stake, Your Story," in this episode we welcomed Bill Davis, the founder of Stance Capital. With our co-founder and host, Gabe Rissman, the discussion navigates through Bill's unique career path, which spans from the direct mail industry to renewable energy, ultimately leading to his groundbreaking work in applying complex data models to ESG investing. His expertise sheds light on the intricate dynamics of the ESG landscape, and the challenges and triumphs in aligning investment strategies while finding ways to incorporate values without compromise into the portfolio-building process.

"You can't scale an industry if you're offering concessionary returns. It was sort of like you're not going to maybe make as much as you otherwise would, but you're going to sleep a lot better at night. But if you really want to scale it, you have to prove that it's free. So that has always been what we have been trying to prove.” - Bill Davis

This episode also delves into Bill’s strategic innovations in developing new investment products that synergize the benefits of both private and public market investing. The conversation encompasses the pivotal role of major corporations in global decarbonization efforts and the influential impact of public markets in fostering sustainable investment practices. Furthermore, Mr. Davis discusses his unique approach to ESG data analysis in building out material risk factors in his strategies.

Key Points of the Episode:

• Finding the thread of Bill’s Career Path from the direct mail business to Stance Capital and discussing the through line between.
• Data-Driven Decision Making: Learn about Davis's approach to leveraging data across different sectors, emphasizing his innovative methods in informed decision-making within ESG investing.
• The Role of using both Private and Public market investing as tools to generate impact for clients.
• He shares his thesis for starting Stance Capital and how that’s changed over time and how the ESG conversation has shifted in the last few years.

Watch the full video: https://youtu.be/ktwmH1JzEpM

About Stance Capital

Stance Capital specializes in quantitative ESG (Environmental, Social, Governance) asset management and research. They are a Boston-based Registered Investment Advisor, and their clients are individuals, families, endowments, and institutions. They also build products for other investment firms under research and sub-advisory agreements.

Stance Capital took a critical evaluation of the ESG industry and found three key flaws that we aim to solve:

1. Ethical Consistency: Aligning capital with client values is generally not being done in a thoughtful or consistent manner
2. Value for fees: Many PMs are NOT adequately active for the level of fees they generate
3. Risk Management: Risk efficiency is arguably a large source of out-performance that is not properly implemented

Given the rise of disclosure of ESG metrics Stance can take advantage of advances in big data, distributed cloud computing, machine learning, and artificial intelligence to help their clients achieve their investment objectives. They have built a fully data-driven and systematic approach to Investing that gives quantifiable impact and performance metrics for their clients.

About Bill Davis:

Bill Davis is Founder & Portfolio Manager at Stance Capital. Prior to forming Stance Capital, LLC, Mr. Davis was co-founder and Managing Director of Empirical Asset Management, and Portfolio Manager on EAM Sustainable Equity, a strategy he launched in 2014. Prior to co-founding Empirical, he was the founder and CEO of Ze-gen, a venture and private equity backed renewable energy company. Mr. Davis received a B.A. from Connecticut College, and his career in business has included serving as CEO or founder of numerous companies including: Database Marketing Corporation in 1986, Holland Mark in 1997, and Cambridge Brand Analytics in 2003. He is Vice Chair of Impact Infrastructure, LLC, and serves on not-for-profit boards of Ceres and Seven Hills Global Outreach. He is a founding member of the President’s Council of Ceres. Mr. Davis has taught at Columbia University Center for Environmental Research and Conservation, and guest lectured at Harvard College, Harvard Business School, MIT, MIT/Sloan, Vanderbilt, and Boston University. Mr. Davis holds a Series 65.

To learn more about Bill Davis and Stance Capital:

Bill Davis LinkedIn

Stance Capital

Stance Performance

Hennessy Stance ESG ETF

[00:01:05] Priorities shift during pandemic. 

[00:04:11] Children's book on financial education.

[00:08:10] Values as a big deal. 

[00:11:36] Emotional safety in investing. 

[00:17:56] ESG and financial performance. 

[00:19:59] Values based investing future.

[00:01:28] System Change Investing.

 [00:03:53] Economic and political systems.

 [00:07:27] System Change Investing.

[00:14:19] Corporate Support for Climate Policy. 

[00:17:32] Financial Advisors and System Change. 

[00:22:16] Using capital markets for sustainability.

[00:02:31] Financial advisors and tobacco-free. [00:04:35] Tobacco's unsustainable impact. [00:08:42] Youth and tobacco industry marketing. [00:13:21] Harmful effects of smoking. [00:17:48] Tobacco-free finance pledge. [00:22:20] ESG ratings for tobacco companies. [00:26:31] Tobacco-free investing.

In this episode of Your Stake Your Story, we are joined by Maureen Maguire, CFP, AIF, and Vanessa Jilot, CFP, CRPC, the founders of Terra Blue Wealth Management, an ESG-only wealth management firm. 

Together they discuss how they met and founded Terra Blue, how they look at ESG investing, the role of activism and politics in investing, and share their experiences serving clients across wide generation gaps to accomplish the same goal: protect the planet, and have a strong financial future.

In this episode, Gabe, Vanessa, and Maureen discuss:

• How Maureen and Vanessa tackle ESG investing with different generations of clients
• How social justice and activism are core to their work
• Debunking the ESG performance myth
• How values-based investing is emerging as a component of their practice

About YourStake Your Story:

The YourStake, YourStory podcast is designed to amplify voices in the financial industry who are leading the charge for socially responsible investing practices.

Each episode, we are joined by experts in the field to hear their stories about what brought them into the industry, why they are passionate about ESG and values-based investing, and much more.

Resources:

Terra Blue Asset Management

Maureen Maguire, CFP, AIF LinkedIn

Vanessa Jilot, CFP, CRPC LinkedIn

YourStake

YourStake, YourStory Podcast Home

When Marco Vangelisti first started in finance, he was part of a Quant Team using performance analysis tools and optimization packages for Wall Street portfolio managers. 

Soon after, Marco managed investment equity portfolios on behalf of large foundations and endowments focused and was part of a $20 Billion emerging market equities, long-only, strategy that had the best 10-year track record at the time, and outperformed their index by 13%. His model worked, and the team delivered fantastic returns to his clients, including environmental foundations.

However, as time went on and Marco explored the stocks behind the portfolio, he saw an emerging trend that didn’t sit right with him. While some stocks delivered high performance, it was mainly derived from the destruction of animal habitats and the natural world. 

When he had a conversation with the CIO of an environmental foundation and shared that the palm oil company delivered the high returns had in fact destroyed a habit of Orangutans, the CIOs response was that he was focused on the investment side of the foundation and his task was to protect the assets, not the planet.

That was a wake-up call for Marco where he felt there was something fundamentally wrong with the way finance works and led him to shift gears, divest from stocks that created harm, and start the slow money movement.

Since leaving his portfolio management life behind in 2009, Marco set out on a mission to be a 100% aware and no-harm investor with a longstanding commitment to Positive and Restorative investing. He is a founding member of the Slow Money movement  and is on the leadership team of Slow Money Northern California since 2020.

In this episode, Marco and Gabe discuss:

• Marco’s awakening moment of being part of a highly successful Quant team to understanding the trade-off of high returns to the environmental impact at the time.
• The complexity of ESG investing and the shift to no-harm investing, and restorative investing.
• Explain and explore unaware, reduced risk, no harm, positive, and restorative investing styles.
• Why transparency into investments is key to understanding how they bring about change and positive impact.
• How consumer change is easier at the product level versus portfolio change, but tackling investments is more impactful
• The future of no harm and positive investing in the near and far future, and why there is a massive transformation coming.

About YourStake Your Story:

The YourStake, YourStory podcast is designed to amplify voices in the financial industry who are leading the charge for socially responsible investing practices.

In each episode, we are joined by experts in the field to hear their stories about what brought them into the industry, why they are passionate about ESG and values-based investing, and much more.

Resources and Links Mentioned in the Episode:

EK4T's website: https://ek4t.com/

EK4T’s investment classification course: https://ek4t.com/classification/

The upcoming MQU course: https://www.mqre.org/events/2023-towards-aware-and-values-centered-investing/

CNote: https://www.mycnote.com/

RSF Social Finance: https://rsfsocialfinance.org/

To learn more about us:

YourStake

YourStake, YourStory Podcast Home

Elysabeth Alfano, CEO of VegTech, is the fund manager and advisor to the world’s only plant-based ETF, EATV. She is driven and passionate about addressing climate change in a matter of years not decades. Often, many reports say we have till 2050, but she argues that we need to look at 2030 as the date we need new systems in plate to reap the existential rewards by 2050. 

While many issues related to climate change like renewable energy and green transportation are imperative to a healthier planet, looking at how agriculture contributes 14.5% of the world’s greenhouse gas emissions, according to the United Nations is an area many aren’t considering and this sector is ripe for disruption. 

Listen to Elizabeth and Gabe discuss this hidden mega-trend that can help create a meaningful impact on our planet and learn about how our agriculture industry connects to food security, the global supply chain, public health, and animal welfare.

In this episode, Elysabeth and Gabe discuss:

• The growing issue of how to create more food in a shorter amount of time while causing less damage to our planet
• How raising 80 billion animals affects issues of land management and our own health.
• How alternative proteins are created and why using fermentation and fungi creates massive amounts of proteins with low resource use.
• How to bring planet-based innovation into client portfolios and how to talk about its impact on the environment

Beekeeping also created an opportunity for clients of his to shift investments into ESG funds, every year, Jon would give each client a small jar of his honey, and there sparks a curiosity around how the honey was made, sharing ideas on how bees connect to the environment, societies and even governance bring clients to say, “I like this idea and I didn’t think I could put money into issues that I care about, so how can I make this work?”

For many clients, starting a conversation around do they want ESG is not an impactful lens to apply for investing, but having conversations framed around what they cared about and what they were interested in was far more impactful and helpful in guiding investment decisions with their portfolio. In fact, Jon’s alignment of values with portfolios allowed them to enhance and reinforce what clients already were doing. 

With the massive growth in data around ESG investing, he’s able to find investments that align with his clients' values. Jon explains it as “If there’s a certain bank and they’re not doing the governance the way we like it, maybe they’re opening fake accounts or behaving in fraudulent ways, I can search for 50 other banks, and all we have to do is look at the data and find out if one of them is equal in their performance, but smarter in the way that their culture works and their governance.” Jon finds himself helping to create personalized portfolios with his clients by leaning on good ESG data and a strong understanding of what his clients find most important to their investment alignment.

Listen to the full episode, as Jon and Gabe discuss:

• Prospecting new clients using a small jar of homemade honey
• Building better conversations around ESG investing by talking about client’s gardens and how they’re looking for new steps to engage with bettering the world
• Using ESG data to find investment opportunities without the need to compromise on returns
• Understanding client preferences and thresholds for company actions and how to utilize tools to build the right portfolio for them

About YourStake Your Story:

YourStake aims to provide advisors with everything they need to understand ESG issues, analyze portfolios, and report to clients. We want to equip you with the underlying data and analysis tools to navigate ESG. The YourStake, YourStory podcast is designed to amplify voices in the financial industry who are leading the charge for socially responsible investing practices.

Each episode, we are joined by experts in the field to hear their stories about what brought them into the industry, why they are passionate about ESG and values-based investing, and much more.

Resources:

• YourStake Website
• YourStake, YourStory Podcast Home
• BankCherokee
• Jon Kvasnik LinkedIn

In this episode, Michael and Gabe talk about:

• The trend of more investors being interested in protecting and growing their wealth, but also creating more good with their money in the world.
• How Michael finds his client's ESG interest in his use of a questionnaire, and further conversations with what ESG means to each client.
• The challenges around making the transition to ESG and how the space is constantly evolving.
• The power of shareholder advocacy to drive change at a company level and how to assess that through a client’s investments.
• The future of ESG terminology as new disclosures and rules will bring some standardization to this industry.

About YourStake Your Story:

YourStake aims to provide advisors with everything they need to understand ESG issues, analyze portfolios, and report to clients. We want to equip you with the underlying data and analysis tools to navigate ESG. The YourStake, YourStory podcast is designed to amplify voices in the financial industry who are leading the charge for socially responsible investing practices.

Each episode, we are joined by experts in the field to hear their stories about what brought them into the industry, why they are passionate about ESG and values-based investing, and much more.

Resources:

• YourStake Website
• YourStake, YourStory Podcast Home
• Wealth Redefined(R) with Michael Reynolds
• Elevation Financial
• Michael Reynolds LinkedIn

 Welcome to another episode of “YourStake, Your Story,” a podcast dedicated to telling the stories of financial advisors who lead with socially responsible and values-based investing. In this episode, Gabe Rissman talks with Meghan Lape-Lefevre, AFC®, CFP®, and EA® of Conscious Impact Financial. Meghan founded her practice in 2020 while in Germany and has since moved to Colorado where she uses values-based investing to align her clients' beliefs with their investments. 

In this episode, Meghan and Gabe talk about:

-How her clients are passionate about what they invest in and how values-based investing allows for positive returns and impact.

-How information is power when it comes to investing, and how finance needs to separate from using high technical jargon to make investing seem accessible to all.

-Why ESG isn’t the best way to describe this trend in values-based investing, and why we ought to consider socially responsible investing instead.

-How mathematics brought her to her path as a Financial Planner, and her ideas on how values-based investing is going to be the next era in investing
 

About YourStake Your Story:

YourStake aims to provide advisors with everything they need to understand ESG issues, analyze portfolios, and report to clients. We want to equip you with the underlying data and analysis tools to navigate ESG. The YourStake, YourStory podcast is designed to amplify voices in the financial industry who are leading the charge for socially responsible investing practices.

In each episode, we are joined by experts in the field to hear their stories about what brought them into the industry, why they are passionate about ESG and values-based investing, and much more.

Resources:

• YourStake Website
• YourStake, YourStory Podcast Home‍
• YourStake YouTube‍
• Conscious Impact Financial Planning‍
• Meghan Lape_Lefevre LinkedIn

Gabe Rissman  00:07

Hi, everyone, and welcome to YourStake, Your Story. We are a video series focused on best practices around ESG. And really focusing on the financial advisor experience and what your challenges are and what's out there and what you might be worried about thinking about excited about. Today, I'm really excited to be speaking with Zack Stein, who is the co founder of carbon collective. Zack, really glad to have you on.

Zach Stein  00:34

Thanks so much for having me again.

Gabe Rissman  00:36

So do you want to start by sharing where you're where you're calling from today?

Zach Stein  00:40

So I'm in the Bay Area, right near Berkeley in a small town called Albany. It's a beautiful day, and we got a little bit of rain yesterday, some are expected and in this kind of drought-ridden region. I'm very happy about that.

Gabe Rissman  00:54

Thanks a lot of sense. And is that where did you grow up? Is that a recent move for you or

Zach Stein  01:00

I've been in the East Bay for about the past 10 years. So moving between Berkeley and Oakland, and now in Albany, and I grew up on the peninsula. So over near Stanford near Palo Alto, and it was there I actually have known my co founder, we first met when we were four years old, our dads went to Stanford together. So I have many fond memories of us playing in his backyard and things like that. And so it's pretty cool to be able to work with that person. 

Gabe Rissman  01:26

Would you ever have guessed that you would work together?

Zach Stein  01:31

You know, like, who knows what these things is? I like the phrase life is only linear in the rearview mirror. And yeah, we actually fell out of touch. He had a pretty interesting childhood when he was 10. His parents pulled him out of school, and they bought a sailboat. And they sailed around the world for five years beginning in the south of France. And they ended up in New Zealand. So I visited him in the Canaries, and in Tahiti during that time, but but kind of after that, we lost touch a bit. And we actually only ran into each other. Post College, I was living in Berkeley, and I was really into pickup basketball at the time. And I was crossing the street coming home. And this guy who was on a bike at the crosswalk, we're just staring at each other. I forget who said first, but I can tell when James Zack. And so yeah, after that, we started hanging out again. And it became clear that that we wanted to work together.

Gabe Rissman  02:39

That's amazing. And were you were you both in different jobs. And you decided to leave to start something together? Or what was that? Like?

Zach Stein  02:47

Yeah, I've had a very winding entrepreneurial path. I've been in sustainability for the past 10 years, post college, I did an urban farming fellowship in Berkeley, this was in 2011. That kind of opened my eyes up to the realm of sustainability, but through the lens of our culture, and our food system. So I actually with some of those fellows, my first job, my first real business was a worm farm. So we literally sold shit for a living. It was a pretty fun business was really interesting, very labor intensive. It's good for a 22 year old. And James. He's an engineer by training, he went to Olin College, which is a great small engineering school. And so he was working at an alternative energy startup that just happened to be like three blocks from my apartment at that time. So yeah, our paths I kind of through my urban farming path, what got increasingly into indoor farming, and ended up meeting someone who was developing some novel sensing technology for it, brought in James with it didn't work out with the first guy that was really our first company in 2016. And then, you know, raised from top tier VCs, to really get that to take off, we couldn't get the technology to work for it. Ultimately, it was a very hard technical problem. And we set out at the beginning of 2020, with this kind of broad mission of how could we build better tools that can enable individuals to collectivise their climate impacts. So we didn't set out to build and invest in company but it was through a process of product discovery that we really saw that this was a both a place that individuals were really running into not having things that it portfolios that met with what we need to do to solve climate change. And looking at from a top level down for us to solve climate change. We fundamentally need sustainable investing to massively scale. If we're to be on track towards doing so. And what Wall Street is selling today. Just it's not whatsoever aligned with that reality.

Gabe Rissman  04:56

Well, I'm excited to dive into that. I think that'll be really fun. I should have brought up the pickup basketball though is it? Do you play one on one and if you have a disagreement, you do a little game one on one. Then you go with this strategy, or

Zach Stein  05:17

I'd be amazing because I would definitely win more arguments. James is an incredibly, incredibly talented human. And basketball is not one of those talents. I am not whatsoever talented in basketball either as a five foot nine Jew who you know, likes to imagine I'm much taller and stronger than I am. I don't know if you know, basketball, basketball that Well, I operate like I'm like, you know, six foot five power forward. And then like I like to rebound and set picks. But I just don't have the height for it.

Gabe Rissman  05:50

I definitely know the prototype. I play a lot of Shabbat basketball. And it's a very common, very common thing. So you fit right in.

Zach Stein  06:02

Next time I'm on the East Coast, let's get a game together. i It is there's nothing better than good pickup.

Gabe Rissman  06:08

Yeah, I'm with you. And one more one more thing before diving into that? It's a really great question. And I think that's really cool. Also that didn't know you're going to build an investing company looked at the problem first and led to that. So it'll be fun. But first, why did you want to be an entrepreneur?

Zach Stein  06:28

I it's a hard question to answer. I've never, I've never really had a real job. I've basically only worked for myself in different ways. And kind of made my own way of doing so. So it's almost like it's the only thing I've known to some extent. And I think I am completely addicted to the learning that it forces that is just what is and I'm sure you've experienced this, it is so fulfilling, to be able to look back and be like, Wow, I am a different person than I was a month ago, or a week ago, the things I can know the things I can do, the ways I'm able to talk about things, just all of that it's like the best grad school you could ever go to. And so again, it goes to that phrase of life is only linear in the rearview mirror. So it's like, I don't exactly know where that's necessarily going to lead. I have ideas for it. But there's like, at least for me, I have some level, it's an act of faith that so long as you're learning and growing, that you're on the right path with that. So I kind of didn't follow that on almost like that level into what I'm doing now. And it's a really cool job that I get to do now.

Gabe Rissman  07:43

That's really amazing. And so now I'd love to dive in, you have this question. And this problem, how did you realize and find that investing was the main I guess, blocker, which also allows it to be the big opportunity to create impact?

Zach Stein  08:00

Yeah, so we took ourselves to school. So on the top level, we're like, okay, we, you know, we're smart people who have followed sustainability stuff. But there's much smarter people in the climate world. So like, let's read everything with that. So I think, in q1 of 2020, which is when we started, we probably read like 30 books, James and I both love audiobooks, we blitz through them. So we always say we had this shared ongoing dialogue with it, as we were refining and refining from that top down. And then from the bottom up, we are starting to put together what are the different ways that we could address kind of that mission of how do you build better tools to collectivise climate action. And there the thesis was, is that as you know, for especially, you maybe on the East Coast, it's not quite as clear yet, but especially here on the West Coast, like climate change is here. You know, the fact that fire season is now a thing, when I growing up in the barrier, it never was the fact that every year now, from August through November, I think there's a fairly high likelihood there'll be smoke in the sky, and might feel a little bit in danger. Like that is climate change that just did not exist in such regularity before. So that so much of the problem right now with climate change, and climate anxiety is that we just get left caught at the top of the emotional cycle. But that is we're just like, This is terrible. And it's like, it's only supposed to get worse from here. And the news is doing a much better job of coverage covering all of the negative aspects of that. But it does it say Okay, so what do I do? It's basically just leaves you hanging off, while you're one person who is part of a global system that is run by fossil fuels with like very, and, you know, governments that are filled with kind of fossil fueled corruption and corporations that run on these things. So what do you do within that, and there's a lot to do and again from a theory of change, perspective, we looked at this very closely and asked ourselves like, how does the world actually change? Because when we were starting carbon Collective, we ended up doing 120 interviews of people in our networks that around us who experienced climate anxiety to understand where it took them, and where they got blocked, which was how we got to investing. And we often there's, you know, one thread that some people fell into was this thread of just anger. Or they would say, It's not my fault. It's corporations and governments, and they're the ones who should fix it. You know, I'm just one person, why am I being this guilt being put on me? And like that, that anger is so justified and at the same time, it's okay. What we haven't heard from that anger is what is the counterproposal of how does the world actually change? How does the government change? How did those corporations change, if not, for enough people saying enough is enough, and changing the status quo. So that kind of framed everything that we are doing? And we got to investing by using this book that we were given after our very first product test, we put together this whole mock up of what Harvard it could be, and as all this clickable prototype and everything, and after our first one, the guy was like, no, look, this was a good test. But really, what you should be doing is, is the Mom Test. And we're like, what the Mom Test? I don't know, have you? Have you heard of this book? Explain it. So the bomb test is a way of interviewing a potential customer to understand if you should build the product you're thinking about. And it's a it's a way of doing so by you're just digging for previous actions, and that previous actions are the best indicator of pain, and that someone needs something for that. So for us that what ended up being we were kind of talking about different categories of climate actions. And it was that it's probably similar thing that your clients experience, which is people looked at the Blackrock ESG fund, they looked under the hood. And so that's like, why is this in here? I don't get this, how is this actually making change? I have this sense. And I also know by studying this, that the only way we solve climate change is to our investor our way out of it. And I want to make sure I'm participating in that. But what's out here being labeled as sustainable our ESG doesn't actually fit what the experts are telling us that. So it was that gap that became clear of saying, oh, we need sustainable investing to massively scale to fix climate change. But sustainable investing broadly is not whatsoever aligned with that it's actually a broken system. And so that's what led us into say that sustainable investing is not a box to be checked, necessarily on an investment out. But that we actually there is a new company that is needed in this space to come in and really help start changing that narrative, by holding what is the world where we solve our most pressing, environmentally sustainable issue, which is climate change, what does that look like? And then how do we work backwards to today, the world that we have today, and then leverage what we have today to then work that, whereas so much of today's investing, and this is, you know, where products like yours really help with is saying with ESG, it's like, alright, let's picture that today's world, and then create a slightly less bad version of it. But that's it, there's not actually that tracking towards the future. But we need that. And we need to if we do not collectively imagine it, and invest in it and build it, then there's no chance that we're ever going to get there. And we're unfortunately, just on a path for catastrophic global warming, where if we continue on the course we're on, we'll have three degrees C of warming by 2100. I just had a kid, you'd be at in a year, he'd likely be alive, I might be alive, who knows? In that time, in that it is unimaginable the level of chaos that that level of warming would unleash. We have to do all we can to do it. But in investing, we can't do it without investing. So that's what led us into this place of carbon collective. Wow,

Gabe Rissman  14:09

that's really fascinating. I also, I love that interview style. The mopping. I hadn't heard that specific terminology. But we learned a very similar concept, obviously, and we're going through our journey. Never do product validation, just try to ask questions about what people are doing and what their problems are and what their needs are. So I totally get where you're coming from there. And also, I think the thing that you learn is really interesting. So we have a very similar mission motivation. We have a very similar obviously, mission statement, you put it more concisely and cleanly have collected it carbonate climate action, but that what we oftentimes really like to focus on at your stake is the fact that according to these Morgan Stanley and A whole bunch of other studies, 85 90% of people want to align their investments with their values. And then the CFA Institute only had between 10. And I think 18% of people actually doing it. And that question of where is that gap coming from has a whole bunch of different hypotheses and answers. And it sounds like, you also saw that gap, you saw the positive impact potential of closing that gap. And your hypothesis and thesis that you're now solving is based on those user interviews, and it is that the products that are currently available are not compelling enough for individual investors to be excited enough to actually make decisions based on an impact that they don't actually see being realized or that they don't trust. Does that sound right?

Zach Stein  15:46

Yes. Yeah, I think that you your stake does this, again, you're approaching it from a different angle. But I think it's the same hypothesis, which is that sustainable investing, it doesn't have like a major technology problem, but it has a storytelling problem. It is how are we connecting the dots from what needs to happen down to me, and my actions. And if you get that, that's when you get the value for it. Because at the end of the day, like what's in my stock portfolio, it doesn't have any impact on me beyond its returns. And if it's sustainable, it's all about how it makes me feel and how it's it reinforcing my own sense of identity and place and purpose in the world. And that, that's it like that, that is what you're selling, that is what I am selling it is that emotion, and that. And I think that this is, you know, for us, zooming out a little bit out of investigated more just towards b2c Climate tech companies, the Promised Land is how do you deliver an experience that genuinely it can't be bullshit that genuinely connects people to something that's bigger than themselves, and can elicit that, because that's what we need for addressing the global issue of climate change that is far bigger than ourselves. And so I think they get out with your like, the metaphors and things like that, that you have. That is another attempt at drawing those those lines and those connections of saying, Hey, this is bigger than you. And we want to make sure that's aligned. So I think we're very much aligned with that we just wrapped up our latest fundraising round. And over half of it is this year marked. Thank you for marketing, narrative storytelling. And what we're doing like that is so much of the value that we see ourselves bringing to this and if we were to zoom in of what is carbon collectives mission, from not just you know, alright, how do we build better tools to collectivize climate impact? It's really it's how do we redefine what is understood to be sustainable investing, and help individuals, especially starting with those, but eventually the entire value stack, and customer base? See it be able to make those type of decisions far more clearly than they do today? Which is, again, the exact problem that you are also working on with those exact type of tools right now. I have a theory that I'd actually be interested in getting your thoughts on right now from a kind of almost like a VC perspective. Sure, is that I believe that right now, we are witnessing the unbundling of ESG. Which is if, if you're familiar with kind of that term, from a VC perspective, we saw the unbundling of Craigslist. The unbundling of Excel. And what happened in those past instances is you had a lot of usage for a tool, a lot of demand for a tool. And it the that didn't actually indicate that the tool was great. It just indicated indicated demand. And you started then peeling off things. Airbnb is like the most famous example of Craigslist, and but there's countless others. With that, of saying that, no, we need to actually build something that's far more tailored for this. And I believe that companies like ours are participating in that, again, it's occupying different verticals within it. But that is ultimately what you're doing is helping unbundle ESG away from kind of just the what it was of institutional MSCI, etc. Be interested in your thoughts?

Gabe Rissman  19:26

That's fine. I've never thought of it in those terms. Again, but similar concepts we, we oftentimes say and believe and I, I think this is one of the biggest trends of probably the next two years and ESG is probably I think the term ESG right now is used to mean anything, and it's going to really narrow into what its actual definition is and I think that will become more common, which is what are the environmental, social and governance factors that have proven correlation with finance purpose For me, it's going to be materiality, it's going to be that. And then there's going to be all these other terms, probably under the umbrella of valleys line investing, that are more about what the client is looking for. And that's really where all the demand is that there's, at least from a retail and general client perspective. Maybe institutional investors are interested in using ESG to reduce their risk and their returns. And individuals don't want to lose money, for sure. But what draws them into this is that feeling of identity, and the idea of creating impact, and because people have different views and visions of what impact means, and different goals, and it's not everyone looking for maximizing risk and returns with no other constraints, I think that there's going to be a ton of personalization, that means personalization of products, and also means products that allow for individual customization and personalization. So the unbundling, I think, is happening. And yeah, I think that makes a ton of sense. And I think it's probably more gonna be the dissolution of ESG, instead of just the unbundling, because ESG is kind of overstepped what it actually is useful for. So I think ESG is gonna pull back and what the real demand is, we'll go forwards.

Zach Stein  21:28

Yeah, it's gonna be really fascinating to see what those terms kind of ended up being in that, that breakdown of if that brella term of ESG starts getting more holes that are fading a bit.

Gabe Rissman  21:40

Your favorite term, which do you usually use when you're talking to people?

Zach Stein  21:45

I mean, we you know, we're specifically focused on climate, this was kind of our bet, in this space of saying that, of of the things in ESG, it is e that is where people are most often drawn towards. And within that, there's a sense that when you invest you invest to build things like that, that is just, it just makes gut sense. It does. So there's certain types of issues that we have to build our way out of, there's others that it's like a little bit more round hole, like square peg round hole, where it's like, well, you could like get a company to change its policies. But it's not like additional capital going into that space isn't necessarily going to solve that issue. Maybe some divestment from it. But it's kind of you get more ice squinty. Versus with climate, it's like no, we'd have to build a way more solar panels and way more electric cars. If we're to do this, it's like it's, in some ways, as simple as that, for us to be able to do this successfully. So that was kind of zooming in into that and making kind of our bet on at that intersection of climate and investing and saying that we actually need a company at that level. So we use the term sustainable investing, or climate investing. But we are working to define it, that it can only be sustainable, if it is truly aligned with solving climate change. And for that to be the case, because we know it's very clear in the next 30 years, we have to dramatically increase annual investments into climate solutions, while dramatically decreasing investments in fossil fuels. To us any any investment portfolio that does not align with that reality, it is very hard to see how you could label that as sustainable, especially given the fact that we have to invest in order to solve climate change.

Gabe Rissman  23:38

I think that leads me to my next question, a lot of our audience on this podcast is financial advisors. And you are occupying a very similar space and in the need to tell the story. And a lot of times advisors want to be able to better understand how they can tell that story of impact. And I would love to hear how you differentiate with your messaging, especially because there's a lot of funds out there called the Low Carbon transition fund called the what? Like and, and there is a lot of skepticism as well. And people don't just go with the name. So what have you found the most compelling and effective to prove the differentiation between something that's real and something that is well branded? How do you cut through the greenwashing which I'm sure you probably get questions on that all the time.

Zach Stein  24:28

I guess the number one question is, you know, why couldn't Blackrock just do this? Or, you know, Betterment has a climate impact portfolio, or, you know, Calvert funds or, you know, there's its ecosystem is not empty here. And the problem that we see is again, the difference is ESG. So it's today still and I think as you alluded to this is changing, but it is just a less bad version of today. battlements. Climate Impact portfolio? For example, it does not it contains more fossil fuel companies exposure to fossil fuel companies than it does to climate solutions. Companies. How does that that just doesn't square with where we actually need to go. And there's not a clear theory of change within that this, you know, can come to I think this is part of where advisors often gets tripped up is like, okay, like, we made some switches for you. What does that mean? What how do you actually make that tangible? And draw that to the point? And so for us, the what we see our role is, is how do we make sense for folks of what is like a pretty confusing, really complicated and overwhelming ecosystem that has tons of greenwashing. And, and, again, what we've seen success in so far is that by being outsiders, by not being folks who are like, Yeah, we have this long history in Wall Street, and, you know, now are coming to the table by saying, No, we started first with what is it gonna take to solve climate change? And then went back and said, Okay, people's 401k Is their IRAs, these aren't charity. So you have, it has to be a smart investment. And it has to, you know, so many, especially on the retail side, see index passive Based Investing, as that strategy, how do we build something when they're with a really clear theory of change that also meets those investing needs first? Yeah. And so go ahead.

Gabe Rissman  26:32

Let go. Yeah, continue.

Zach Stein  26:35

So for us, we've, I think, had a lot of success so far, starting in the high level of saying, what is it going to take to solve climate change? And helping people through the logic of wise investment? A critical piece of that? And then why does your IRA what role does that play into it and addressing some of those concerns, you know, for the more savvy people would be, like, well, efficient market hypothesis. And, you know, it's all publicly available information, how do you change that and things like that, to then having a really clear theory, which is, again, we're not trying to do everything a carbon Collective, we are focused on climate change, and how are we driving as much impact as we can there. So we adopt a fairly simple strategy, we first we do three steps on our equities, we divest from the industries that are technologically dependent upon the long term use of fossil fuels. So this is not just oil companies, but also petrochemical companies, dirt, utilities, cement, steel, and airlines, airline manufacturers, etc. These are companies who, barring a complete breakthrough of technology, in the world, where we have decarbonized, their core business fundamentally can't exist. Which means that it, they need to either change or go out of business. We on the divest versus engage for these companies debate, we are very much on the side of divest, and I'm happy to talk about why more, I think it's might be pretty interesting. To some of your audience, like we do not think voting on Exxon Mobil is where we should be spending our activist industrial energy. So that's about 20% of the US stock market. So we divest from that 20%. And then we give that share to the companies that are building solutions to climate change. So again, this is how are we aligning with that long term view, if we have to dramatically ramp up investments, and climate solutions, while winding them down and fossil fuels and related industries, we create this list and manage it ourselves. So what we do is we go and look at what are the top independent resources that dictate how the path to solving climate change, and we say alright, what is every single publicly traded company that is building one of those solutions? We then So in 2020, there's about 350. On US markets, we then filter out those who generate more revenue from products or services that are built for or dependent upon the fossil fuel industry. We do not use climate pledges, we talk is incredibly cheap in this space, we say that your past action, similar to the Mom Test, is the best indicator of your future actions. So an example of a company that didn't make it in 2022, in order to in 2021, was General Electric. They're the second largest manufacturer of wind turbines, but they generate more revenue from their natural gas turbine business and their jet engine business. So that to us means that they do not meet our criteria, and thus we exclude them. Then broadly for the remaining 80% of the stock market, we hold with a few exceptions, we cut out big banks because of their significant loaning to fossil fuel companies. We both don't want to hold that ethically or financially. But we broadly hold the rest because these are the types of companies who its core business can exist in a world where we solve climate change. which means that it's upon us as shareholders to push them to get there as fast as possible. So the example I often use is Coca Cola. For, you know, greenies. Like me, Coca Cola is far from an environmentally friendly company, but in the world will resolve climate change. Coke can still sell me a brown, sugary, bubbly beverage that is using the secret recipe. It's just done with 100% renewable power. It's delivered on 100%, electrified or green hydrogen powered fleet. And they're protecting instead of abusing that our watersheds. That means to us those are big changes, but it's much different than saying, hey, Exxon Mobil become a solar company. Yep. And so that's why for us, we need to shrink the demand for fossil fuels. And that's where we focus our shareholder engagement, especially because these are companies that care much more about what climate people like me think, than an oil company, so we can get that dual leverage. So that's our broad approach with our equities. And with that, combined with our bonds, we can offer our clients portfolios that have similar levels of risk and reward as they would get in a generic US based index portfolio. So I think some of that differentiation that I think you hear is, we are fully focused on climate. And this and I think, have a clear, a theory of change that we think is a fairly clear and can help people say, okay, I get I get this. And that's, I'm either in or I'm out, and we hopefully give the people enough information to make their call.

Gabe Rissman  31:33

That's amazing, man, based on that. I'm not going to be able to ask all the questions that came out of that in the time that we have left, but I'll try to prioritize the rest ones. First, I'll just do a quick clarification on that on that research process. So you said there are 350 companies that are your their core business model is climate solutions, is what you're saying? Is that using like Project drawdown, or you have a taxonomy that you're looking at, or

Zach Stein  32:00

Yeah, so it's not their core business model necessarily. It is just a bill to climate solution. So we project drawdown is one of the main independent resources we use to define that. We also use the IEA and rewiring America to also help inform and define what is a climate solution, but it's largely project drawdown.

Gabe Rissman  32:21

Okay, awesome. And then the next question that divestment versus engagement, can you before? Well, actually, this is this is a very personal one for me. When I was in college, I wrote my first article in the Daily newspaper about how shareholder engagement with fossil fuel companies was ineffective. But then two years later, I filed a shareholder resolution with the fossil fuel company. So I think what I learned and what I realized is that divestment versus engagement is something that I think is sometimes counterproductive and leads to discussion and disagreement on tactic when both are very important. And I also think that divestment helps to create the space for engagement. And that engagement is also effective for divestment. I think they are compatible and complementary, and helping each other out. But I would love to hear your thoughts on that your thoughts on the divest versus engage?

Zach Stein  33:29

I think that's like a really nuanced answer. I'll maybe tell an analogy I I really like Matthew Yglesias. He does he was with Fox, he's doing his own thing now and he wants talked about the role of different people in journalism, and how there are some people whose it's their job to be the pushers of what is possible. With that, and not necessarily grounding in today. And kind of the like, you know, measured both sides fact fact that you that they actually pushed the window of what is possible. And so yes, I think, you know, Overton Window, etc. I think that what you like maybe potentially within the ecosystem that you described, which I think is, like, quite good point, is that if you have complete divestment, then you to some degree, lose the threat of divestment. Which is something that I'll need to think about more, I'll present our logic on it, which is going through the motions of saying, Okay, I think we're probably all familiar with engine number one, and their work on Exxon Mobil. That campaign costs about 12 and a half million dollars, generated a ton of press, and was really influential in that it proved that David could stand up to Goliath. I think it was very inspiring in that regard, generating a ton of press for it. When we look at its impact on solving climate change, That's where it starts to get really hard for us to see how it could have any impact and potentially even be negative. And so let me walk through some of that logic. Let's just let's assume that ExxonMobil, that this is as successful as it possibly could be, that the board members that join ExxonMobil, and the extra pressure that's put on leads Exxon Mobil to saying, Alright, we're going to get out of the oil business be huge, right, you know, largest publicly traded oil company in the world. So what would the actual impact on you know, carbon emissions be of that? Well, one, potentially very beneficial impact could be if they put up banners around the country, say, we're getting out of oil, it's a bad business to be in. That'd be like, would lead to a fire sale of oil assets likely around the world, that'd be amazing. Exxon is unbelievably unlikely to do that. Because you don't, you know, say, Hey, I'm gonna, the business I'm in is terrible, would you like to buy that asset from it, you know, you don't do that in advance. So if they were to get out, they probably likely very quietly sell off their assets, because they wouldn't want to create a rush for the exit. And frsl they would want to keep those asset prices high, you know, in delivering that return to their shareholders. So alright, so we can kind of, I think X off that potential benefit of decarbonizing. So, if they do, you know, let's say they quietly sell off all their assets. The problem is someone has bought those assets. And so they bought them, unless it's like the Nature Conservancy or something crazy, like they bought them to extract the oil. And so so long as there is demand for that oil site, then it's likely going to get used. So that kind of just then leads to the question of saying, all right, why would we spend this amount of money and time and effort galvanizing a campaign around oil companies, instead of trying to get them to voluntary cut down supply in a world where they have customers lining up around the corner to buy their products? It seems it's backwards, we should be going to their customers and saying, Hey, come over here, electric cars are significantly better, let's get solar panels on and stabilize your energy costs. It's just a better investment, that to us seems like it's a much better place to be spending our energy on these, let ExxonMobil do what it's going to do, it's going to be incredibly hard to change them. From that regard, you know, the best of all possible worlds is you have their level of capital, now participating in green energy. That's the best case scenario. But it doesn't actually mean you've done anything to reduce carbon emissions until we've lowered the demand for it. So that's our theory. I don't know. Pokeballs.

Gabe Rissman  37:59

Yeah, I think that makes a lot of sense. I think that the business model change will be very tough. I do think that there are some side benefits. For example, a lot of the shareholder engagement work done with oil and gas companies is getting them to stop obstructing climate legislation, with their lobbying. So I think there's still some good stuff. But in terms of changing the core business model, that is trickier. I also love the way that you talked about, like Exxon putting up all these banners saying, oil is no longer good investment. That's, that's what divestment does, as well as the public single aspect of that. So I really am playing. Like I think both are very effective strategies. And I think that, like, I have it, but they both have to be done. Right, like divestment without any public statements is not very helpful. But divestment with the story divestment with the collective action. And this kind of leads me to my next question, divestment with community, what are ways that carbon collective? How are you thinking about the collective? Do you? Yeah, open ended?

Zach Stein  39:08

Yeah. Let me just address like, I think a big missing piece of the equation right now, which we touched on, is the divestment engagement debate is just focused on oil companies, which it then says like, it's kind of gets at this binary have to do you engage or divest? Which if you then say divest, then you're kind of implicitly saying that engagement broadly with companies is not a useful tool. And we are saying no, engagement is an incredibly useful tool, but we're talking about it in the wrong places. Yeah, we should very much be using it on these types of companies like what is it? Shareholder resolution that we'd love to see is let's get a big box store resolution of saying that within the next five years, you have solar panels on every single one of your buildings with battery backups, where it makes like so long is it you don't know lose money on it. And we can make economic arguments for it to you know, fluctuating prices of energy, being able to support yourself and blackouts and things like that as a climate adaptation measure, that could lead to a significant reduction in fossil fuels. While for those companies creating a bunch of positive press it like those, that's the type of engagements that we should be working on. Again, it's not, there's maybe a different emotional feeling of it's not like going to the enemy. And saying, Well, you know, if you have the other thing I'll say, on the divestment part, because, or the engagement piece with fossil fuel companies, and this has gets to where I think it can be dangerous, which is fossil fuel companies have shown that they are not good faith actors around climate change. Yes. And they are very happy to say something, if it relieves pressure, and they're happy to pay fines, they're happy to get caught lying. In this an example that really stood out to us was Exxon has been really investing in Guyana, and their oil fields off the coast there. And in order to do that, they signed an agreement with the government of Guyana saying that they were going to capture all flared emissions. That technology doesn't work yet. And so they just flared it. And Guyana was like, what what do you what are you doing at Exxon was like, oh, we'll pay the fine. But actually, we're gonna pay like a 90%. Lower fine. So what's hard then is to think, Okay, this is Exxon dealing with a government, where it's doing it's like business, biggest piece of business. What is to us? Why would we think that if they're making any type of commitments with their greeny shareholders, that it's not just a delaying tactic? Interesting to get us off their back?

Gabe Rissman  41:59

Yeah, I've actually. So before starting our stick, Patrick and I did a whole literature review on on what creates impact impact investing and looked at all the research on let's take a look at the whole track record of shareholder engagement. When is it effective? And when is it not? And it's not it is effective, or it's not effective? It's about when and where and for what reasons it was what context? And there were a lot of examples, not that many, but but there were definitely examples of companies making commitments to basically get their shareholders off the backs and then not following through. And there's a lot of worry now I know a lot of resolutions being filed of, hey, company, fulfill your commitment that you made, what's going on. And so it, it is definitely something that happens, but the way that engagement can be most effective is with kind of the more persistent campaigns bringing a lot of people together. It's really just a way it's a component of a campaign, essentially, and it's part of that collective action engagement can play an important role. An important part

Zach Stein  43:04

of thing. Absolutely. And how do you make it near term? This was like, you know, there was some celebration a little bit while back of getting the big banks to say they're going to be net zero by 2050. Yeah, Jamie diamond, dead by 20 52%

Gabe Rissman  43:20

of the employees will still be there something like that. Yeah. Yeah,

Zach Stein  43:23

like, sure. It's like a really easy thing to say, and know that you're not gonna have to be the one to actually deliver on it. And do it. So how do you make these so much narrower term and so much more concrete, and have built in carrots and sticks with it? And then I think as exactly as you said, and this gets to your question about collectivization, of how can we make this broader? That's where it's, I think, you know, in some ways there should, there's so much more room for experimentation when it comes to shareholder engagement, of how do you make it like cross company, but really focused on it. And this is an area that, again, we're just starting to scratch the surface on. In the climate space, there's such this focus on, you can't fix what you can't measure. And that's true. And we also know there's like, really like, regardless of what the measurement turns out to be, like, everyone's kind of such 100% renewable energy. Why don't we start on that now and get better measurements, scope three and all of that, it still will keep the pressure on that you can't have it release the pressure. But the switch to 100% electrified fleet, like that's basically also has to happen. So yeah, in terms of how does carbon collective where do we fit into this? Yeah. Is that we believe that change happens bottom up, that it's much harder. Maybe you can argue Elon Musk is doing this, but to have some rich person top down and saying, Oh, I control this money. I'm going to create this change. Here. That instead having enough people, individuals who are saying, I believe I want to change the status quo, that is when you then start to get a pushing up this is whether it's getting your company to change its 401k. This is the your charitable organization to change how its endowment is invested your pension fund institutional fund managers, et cetera, it needs to happen bottom up. And so with that, we very deliberately set out in our path to make it that anyone can participate in it. There's no minimums, for what we do, you're gonna pay the same you would, as generic other generic online investment platforms, like betterment, or Wealthfront. For us, we launched our second product, which is our 401k service for mission driven companies. And we have a lot more in the works there as well. So it's with that, that our goal is saying, Alright, how do we reach as many individuals as possible through that and help start that change? On a just a purely a headcount level. And with that, we can start pushing up into higher level higher concentrations of capital. With that, so like, what is what does the world look like we're carbon Collective is very successful, is where a student group at the University pressure's a their endowment to divest. But they don't just say, stop investing in this. But they say start investing in that, in that clear strategy. And whether it's carbon collective, or we're really successful, and BlackRock copies us and does the same thing. Doesn't matter. That's what we wanted to happen in a position to change that definition here, of how do we drive impact specifically in relation to climate?

Gabe Rissman  46:50

Well, and that is one of the big questions that advisors oftentimes really want to know, financial advisors. They get these questions from their clients sometimes, and they want to know themselves as they're pitching ESG by investing in this company and not that company. What is that doing? What impact is that having on the world and it sounds maybe I shouldn't put words in your mouth, it sounds like what you're saying. It's not just that choosing this company or not that company, but it is changing the identity of the person based on the way that they're investing in alignment with what is really needing to change. And that has a ton of impact. I'll stop putting words in your mouth, and we'd love to hear from you, you get a financial adviser gets a question from their client. Hey, are you recommending carbon collective? What is? What's changing what's happening in the world? I'd love to hear your thoughts.

Zach Stein  47:39

Yeah. So there's kind of three ways he's like, look, let's be honest, I think we can often beat around the bush here, we're talking about buying and selling used stocks, like the stock market is eBay. We're often not buying directly from companies. So what does that impact here? You know, there are more direct ways of impact, you can invest directly in a solar farm, you could put solar panels on your house, that's going to have a very direct carbon impact, and publicly traded markets. And those portfolios are how much of us hold wealth. So how do we start there and maximize as much as possible, and we've done it, we find it really hard to get into the ownership principle. We kind of started on on talking about that, how many flights across the country your portfolio is representing and people are like, you get into the well, someone's buying it and selling it and it gets sticky fast. And so what we found is kind of the most effective of talking about that theory of it's not just you know, while you feel better about it, that's certainly part of it. Earning dividends from Exxon Mobil feels to a lot of people really crappy. It's like blood money. So definitely, that's part of it. But there's three ways that we can generate impact. The first is voting, we talked about that a lot. This is really underutilized in the climate space. And we think we're just at the beginning of how to really put together these campaigns, and do so in a way that's very fresh and new. And news breaking because it's really, it's great news to be making. So that's the first one. So any, any way that you're evaluating a sustainable investing, how's it voting is really key for that. Number two, is this often is hard to talk about or people get tripped up in it, but your shares do impact share prices for companies. The stock market is dictated by supply and demand. It is a really simple equation. And yes, even if you have like a few shares of Apple like that does make some type of difference. And it's especially true in retirement accounts. Because when you buy and hold a company stock in your retirement account, you're fundamentally keeping that that stock out of the actively traded stuff ply, so you're basically reducing the supply of that company. So if that company has an awesome quarter, and a bunch of us are holding it just in our retirement accounts, we're not touching it or trading it, then that company's share price is going to go up. And that's going to allow that company to raise debt and sell more capital more cheaply. We saw this with the latest renewable energy boom, in 2020, Tesla sold a bunch of stock expanded faster, companies like plug power, were able to raise money to go out and build out their green hydrogen infrastructure. It's great. This is something that fossil fuel companies have done really well, because they provide really high dividends. So they make a lot of sense in IRAs, which is a little bit of a sneaky move on their part. But the supply and demand really matters. This is the third part. And this is so critical and not talked about enough is narrative sort of comes back to storytelling. When we talk about efficient market hypothesis, I think we imagine that it's like computers that are making all of these trading decisions that are just like fully rational beings only analyzing data. And it's not we are humans, we were beautifully rationally flawed, I think it was like, like, there's like 188 recorded cognitive biases. Like something crazy. And confirmation bias is a huge one with that. And so what we don't appreciate is that the underlying narratives about investing are part of the publicly available information. They're the like, like slow undercurrents with it. And the current narrative is that fossil fuel companies are a necessary evil in a balanced portfolio that you will be losing out on. And that's just not true. If you had divested, and from there, I was born in 1989. From the s&p 500 and fossil fuels to today, you would have made more money over that period of time. And that includes a counter cyclical decade, because everyone's like, Well, no, it's it's because it's counter cyclical. The 2000s, the s&p 500 was basically flat. And fossil fuels in the US are like up 350%. So it includes the thing that advisors talk about us like why you need to have this. So that is wrong. And then on the sustainable investing side, we still get this all the time. People are like, Yeah, I'm gonna join carbon collective. And you know, it's okay, I've thought about this, I'm okay, accepting a few percentage points worse returns. And we think that, you know, we'd love to have you and we think that your rationality is wrong here. That sustainable investing might not perform better next year. But over the next 1020 30 years, we actually have can look at a lot of the mega trends here and see that make, I believe, a strong argument that fossil fuels are fundamentally an industry in decline. And the industries that are replacing them are poised for massive growth. So it's like an investing basics, do you want to invest in the declining industry for the next 30 years with the growing one, like, it's not that complicated, but those type of narratives become self perpetuating. In the market, fossil fuel stocks are kept elevated, because they're seen as that necessary evil, whereas climate pollution SOPs are kept down, because it seems like Well, I'm doing it because it's charitable, versus letting greed come into that. So that's a really critical piece, in terms of education, that I think advisors can be doing more. And I think it also connect the dots more for clients to be able to draw those macro conclusions of what's going on. And it's not just you know, what's going on with treasuries and things like that, but like in the, you know, the decades long perspective. So, we found that very helpful as well.

Gabe Rissman  53:34

That was really compelling. I also, I think what you're saying there, I probably maybe even said the same thing on a different podcast episode of this one. But we found it's pretty amazing. Three or four clients out of maybe 100 clients that a financial advisors have, asking for fossil fuel divestment, or ESG, is enough to get the advisor to take it seriously and start doing stuff. Three or four advisors, asking a fund manager to take something seriously and start making changes from an ESG perspective, gets that fund manager to start doing something differently. Three or four fund managers pushing a company to make a change. And this is this isn't literally, I mean, like you get enough, there's not that much. It's like small things at the margin. Being the squeaky wheel that gets the grease really changes things. So we've found that like, not just having your stocks in one place versus the other place, but the actual act of making that motion moves things up the chain in a really powerful way. And that's why I really love your name of carbon collective because it is it's about the collective action. And I love that the voting is a part of what you do too. And it was really part of the theory of change. So yeah, I thought that was really compelling. explanation.

Zach Stein  54:56

Thanks, man. Yeah, I like loved what you're just saying, oh, have the three to four. Like, if I was to summarize like, what is the mission and our challenge, and we're doing it in different ways, we're working on the RA community, we're right now working with larger with retail and maybe eventually institutional. But it's exactly that. It's how do we tell that story of not connecting, and leading to change? If we get that right, then we can have massive impact and I think also be very successful companies yet. So yeah, I would love to coordinate with you further, like, how can we help tell that three to four story? He has? Yeah, when we started carbon Collective, we were very influenced by the Obama campaign, were in 2018 are very successful. And they were really good at saying, Alright, your call center, you know, called this many people today. This is this. Many people in your county, this many people in the state, this many people in the country, they always connected the dots, for you to your impact? Yeah. And that if we do that, that's how we make change here.

Gabe Rissman  56:00

That's amazing. I know, we're already over time. I have one more question. If you have a couple more minutes,

Zach Stein  56:05

ma is fine. So

Gabe Rissman  56:07

transparency, really important to us. And I can tell from from your website, and from what we've talked about, really, really important to you as well. Can you talk about how you make your information really public in a way that I was shocked by it and and what you're doing there and why?

Zach Stein  56:24

I'm interested to hear the shocking parts of it. So to us this is again, generally a problem with ESG that I think your company it's it's resolved to etra is to solve is its lack of transparency. It's when I'm investing in a Vanguard ESG fund as an individual, I might know Vanguard, I have no idea who MSCI is, who they're choosing, and MSCI they make their money, like by selling proprietary data. And when it comes to ethics, it's all about trust. So you're asking me to trust the one I've never heard of, to make decision ethical decisions for me in a way that I literally would have to pay $30,000 a year to see into how it's done. That doesn't make any sense. So for us, it was really critical that we only use publicly available information and be post our methodologies and our work to such a degree that if you did the same thing, you hopefully could do it yourself. So you could replicate our carbon collective portfolio. Full stop, it might take you a very long time. But you absolutely could. And we think that that type of transparency is really critical in building trust in a space that has been so battered down by greenwashing. And there's so much distrust, and especially for us, we're starting largely in the climate community, and people who are working on this and close to it. So there's just a lot of initial skepticism we have to get over which is good. That means that it puts us through our paces even better, we have to be better. And we like it for that reason. But that's why we try to be as transparent as we are. Because it's under that theory that you build trust and get excited by knowing that you're going to be able to see why everything is in there. And then also talk to someone and being like, Why is this here. And I try to say this very publicly, our portfolios are always built to be a work in progress, and never want to think that they're perfect. Because they're all just really complicated. And there's always going to be things that don't fully add up are things that we need to tweak and build. And that's also part of that collective aspect, as well, is being really open and receptive to that feedback of saying, Hey, this is how we do it. If you have feedback to that. Yeah, we're listening and we very well might integrate it.

Gabe Rissman  58:38

Love it. Any any last things that you want to share.

Zach Stein  58:43

Now, this is great. I'm like such a fan of your work. And I'm just honored to be here. And I really look forward to continuing imagining in five years how we have both done a significant amount of change the narrative and the story of sustainable investing and its impact.

Gabe Rissman  59:03

Love it. Zach, thanks so much for joining and have a have a really nice holiday weekend. Thanks Gabe you too

Gabe Rissman  00:06

Hi and welcome to another episode of your steak your story. We're a video series with advisors and for advisors focused on highlighting best practices around values based investing. Today I'm really excited to have Dave and michelina with me. Dave has been working in the financial industry for more than 20 years. And fair planet advisors represents the culmination of Dave's years of professional experience, combining his passion for protecting the goals and dreams of his clients, and doing so in a sustainable matter. And Melina is excited to bring her passion for individuals in those they love to fair planet advisors, she's committed to building a just and sustainable world for all their professional and personal life. They have michelina really excited to have you on. Thanks. Good. Cool. So I'm gonna start with my favorite question that I always asked at the beginning. Just with the audience would love to know a little bit about you. Where'd you grow up? Was your journey to financial advising? And maybe how did you meet?

David Roth  01:10

How did we meet? Oh, that's, that's a whole nother SIX series, how we got into where we are now. So I grew up in the Pittsburgh, Pennsylvania area. So my mom joined the military. And she went on and I went with her to a number of different base assignments. So as a military brat throughout high school, ending up in Frankfort, West Germany, all of her siblings were big eight or big six CPAs. So I was basically voluntold from them that I was going to be an accountant, I didn't really have a choice. My mom was a psychiatric nurse practitioner. So she was in the medical field. And it's 25 years in the military. So after graduating college doing accounting, I realized I didn't want to be back office anymore. I wanted to do service, I wanted to help clients more than just pushing numbers. And I discovered this thing called Investing in finance. And that kind of started the path on to being a front office support to clients.

Michelina Roth  02:06

And I grew up in the Pacific Northwest in Southern Oregon. I had a family that was really involved in the social justice movement. And really, that was a big part of conversations around the dinner table. And so that was always really important to me, I went to college to study French and theology, I kind of just that philosophical approach and interested in making connections with people. So I did a year abroad in France and that ability to connect with people I was just really passionate about. And then we met in Denver, Colorado, through actually through through some youth group stuff and just church activities. And I got married a year later. And when we had our first children child, I decided to be a stay at home mom and went on to homeschool our boys was really passionate about helping them feeling like the most important thing for them to learn was who they are and what was important to them. And so I've been doing that for the last 20 years basically, and about three years ago joined our business really excited about also bringing that message to other people. I feel like that's what ESG investing is, is is helping people connect with what's important to them. And not we just our planet can't afford to have people who hold their noses and don't live the way they believe and know is true in their hearts. So

David Roth  03:22

I gave you mentioned kind of the audiences or other advisors that do what we do. So they'll also relate to this comment probably that we sometimes find ourselves kind like being marital counselors for our clients. So I'm going to share a little bit here so I'm gonna government owe you a copay for a little marital counseling here on our, our podcast. But when we were deciding where to go back, Kellyanne and I were dating, I was working for what I thought was my forever job Smartscope Capital Management, Denver, Colorado as CFO right out of college thinking, while I'm in the industry, I'm doing accounting for large cap mutual fund, this is gonna be fun. And Mick wanted to go to grad school. So we did the won't tell us what and why write the pros cons list. So I put together this giant thesis of all the reasons why we should stay in Denver, I should continue to work for this firm, and how it's going to benefit our family. And Michelina had basically two words on her side, you promised and so we moved, and we left the job. And that was the launching into because we got to I got to see behind the scenes of what goes on in that industry versus just accounting. So it really planted that seed. And we had no clue but ended up working for a venture finance firm after that and continue in the accounting world, that we would then circle back around to that passion that was instilled by this working at that farm for a few months. So she was right. I did promise but who knew that that was kind of decisive in our in our whole business plan.

Gabe Rissman  04:42

That's amazing. I'm so excited to dive into a lot of what you said I just want to start at I always liked the decision points. It's really interesting to hear about why you made a particular like life transition and path so you wanted to move out of the back office into the front office. How did you go about doing that? What Is that? Like, did you bounce around for a while before you settled on what you're doing? And then if you want to both talk about, like, from that journey, how you came to fair planet, that'd be, that'd be really cool.

David Roth  05:14

I will say, doing different careers, learning the things that we didn't know, really built our bandwidth. So we're better advisors were a better team. I mean, going through that process, even back when we were first decided to leave Denver or not, that was critical to how we built our business or not, right? There's certain times where you just have to have a partner relationship that you have this trumps all else. ESG was one of those moments later on. We didn't know what at the time, but we're building towards that. And so even the way we do all the other stuff in the family was building towards that. So

Michelina Roth  05:48

yeah, I mean, I don't know that I have a whole lot to add to that. But we we've always made our decisions together. And we did have Dave started out, he has worked for a couple other firms before we were independent. And then when he was first independent, he was doing a lot of DSP for but when we talked about knee joint coming in joining the team, I said, let's just go under percent. This is what we believe in. This is what we've always done in everything else we do, you know, in terms of conscious shopping, and considering fair trade and sourcing and all of those things, we'd always been making those decisions. And so it made sense, to just continue that and say, This is what we do. 100%.

David Roth  06:27

And one thing I'll add is all the sales training I've ever been through, whether you're talking insurance or investments, they're always like, Oh, just you know, fake it till you make it in my mind in ESG, you really can't fake it, if you really are talking about it and doing talking to clients that are really passionate about it. It was an easy transition for us because we were already living this organic life, we already want it to be values based because that's how we did things at home. You know, whether it was I was Rotarian, or scouting, you know, when I was 17, you know, someone told me, no one should ever have to ask you to if you're an Eagle Scout, your action should just show it an ESG. Someone shouldn't have to ask us for ESG. It's just we exude that it's what we do. It's how we are we got be certified because it was the right thing to be a B Corp. We aligned with USF because it's the right thing. So it just it just should be there.

Gabe Rissman  07:16

I love that. So So you were running your own practice. And then when michelina was going to join, you were already doing some ESG and then went all in? Can you talk about what that was like? And? And what was available for you? And how, like, did you have to what what were all the things that you had to change to go from maybe exploring yesterday a little bit into into all with?

Michelina Roth  07:40

Well, Dave, started at our annual broker dealer conference, we were looking for more and better options. We were meeting with a couple of different folks and just exploring things and we went to a seminar.

David Roth  07:55

So everyone on the call has been if there have been with a broker dealer, you go to the national conferences, you have the tracks, like what which topics do you want to go listen to. And so we're watching this from home going, Okay, here's where we want to go. And we see the track. It's like ESG investing, and we're going, we want to align with ESG. This, we're going that track. So we start going into this. And we're going through all the large we know conversation Hall at the big convention center. And they have an opportunity for questions. So I'm not very shy. So I raise my hand I stand up. And I and there's a board up there with all the different panelists. And I go Excuse me, Mr. Mrs. National Fund leader who's making all these decisions? How do you determine and what do you use to evaluate your funds based on ESG? Information? Because we want to know we're trying to learn like, how do we do this? What's our story about our client,

Michelina Roth  08:40

and this is the breakout session on ESP fMRI, you're the experts,

David Roth  08:46

give them just like all 1000s of advisors, this is the moment you all are gonna go here. And they looked at me and they said, Oh, just trust us. And I said, I'm sorry, I must rephrase my question. Well, I wanted to know what specifically you do that says that fun versus this fun under your umbrella is ESG. And I'm thinking in the back of my head, what do you change light bulbs and the security standard? And now all of a sudden, your ESG? Because that's an LED versus you know, the old style? And again, there's Oh, no, you know, we're just that's a core of our nature. It's who we are. And I'm going back to like, well, if you were my neighbor, I would look at how you live and do everything. But since you're a large manager, having worked in management firms with this, like, there's a lot of back behind the scenes work that goes in. And if you can't tell me the process, that probably means there is no process because if that moment, you would probably be singing your praises, like thank you for asking. Let me just, you know, give you all the overall sales that we're always told not to do with the, you know, too much, that was just lacking. And so we just sat down like disheartened, like, we can't be ESG because we couldn't find it. We didn't know where to go where our national conference we're getting no answers. And then someone comes up and says this what happens?

Michelina Roth  09:57

Yeah, another financial advisor. ever said that? Thank you for asking that question. That was a ridiculous answer that they gave you. And I'm, you know, want to share what I know. And, and that was the beginning of getting involved in in the ESG community and feeling wasn't like, Hey, your clients from me or there's a competition, it was just, I believe in what I'm doing from this other advisor. And I will help you and I will show you what I have learned over the last 30 years. So,

David Roth  10:28

and it was really one of those moments where I went from Doggy Dog Commission's base, I'm going to steal your client, if you're not there to take the phone calls, because your person sitting next to you is going to take that lead to way we're ESG Sri advisors, we're here to help each other, better the planet better the world. And I'm going to show you everything that I do. And oh, by the way, I'm in a different chain. I'm not getting any override on you or anything else. But I'm going to open up the entire toolbox. And she did was a she in this case, and she just loved on us. And it was one of those most refreshing moments because we were just down and out like how we build this business. How do we do it? There are no answers. That's an

Gabe Rissman  11:08

amazing story. And I don't know if I've ever heard a clear, like, this is the moment or I need to do something. And you had that guardian angel that that came in. I've I've also the reason why I love being in this space, is we found that as a technology provider, people want to welcome you into the community, we found that people want to, like, everyone loves being introduced to the ESG study group and just forming these bonds, because it's a shared mission, which I guess you don't really see as much across the industry. So I think that's really cool. And you've been a big part of, of being part of our community, which is really amazing. What were some of the things that maybe surprised you? Or what were the biggest roadblocks that you've had to overcome that this advisor and then others in the community as you continue on your journey?

David Roth  11:53

Well, you'll remember us trying to get your state onto our platform took about 13,000 years, I think was well over a year. And I think I was the only advisor ever asking to get something like your information your platform in and why our due diligence departments like, but why why do you want this and we had to walk them through and educate them. And that I think they now finally see why why is it important? Because it's a data tool. And we need that information that was lacking, that the other mutual fund managers didn't have the time that the industry is shifting towards. So that's been a part of is trying to push the envelope. And we're going against these stereotypes of if you're an ESG, you're gonna take a haircut, if you're an ESG, you're only gonna have two or three options, you're not gonna have anything available, you're not going to really get the data because no one's really providing anything. All of those things have been disproven for the most part. And I think clients are now able to make better choices, because there's data points available.

Gabe Rissman  12:55

So it seems like having a tool to show the data was a really crucial part. And now we're getting a lot more people requesting that. But when you were getting started, you're right, it was totally new, and no one knew why you need an ESG tool. Was it also difficult to find investment options? Was it difficult to have that conversation with clients about financial performance? Was it difficult? Did you ever have to do things like come up with an SSRI policy statement, war, war, all the things that maybe you didn't even think about? Or what were the biggest challenges in in making that transition?

David Roth  13:28

I think once we heard from the other advisor, they already kind of Blazing that trail, a lot of those other roadblocks that would have been kind of like insurmountable, we're already kind of clear, because we're able to build upon those were before us. So there are industry leaders that have been doing this 30 and 40 years plus, that when we look at what they've brought to the table over those years, we're really standing on their shoulders. Yeah. And it kind of makes us pause and go as we meet new advisors or other opportunities, it's our responsibility to share that same data. And that leads from the standpoint of there's plenty of business, we need to operate from the sense of abundance versus scarcity so that others can do what we were so fortunate to get introduced to.

Michelina Roth  14:13

Yeah, it was actually relatively easy. I feel like once we got past that initial hurdle, we haven't faced that many roadblocks. I mean, certainly there. There are little difficulties, but mostly it's been, it's been pretty easy to find. And to serve clients.

David Roth  14:29

We moved from that, you know, just trust us thing to now trust but verify with the data. And then as the world has changed, we as a firm have come out with statements of support for different areas, that sometimes some of our clients that were earlier on before we made kind of the switch to be, I would say big tree hugging firm that we are realized, oh, maybe you're a little bit too ESG for us. So we came out with a support during the riots and different things with the plan. Lives Matter.

Michelina Roth  15:01

Right after George played smarter, we put out a statement in support of Black Lives Matter. And we lost a client over that. And we were actually it was, I mean, I was completely okay with it. But it was, it was hard to lose that relationship.

David Roth  15:16

But we kind of pride ourselves as a firm, I can count on literally two hands in the last 10 years, the number of clients we've lost for whatever reason other than passing away, right? So when I lose a client, when we lose a client, I'm emotional. But I'm like, Whoa, what happened? We're and this is not one of those that we know the family, there's all that it was just, we've gone a direction that's taking them a little too far. And but we're okay with that. As a firm, we have to push that envelope, we have to do what we believe in, or otherwise, we're just not a firm. We're just, you know, faking it. And we won't fake it.

Gabe Rissman  15:50

As you delve more into ESG. What was it like having those conversations with clients that were already working with you before you started talking about this? How did you have that conversation with clients that were

David Roth  16:01

not involved, and we introduced them to ESG, it was almost like a breath of fresh air, because some of them didn't know what they didn't know. And here's that relationship. Most clients want to work with you as a firm as whatever, because they trust you. They like the branding, or they trust you as advisors. So when we come to a client, and we're sharing with our overall client base, they had no idea what these acronyms meant. But we had the education, we had the background, we had their backs, we had that best interest piece, that fiduciary thing, before people were forced into doing it, we're already thinking, this is already good for you. Let's talk about this. So if you could make this decision based upon your values, and if we can show you that it probably isn't gonna hurt you on diversification and performance. Why wouldn't you want to do this? Because it's not as telling you your values. It's us asking you, Mr. Mrs. client, or entity or nonprofit? What are your values? What's important to you? What do you want to stand with? What do you want to stand against? And if we can make that happen? Would that be okay? That piece has been very powerful.

Michelina Roth  17:06

And I think there's been a shift in these last few years, people, people don't want to not know anymore. They don't want to hold their noses, they. So they're very refreshed to hear oh, I can know what's happening. And I can feel good about it. And I'm still going to be okay.

Gabe Rissman  17:24

michelina, can you talk about when you were even talking about your philosophy and raising your children? It was helping people find their purpose? What does that look like? What's an example conversation? How do you do that with clients to be able to figure out what ESG means to them?

Michelina Roth  17:40

So we started the conversation by saying, you know, our values aren't necessarily going to be the same as yours. There's lots of hard questions in this industry, we go through sort of an inclusion exclusion process where people can choose, you know, big oil, private, for profit prisons, what things do you want to exclude, some of those things like nuclear, for example, are not going to be the same for for everyone. That's okay. What we what we say is, we really, truly believe if we, if we're going to change this world, collectively, together, we're going to change it so that our children and our children's children have a planet and have a future. We have to as individuals, we have to say, something's important to me, and I'm going to act upon that. And even if we're not all making the same choices, just by listening to our inner voice, and being true to ourselves, like the planet will be better the world we live in will be better. We can't I think we had a long period where people just sort of were numbing themselves and saying, I can't live in this world and do what I believe and live my true, you know, heart's desires for lack of a better expression. I can't do that. And I think that that just breeds hopelessness, if we want to plan it, hope is what we need. So. So that's kind of how we start the conversation is saying, you know, what do you believe in and we'll help you do that.

David Roth  19:01

And I think one of the things that we've been end with with clients is, well, there's this decision of how to include or exclude or divest from, but that doesn't even touch on the shareholder advocacy piece of it. So you can go into and say, I don't want to be an X, Y, or Z. And I'm going to hold my nose if I have to buy a plastic toothbrush, because that's the only way that toothbrushes are coming for it's hypothetical example, right? But you can then decide, I'm going to go to those makers. And we want to put a shareholder piece with and say, Let's not make those things out of plastic anymore. Can we do with bamboo or make them out of cement, whatever it is, right, the right answer, and move that bar. And so when people hear there's a dual prong approach to this, and then we add in comprehensive financial planning with the diversification, we're actually talking about the holistic side of it. They're like, wow, why are more people not doing this? And my question to answer that is like, I don't know, I think if more advisors realized it wasn't that hard to do, I think they would do it. It's just they don't know what they don't know. So this kind of a service to come out and talk and share. If people hear this and go, What are you all doing, call us, we'll tell you, we're not going to hide anything. Because there's how many people in this world that need to make this a better place. We need more people doing this more firms.

Michelina Roth  20:18

And I think most people who are in financial advising are hedge because they care about their clients, right? They want to help their clients live their best lives. We just became a certified B Corp, and the B Corp model is considering all stakeholders, right? So that's clients, that's, that's profit. But that's also sourcing materials, fair trade all of those issues. And it's I think, if you're dealing with your financial advisor, you already want to help your client just ESG allows you to expand that and say, you know, we can help all parts of this equation, and we really come to work every day, super excited and energized. And so I feel like it just could be that for so many more advisors.

Gabe Rissman  21:00

Do you want to tell a couple of examples, stories of maybe even with clients that don't come in knowing that they're all in on ESG? But you can work? Through that? I think that'd be really cool to share?

Michelina Roth  21:12

Do you have someone in mind or situation?

David Roth  21:15

So we've had, I'm going to do some very unfavorable stereotypes, some just put my disclaimer out there. I wouldn't say that there are a few typical clients that may say, we just want profit, right? All we're looking for is return. I hear you, David michelina, that you're kind of touchy feely, and you know, you want to worry about this and that, but we're looking at you for you know, just make sure our retirement accounts there. And we have plenty to spend. Well, we were able to show some numbers and say, Okay, well, if we went this direction, you're gonna get this kind of return. If we go this direction, we'll get that kind of return. And not to say, you know, that whole disclaimer, past history future performance piece, but we're able to line him up and go, you know, what some of the things that we may lean, say more green ESGs arrived, keeping pace, outpacing maybe even way superior performance, or boards that are going to be more receptive to some of the shareholder efficacy pieces, or maybe companies that may actually be here in 30 years, versus people that have just depleted the resources or the industry sector they're in? Where would you want to be when you look at the board of directors don't make up the planet, the resources and all that. And oh, by the way, that piece that you're talking about profit may get sucked along in there as well. And maybe we say it's gonna be better. Some clients are like, absolutely. But don't tell me about all that other stuff, I just wonder about the profit. But either you got us there. So we are kind of, you know, I won't say force feeding, but it kind of feels like you are a little bit because you're like, right, now we can say the numbers are really strong. So if it pivots for those clients, we've got to, you know, stop and rebalance and look, but you know, right now, it's killing it. So

Gabe Rissman  22:57

there are plenty of people convinced by the thesis that ESG is just better investing?

Michelina Roth  23:03

Well, I mean, I think, you know, COVID is a strong example of that, if you were a corporation that wasn't really caring about their employees going into going into a pandemic, then then how do you survive, right, you have to some of these things, just it just makes sense. To me, if you're considering everybody, you're going to be able to last the long haul and profit tomorrow is really nothing if it's not profit, and sustainability for the long term.

David Roth  23:28

And I would say all the advisors on this call, especially if they're listening, because it's you know, the your estate spin in it, realize there are billions of dollars moving from traditional investments over to more of the ESG tranches, if you will. And the big wire houses, there's a reason why they're buying up everybody else out there that has that something, something ESG in them, or some kind of screening values based, because they have to have an answer to retain their clients. So as we look at the next 150 years, whatever it is out there, you know, global investing, if we're not aware of what's going on the planet, we're not going to be here, folks, you know, we've got to shape up and figure this out. And, you know, one of the stories I tell when I'm talking to high school to kids is my theory of you know, the Pottersville versus bay of Bedford Falls, right, which which side of that story you want to be in from, It's a Wonderful Life, you know, and I look back and go, that movie wasn't a big hit, when it came out. It took however many years for it to become irrelevant, you know, ESG now is becoming irrelevant. It took a while for it to get there. But we're at the stage where if we don't all show up, because, you know, mas calm people on the phone, and George needs money. You know, our planet needs help. And we've got to decide which way we're gonna go. And these are those moments where people are gonna watch us. And so you've got to be on visible and honest with your clients. If you've got a passion for leaving something for people behind, stand up and change what we're doing. And this is one way we can do it in our industry is by where we can invest in how we invest, you know, and then we take it to our local communities and our neighbors, but the time is over for somebody else is going to do it for us. Nobody else is going to do it for us.

Gabe Rissman  25:11

Yeah, I'm loving what you're saying, I think that a lot of people will really resonate with that as they're listening to this call. And a lot of people want to know how they can contribute and make a difference. And that's what gets a lot of advisors interested in ESG. There's obviously, people getting into man, but sometimes the advisor drives it based on their values and what they really want to do. So I think that when you believe it, and have that passion, and can speak like the way you do, I'm sure your clients are really receptive to that. Because they, I mean, they get alongside that inspiring comments and realize that they're not sacrificing, or likely not sacrificing returns and getting something that's really more powerful and being part of a movement.

David Roth  25:52

And that's not to say, we haven't had clients walk in the door and go, thank you for sharing, but we really want to do this or that and we look and go, that's not us, and they walk right out the door and they go somewhere else. That's okay. You know,

Michelina Roth  26:04

for most people, knowledge is power, right? So we had, we were talking to and it's one of my issues I'm passionate about, and it was for this person too. And she said to me, that's that's kind of a little bar to just say, Oh, I'm out of out of immigration detention for profit prisons. And I said, You know what, it is a really low bar. But gosh, at least if you care about that, is that something you're gonna show up? Or maybe even protests on the street? Don't you want it out of your investment portfolio? And, and I think a lot of people really just haven't known Oh, I didn't, you know, I had no idea how heavily I was invested in these things that I am adamantly against. So not, you know, knowledge is power. And people are not willing, I think less and less people are willing to just not

David Roth  26:51

know. And I think whether you've kind of asked a couple different ways gave, is that, following the clients and their values, you know, it, it touches on the point of that greenwashing, like, what is greenwashing what is out there? How do you trust but verify that our industry is in a prime situation where we need to have what the FDA had to go through versus natural foods versus certified organic foods, we need clear, auditable statements. And if you're talking Sarbanes Oxley, back in the accounting days, where you are held liable for and responsible for your actions of a firm, if these are true statements or not, we need that in investing. So that we can then say you say this is this, but it's not certified organic, because you're doing all these other things, to simplify it for advisors, and ultimately for clients. Because it's too hard. It shouldn't be this hard that you shouldn't have to dig as hard as we had to dig to get this, you know, we're 3040 years into as an industry. We now need standards.

Gabe Rissman  27:54

couple thoughts and responsible both, you said I think they tied together really well. Last year, there were four major surveys that came out from from giant asset managers. Showing that I mean for decades and decades, the entire history of ESG ESRI financial performance was the big concern among investors for ESRI. But now, for the first time last year, greenwashing and data quality are the biggest concerns among retail and institutional investors. And having a way to show instead of you can't have that trust me argument anymore. Well, that inspired you from the start, that's not going to fly and it shouldn't have ever flown. And I think what you're saying michelina About the for profit prisons, there's a lot more data and knowledge that is out there that clients can find on their own. And if advisers don't have good responses and information themselves, and that's, that's an uncomfortable position they can be and we hear that all the time where advisors are getting educated by by their clients, and they then are inspired to know more. And michelina one last request for you to face Dave while your

David Roth  29:05

bodies have to get close. Good thing we're married, right, we're not getting our problems.

Gabe Rissman  29:14

That's a great point. Um, so if you have anything that you wanted to say in response to that, go for it. I also would love to hear what you currently find to be the most challenging parts of ESRI that you're that you're encountering with clients now.

David Roth  29:29

So I think my biggest thing that I hear, or what I'm seeing from clients that they don't know, is they're buying what I would consider the greenwashing Hey, you know, our old fun family came out with something and I'm okay. And without even naming names, have fun. Everyone has these stories, they can do the research. And you may be in a fund that the fund itself could be phenomenal. But what about the parent company? What about all the other holdings? What about everything else that it's doing? And you can say, Okay, I'm buying my water from a company that has fantastic water, but another side, they're spitting uranium out the doors, right? They're poisoning the water down the road. It's there's a greater impact than just saying that one does check out well. But what about the next one that you're related to Mr. Mrs. Business Owner or board? Are you doing that same thing across the board? Or are you just putting out something so you retain clients? And that's a bigger ask. And some of those large firms have stepped up and supported some shareholder advocacy things that I sit back and go, thank you. That's fantastic. You are really coming to the table. But it was great for that 32nd marketing piece. What are you doing now? What's that next step? Come on, let's get on board because they can make the change in this world as larger firms. You know, we're a small shop, we can help folks, we're not going to change the planet based on the way we got certified as a B Corp. They could, although I will say

Michelina Roth  30:55

I think I think part of the problem all along and people feel like our world is just so big. And you know, what can I do with my little bit, my little tiny investments, everybody feels like they're too small. But really, that's not true. Like you and I, and our neighbor. And each of our clients, we're pushing the bar, we're having that ripple effect. And really, that's all anything ever was, is a ripple effect, you know, of in a positive direction or a negative direction. But what each of us does matters. And I think that that's what we bring to the conversation is it's not just, it's not just, oh, no, I'm just one tiny little frog in the pond, it doesn't matter what I do. No, it does. And you make a difference. And you push those shareholder advocacy conversations, each of us does.

Gabe Rissman  31:43

I love what you're saying. And this is, in terms of how Yes, you can scale as a movement. We found that like three is the tipping point. And I'll explain what that means. We found that when three clients or one really big one asks their advisor for for ESG, they start signing up for demos with us, and they start looking into actual solutions, only three clients out of maybe 100, whoever knows. And then with fund managers, you get three financial advisors, asking the fund manager about their shareholder advocacy asking their fund manager about why are you investing in for profit prisons, whatever else it might be, it really does not take that much because people know that this direction things are headed. So they get a couple squeaky wheels. And they'll get the grease and and you will see that that's what we've seen empirically is that only a little bit of action, and a little bit of using your voice can lead people to really start considering this deeply and trying to come up with solutions.

David Roth  32:46

And that's why we fought our broker dealer so hard to get platforms like you on our platform, because we were going to use you some way, this way or the other anyway, it wasn't so much for our clients, it's for the other 5000 advisors on the platform that then are a part of the larger platform that can roll up and now you're talking, you know, 80,000 advisors really could if they actually asked you, oh, it's already approved. So if you're on this call, and you don't know what your broker dealer has, call your broker dealer, and ask them, it may be already approved by a sister organization somewhere in your tear. So just asked and see what's there.

Gabe Rissman  33:22

Love that. And also, I just wanted to touch on what you were saying earlier about the intentionality of affirm, it sounded like that is I could very much understand that being a really important but a difficult communication challenge. That is not just what your fund is investing in. But it's who's behind that fund. And what firm are they a part of? Do you find that clients are receptive to that kind of logic? Or is that something that they struggle to wrap their minds around? Or what's what's that like?

Michelina Roth  33:52

I think it goes back to knowledge. I think people are really receptive to that they want to know, and there's so much to absorb in this world and our media's news cycle and all of that. So if we have those answers, they're like, yes, please, please let us know. And we will continue the conversation.

David Roth  34:10

Yeah, it's like a client wanting to give to a charity, we can go out there and check out your charity evaluation tools, and you go, Wow, this charity really is taking every dollar you give them maybe a penny or two, and it goes to the boots on the ground for the activity that it's about. That's what we need an ESG. That's what your tool allows us to do is we're able to say, let's drill into this and find out what is it. And then when those holdings keep popping up on all those different values that the client wants. We may not know what the symbol or the ticker is, but we know what the values are that it's getting alerted. And we're able to say it hit on 28 out of 300. Is that enough for us to change or it may just be it hit on one that one hit may be enough for us to move and divest or invest depending on what the criteria is we're looking at. So the facts because otherwise we can't look at the data and the industry and the commodity and what's going on the world and understand what Responding to clients lives, we have to rely on services and tools to allow us to bring those all together for the clients and act as the quarterbacks if you will, for their financial futures.

Gabe Rissman  35:11

Love it. We are running up on time. The last question that I have is your thoughts on where ESG is headed?

Michelina Roth  35:21

Well, I mean, I think the movement is just gonna continue to grow. It gives me a lot of hope, I think hope is really the most, the most promising thing we can do for our world. So I see it growing.

David Roth  35:36

So I'm gonna take it back to where it started. For me, high school in Germany. There were beer purity laws there that I was 17 That shouldn't have known about, but I knew about, and they're still there now. And you don't have to go to Germany and get a certified beer. It's just the way it is. There's just this is how you do beer. And you can do it the right way. I think ESG is going to get that point where it's not going to worry about greenwashing and this tool. It's just we do it the right way. So we need to live on our planet the right way, and stop looking for all these things that tell us, here's how you act. We know how to act, we just need to do it. So I think it's just going to continue to grow.

Michelina Roth  36:15

And I think people want that more and more. I mean, I think it's really exciting to see this movement growing and I think it holds a lot of answers for our planet.

Gabe Rissman  36:25

Love it. So hey, you said that if people want to reach out they should. They should contact you. What's the best way to do that?

David Roth  36:31

email. Go to the website fair planet advisors or info at fair planet advisors. put your questions in. We'll share what we know.

Gabe Rissman  36:41

Thank you so much for joining me today. I really appreciate this conversation. I learned a lot actually again, and love to hear your stories to that they're sort of really incredible.

Michelina Roth  36:51

Thank you, Gabe. It's so nice to talk to you. We appreciate so much what you're doing

David Roth  36:54

need to get a sax player in your background Miles is good. But you know alto tenor sax, that's the way to go.

Gabe Rissman  37:00

You're playing you're talking about heartstrings right now. I grew up playing trumpet. I got this poster. Oh, I'll move the camera a little showing Miles Davis, for my Bar Mitzvah is Bar Mitzvah gift. I was a trumpet player. And the only reason why I was a trumpet player is I couldn't make the sound on the read. But I am such a big fan of the saxophone. I have so much sax envy. It's, it's why

David Roth  37:22

you're gonna love this third or fourth grade. I'm at school in Pittsburgh and they'd have the band people come out. I'm like, I want to play trumpet. And they put my mouth on trumpet like, Oh, you're gonna play a sax. I'm like, I want to play trumpet. So I played sax through college and all that. And so a little bit of a ying and yang there.

Gabe Rissman  37:40

Yeah, that's what is the opposite situation. So who's your favorite trumpet player

David Roth  37:46

than trumpet? I don't really like him. I'm all sax now. All right, Mr. Wood. You are right.

Gabe Rissman  37:58

It's pretty well send me some of your favorite hits because I'm always looking for new Stax music, so that'd be great.

David Roth  38:07

Sounds good? Yeah, I listen to a lot of day Sandborn so you might get some of that.

Gabe Rissman  38:10

Sounds good. Thank you so much for joining.

David Roth  38:14

But see you bye bye.

Gabe Rissman  0:00  

Hello and welcome to your steak your story. We're a video series with advisors for advisors, highlighting best practices of ESG and sustainable investing. Today I'm really excited to have Jeff Gutterman, a trusted advisor. And Jeff has a really great resume Jeff is a widely recognized leader in the ESG and sustainable investing field. Jeff's the creator of the smart, sustainable metrics applied to risk tolerance investing solutions, a suite of global climate aware allocation strategies available to financial advisory firms and individual investors. With over 30 years of experience as a financial advisor, Jeff began realigning determine Wealth Management, LLC towards sustainable investing in 2015. The firm regularly hosts ESG focused events for financial advisors. Jeff is also the co host of the impact TV show, which airs on fintech.tv, and bluebird TV. And Jeff also serves on the board of directors for the Child Health Institute in New Jersey, at Rutgers, Robert Robert Wood Johnson medical school and dedicates much of his free time to raising funds and awareness for the autism community. Jeff, really excited to have you on thanks so much for joining.

Unknown Speaker  1:12  

Thanks, Kay. Happy to be here.

Gabe Rissman  1:14  

Cool. So, I would love to have you start by just telling the audience about yourself. Where did you grew up? How did you grew up? What was your journey to the field of financial advising.

Unknown Speaker  1:27  

I grew up in Queens, New York. So we'll go York boy boarding raised. And parents we're definitely lower middle class, income. Retail, my dad worked at retail. During the 70s, lots of unemployment, lots of concerns about the next check and the next meal and stuff that did a garden apartment if we shared it with my sister and my parents. And I'd say the one influence monetary influence I had early on is that way Oh, God was in the insurance business. You work for all the time, Mitchell V. Or he was one of their top salespeople. And he work until he paid his bills for the month. So someone seat work two or three days, Bob, take the rest of the month off, it was a pretty interesting approach. It was never trying to kill, he just wanted to be a top producer. And once it I was builds cover. But if on Monday, the first day of the month, the big sale and it covered is not for the month, he would take the rest of the month and not work. And I saw it it's like indirectly comparison on a constant basis to my parents, like they're both salaried always worked for them. They never had much control over their life or their income or their job. So I think I was drawn early to just having more freedom. And also see what helping people selling life insurance medicals case could really do for you. And also your career and your freedom and your ability to evolve and develop.

Gabe Rissman  3:16  

It's very cool. And then it's your you started wealth management 30 years ago. When did you What did you make that choice? And how was your I guess you said that was your first monetary influence? How did you get into the field? How do you make that decision? Was that like a start?

Unknown Speaker  3:38  

You could say that maybe subconsciously I was drawing towards it because my uncle. But when I was on break from college, I got a temporary job at Merrill Lynch, to rotate or temporary to say so it was the first day I went in. I had a few months off from school and I was looking for some work and they said me literally that day. We'll be right back and the court sent me to Merrill Lynch. And I started that day. This was in my last year of college, it was at six when the market was fly and pre crash. And when the crash hit, they actually offered me a job full time because they were so swamped. I actually worked on the error desk. You can imagine during your crash, the IRA desk is a very popular place for sure. And I was working 70 hours a week and they offered me a full time job at once the best Electoral College and a were I supposed to pay for me to finish college? Well, and that started my career. So I think subliminally there was probably this you know, influence but really luck played a big part. It means starting out limits yield. And I was in college for a business degree. I should say it wasn't like I was at a philosophy degree they wound up in Merrill Lynch I I was going for a BSBA ride.

Gabe Rissman  5:04  

And how much of your role was client facing? And when did that start becoming part of what you did?

Unknown Speaker  5:09  

Yeah, so I worked for probably four or five years and operations, first at Merrill Lynch that at Prudential mutual fund services and actually launched their 401 K division, part of a very small crew that launched the operational side of the 401k. Business Prudential, that exploded. I mean, it took off like a rocket ship. And again, I've found myself working 70 hours a week, making a lot of money for a kid, while he was I was getting paid overtime. So getting paid a lot of money for that time, not a lot these days, but a lot then. And after two years of that they came in one day, they said, Alright, we're cutting out over time, I realized my salary was a third of what my I've been making two years. And after two years, you can pretty used to what you're making. And that idea that I was going back to a third, while I make the prior two years was a little disturbed. And I saw the producers on the other side who was selling the form of gays making a fortune. And that's really when I made the decision to go from operations and moved over to equitable life insurance at the time and became AXA, I would say equitable again. But I'd moved over there and move to the sales side itd. Well, long time, but longer than you've been alive, we're

Gabe Rissman  6:36  

barely getting there. But that's, and then when did you found good urban wealth management.

Unknown Speaker  6:45  

So we were really lucky, I took a course by Tom Stanley Orchidee, to the athlet. Way back in the day. And it it said that the best place that I would be suited was working with teachers. And I started working with college professors in early biology and really built market that became determine about five or six years later, we actually formed a group of associates at the time, it's gone through a few different names, but always been good or have been very creative. Always been good in some form, in the name, but we started that and really worked in the college market. For the past 30 years or so that's been our primary target market. We have clients in other spaces, but we've got probably 5000 college professors at this point as clients for we're in the New Jersey pension system, as well, which happened. Lady six, so we started working with college professors, they wound up actually getting a slot in the college pension system, and have had that slot since 96. But of a long time. And I would say that, in hindsight, it really allowed me to move into sustainable investing ESG, which didn't happen till 2015. So a lot of time we're just growing up is this to 25 employees and about a billion in assets. And then in 2015, and I think the story a little bit, but I was introduced to the guys that were making itself called Planetary. And they'll be KEBA and Paul Hawken and Ron Garan, the astronaut, some indigenous teachers, and leaders from different communities. And they wound up making me an associate producer on the film, and they want to raise funding for the film. And when it came out, it just touched me in a big way. It's a beautiful film. For those who haven't seen it, you can find it on video. But again, it's called Planetary, but the film was really about telling a different story about our relationship to each other in the playoffs. And that made me take a hard look at what we were doing as an investment company, and a wealth management for and I made a commitment at that point as some sort of team to realize that business, and it's aligned much more with the messages. Phil.

Gabe Rissman  9:17  

Before that time. Did you have any opinions on ESG? Or was it not even coming up in your conversations?

Unknown Speaker  9:25  

Yeah, it wasn't really even on my radar. My personal life I've been a meditation teacher, I read the book in 2009 called the onsuccess redefining the meaning of prosperity. So I was plagued with these themes in my private life. I guess you could call them ESG they certainly for a long time really since my early days, I had a radio show called The onsuccess redefining the meaning of prosperity also were interviewed spiritual teachers, religious leaders and just people about happiness generally and success. And for that So I was always touching it. But until planetary came along, I had this kind of bifurcated journey where on one side of my personal life was in either raising money for autism seven, let's just spend some more working with these themes around success and happiness. My whole life is something I've been researching. I've been teaching about doing seminars well. But in 2015, Morningstar had just come out with their glow bracelets. And it was really perfect timing. Things always look better in the rearview mirror, it was easier to decipher. But in hindsight, that journey coincided with Morningstar coming out the glow ratings, which at least allowed us a starting point of how to do ESG and sustainable investing inside model portfolio delivery, which is what we have been doing for years, we're very big on not having each colleague in a completely customized portfolio that that wasn't scale. So we've been running our portfolio since 2002. That in 2015, we started running well. We started researching and digging into ESG, and sustainable workflow. So it took until 2017, before we launched our first models, and subsequently, we've converted almost probably at about 80 85% of the firm's assets are in ESG, and sustainable portfolios. And the only reason there aren't more sort of, you know, tax reasons, capital gains rates, and new colleagues only get offered bail ESG and sustainable votes, we don't offer non sustainable and on each street portfolio. So at this point,

Gabe Rissman  11:44  

that's amazing. And that actually leads right into my next question, which is, what were the conversations like? I'm sure there were plenty of tough conversations when deciding to make this full transition to ESG to sustainable investing. What tell me about the conversations with your team, with your clients?

Unknown Speaker  12:05  

What was that like? Yeah, I made the commitment, I did make the commitment for the firm, I allowed the other advisors in the firm to come to their own decision. So between 2017 and 2019, there were, you know, constant conversations and dialogue. So all healthy, nothing, you know, negative about the reason for going in that direction. It's why I started hosting the conferences, because there's an old saying a profit, it's not honored its own whole, I thought it would be much better to bring in experts, and gather them together to lead the advisors in life for and ultimately, other advisors, invited to these conferences, partake in really good sessions of digging in around ESG inequality. And it's why we started working with the United Nations around the sustainable development goals and 2080, we held our first conference of the UN. That was really all my way, my way is always education, it's no fight. So my thing was, if I bring enough valid Indian education, to the table on a consistent basis, and we perform well, I knew it had to be both we were running our portfolios side by side with traditional portfolios for the first, really three years 1718 and 19. It wasn't until 20, where we stopped Raleigh, or Nam ESG and sustainable models. I just put my head down, and did the education and did the work. And also I have constantly been trying to learn as much as I can. So that's why be really made the move from ESG from ESG. But why we developed climate focused modeling as well in it, because I think the more we learned, the more we educated ourselves. And then the more experts we spoke to, the more we realized that ultimately, climate risk would be the biggest rest of the capital market so that while ESG was important, that was a really good way to examine more data in the investment decisions that we're making. That climate would play a much more central role in the effect and impact on capital markets brights. I just want to go back to and say ESG is very misunderstood. Since you know, we're talking to advisors today. I think it's appropriate to bring up the Wall Street Journal article series that's running right now by Macintosh. That is a very critical view of ESG or it's a critical view of ESG without explaining what ESG To eat basically makes the argument which a lot of people like to read fancy if they'd also that ESG investors want to save the world and ESG investing doesn't save the world. And I would argue that's a completely incorrect, you know, viewpoint or perspective. ESG is more data ESG is not investing, you can't buy an ESG fallen, that's just an ESG, you're still buying a large cap growth fund or a mid cap fund or emerging markets. But you're buying those funds with more ESG data, hopefully, being viewed by the manager for it's a passive fund, which he is very critical of, and I have, I agree a lot with his critique of passive funds, because you're just using a scoring methodology that doesn't really look hard at the underlying data. But if you're an active manager, and you're buying ESG data, then you're still looking at all the same metrics that are not ESG managers, but you'll get more data. And as we become well, the over analogy, that ESG is GTS of investing.

Unknown Speaker  16:12  

It would be like trying to argue with someone today that it is that a GPS is not better than a mat. And that people using a GPS, only because they're trying to get somewhere faster, are being misled by the GPS manufacturer, that that's really the same argument that Macintosh is that people use GPS really more for safety. And for risk mitigation, they don't want to run into a six hour traffic jam with the li e, if they could be told ahead of time about that. That's what the GPS does. It doesn't throw out the data that's in the old map, it adds to that data set. And that's exactly what ESG does, it adds to the data set. And if you present it that way, I don't know anybody that doesn't want more data about the company their best. It's just, it's unfortunate that the Wall Street Journal is allowing us to really doesn't amount to much more than to knee like Facebook posts that he's posting every day about opinion pieces, really about ESG without much depth to it, and using ESG to bash it from an incorrect perspective. So I think we have to be clear, sustainable investing, and ESG are different. ESG is not investing its data, sustainable investing is saying, I want the companies that invest in to be not just better around certain environmental, social governance issues. But I also want them to be more sustainable for the planet. And that's like route preferences. Yeah. If you don't use route preferences, you're just gonna get the best route based on the data, that'd be out with the talent. But each individual can exercise their discretion in their GPS. So you know, I want to take the scenic route, I understand it's gonna take me longer. I'm willing to make that sacrifice. But it's important to my mental health drive along the ocean, you know, let's drive through the city every day. Same thing with sustainable investing, I would use ESG data no matter who you are. But then you could also make a personal decision that I know it might not save the planet. But I'm going to sleep better at night, if my investments are more sustainable forwards. And he argues the point that those people are fooling themselves. When he makes that point, you know, repeatedly the articles that he's posted. I don't think people care about that. I think people understand that they are a few $100,000 in retirement plan best more sustainably isn't going to necessarily save the planet. But it's going to make them sleep better either about subsidizing companies that are poisoning the planet. And then impact which we call a destination in our ESG is the GPS thing analogy, because it's measurable and intentional, is also different from sustainable investing and each Jade's maybe the highest form of the top of the pyramid where you're making a very specific investment impact that end result, or to drive it end result, and that you understand what you're doing. So I think it's always important when you write articles like this to be really clear about what are you actually open holes in or support and making sure that everyone's agreed upfront on what the language needs like that.

Gabe Rissman  19:50  

That's a really great analysis. I've seen a lot of people be compelled by those arguments, and it's more of a miscommunication in my mind, and a mismatch of expectations. How do you talked about ESG? sustainable investing and impact? I think that's a pretty good distinction. I'm guessing, how do you find out which clients care about which client is in which bucket because you probably want to serve the impact focused clients with impact solutions, the ESG focus with ESG. Sustainable, but most people, they don't know what category they fall into. They just hear, Hey, there's this cool thing called ESG, when they might actually need something very different. What are you? What do you do in those situations?

Unknown Speaker  20:33  

You know, this is where dialogue and conversation is critical. I think one of the easiest things to always do is just start with a typical backfired with a Addington. What are your philanthropic endeavors? What charities do you support? And have you made any decisions in your life that are more values driven than investment trip? Those questions should really bring up enough of a dialogue and conversation if you're listening, to really pinpoint how to help the client make some decisions about what investment strategy might be correct. We are adamant that ESG data be used in all of our models. And we explain it that way. It's just more data. You're not excluding any industries, you're not excluding fossil fuels by doing an ESG portfolio, but you're buying the fossil fuel company that leaves the environment better than 90% of its peers. So you're making a decision to strive for better, or best in class, as they call. But some clients have made really specific decisions, there's a Tesla in the drive. So clearly, either. It might just be a Tesla fan, which a lot of people are, but they might have made that decision specifically because they don't want to support the fossil fuel industry, it would be important to let them know that they could do that in their investment portfolio as well. And I think what we've learned is that we're very vocal about our opinions. I think for a long time you were told in the investment advisory community, don't talk politics or values, with your clients just get them the best return pots. I think things have changed a lot in the last 20 years. Certainly last 30 years, I've been straight, but were very vocal we post regularly on Lake Devon's. We are on webinars regularly, you have a TV show, and then that's aired worldwide about our opinions and bringing as much education or clients as possible. But we also don't judge our clients and anyone. If having ESG data in your portfolio seems antithetical to what you want to do. You're obviously not the right client, for us and our firm. And being okay with the fact that not every person out there is a good client for you. It's also important as an advisor, you're gonna have a much happier, more peaceful, more successful career is you align your values, the clients that you work with, and I'm not judging what those values should be. I just think it'll in the long run, it will serve you a lot better to be open about what your values are, and work with clients that are similar about

Gabe Rissman  23:37  

you. You're mentioning your LinkedIn posts. I'm thinking about the great repricing, can you tell me a little bit about what that means?

Unknown Speaker  23:45  

Yeah. So in 2015, when I started seeing all this data for people like Paul Hawken, and building the cabinet, and really people that have been leaders in at least the climate conversation since the 70s, actually, when George Bush ran on greenhouse gas emissions, and one which is uncanny that we're sitting here 50 years later, with the Republican Party fighting any future evolution or discussion on climate issues, but regardless, he did right on greenhouse gas emissions. And Bill McKibben and I forgot the other guy's name it was the garrison or something, was really instrumental in helping guide that policy, the public record at the time. But things have dramatically changed at this point. We have seen that from all the scientists that we speak to, in all the different verticals, whether they're quite sure experts, whether ocean acidification experts with global warming experts, that every vertical is collapsing to the brim. And it wasn't a Stretch to understand that would affect pricing capital markets at some point, you can't manage what you don't measure. So we do, it was instrumental to get an understanding of where we were in measuring these risks, but really in 2018, and this is as well as anyone, the large rating agencies and data companies started by climate data. And they started Godley got physical trips, it shouldn't risk data. And it doesn't take a rocket scientist to understand that they're not spending millions of dollars on companies to not incorporate those risks and measurement tools into their ratings data. So the data is widely available today to make assessments on this will bonds mortgage rates, supply chain risk, there's just an incredible amount of data to understand that once the market picks up on it, and once the rating agencies which is emitted, start actually reporting on those risks, that there's going to be a shift in markets to bring in visa assumptions are and climate threats. And right now it's not priced in. So we call this time that we're in the great repricing because we're literally on the precipice of seeing huge repricing risk across reinsurance, you're already seeing it Florida and California, people, renters have seen reinsurance double and triple the last two years. So some flood risk and increased fire risks. And we're already seeing it dribble into the marketplace. But it'll, in our opinion, become an avalanche. But right now just trickle in right now, what I try to get across to the market is that you can really assess that risk and try to sidestep some of that, where it's free to do that. A bond in Tampa, Florida, is at a hospital on the waterfront that has there's a VAR calculation on bonds and different instruments value at risk, that bond probably isn't 85% value at risk due to climate change. You can buy a similar bond with similar coupon with similar yield similar rating in Rochester, New York, May, that gives you the same deal, same maturity, everything else being equal. And your half, maybe it 11% vieo reps. So to not do that. Now, when there's no additional cost to doing that. I just, I can't find one valid argument to not realign your portfolio, you could look at flood risk scores on meats across the planet, literally look at flood risk scores on every single hole in the United States ripple through StreetEasy. But you can use companies like 427 client in park and delta, all of these companies are assessing risk of property so you can look across it reads, okay, this read has 30% of the underlying commercial properties are at risk to severe flooding, history has 5% at risk this year flooding and they're both pay the same yield and at the same class of properties and that, why would I buy this? Those decisions are going to become much more

Unknown Speaker  28:36  

magnet gonna be felt much larger magnitude a bit more complex over the next 1224 or 48 months? Yeah. And then once the price did that price, that ETL then you suffer the price disconnect.

Gabe Rissman  28:50  

Why do you think there is such a essentially you're saying this is a tremendous market failure? Why do you think this exists? Is it data quality? Or is it? What's your thesis on that?

Unknown Speaker  29:03  

I'll point to someone wastewater the mayor, if you return the ground, newest article about bubbles, you go back to 2006 2007 during real estate level, and there were just too many people making too much money on the status quo. And there was just no belief. This is very interesting, because there's never been a real estate bubble in the United States. And Greenspan was very adamant about the fact that you could go back and fine writings at the time. That said it was impossible for there to be a bubble in the real estate market. And prior to that, the real estate market was very kind of multiclass it was only really when residential real estate started getting support through subprime led stuff that he saw it is once the evil real estate bubble and no one really paid attention to that disconnect. They looked at real estate as a whole lens. And they didn't understand the subprime market, my chief operations officer at the time used to call those instruments sausage. And he said everyone wants to eat, uh, but nobody wants to know what the hell's inside. It was a great analogy at the time. And we sold out of all over real estate in 2007, which was very fortuitous because of them. But nobody wants to see what doesn't generate a past, return or past it's very, it's mentioned, and climate change in our lifetime, really, in the past couple of bouts of years, it's been this very stable instrument. And people will argue all the time, I have friends that say climate changes all the time. That's totally true. I don't even care whether you think it's manmade, what I'm telling you is the climate has never changed this fast in our lifetime. So all the assumptions you have about climate aging, hundreds of 1000s of years to actually affect the environment is out the window at this point. Climate change is having an impact worse each year, in the last really since 2015, when things really started exacerbating real damages from storms, and others like droughts, exacerbating at a rate that we can't even wrap our heads over. And when you can't wrap your head around something, it's easier to ignore. The real estate market, Michael Berry was running around screaming that the subprime market was going to blow up Wall Street, people looked at him like chicken, the SEC cut off aid and the SEC still wound up investigating the hell out of them three years after he was right, because I think they were pissed that evening. So we're sitting in the same environment, right sit environment where we know exactly what's going to happen. And we're sticking your head in the sand because we don't want to acknowledge it. We don't want to take responsibility that we can do something about it and that those steps are Herculean, maybe you have to take dramatic steps and nobody wants to do that. Financially, we've been kicking the bubble can down the road since 2008. We've had hurt Grantham actually calls Greenspan, the worst person that's ever had its foot on the gas in the markets, and doesn't give Bernanke or Yellen much more credit. The E is shocked, actually, the lack of understanding of the prior bubbles has led to them to allow the chaos few bubbles that we've been at to play out and not support it with more complexity in East London. He says, we're in the worst bubble state right now that we've ever been in history of the markets. With the triple bubble he calls, and he isn't even at he's very big adamant about climate change. And he hasn't even braved me in the risks that climate change. So add that on to the markets. Were at another real estate bubble, great equity bubble and word, that bubble of interest yields been so low in huge quantities.

Unknown Speaker  33:45  

So when the party is going on, who do you want to be the guy at the party that starts screaming, the cops are covered? We better stop or we're making too much noise and we want the parties raging. Nobody wants to be the party pooper and no one wants to listen to the party people give. Yeah. Well, it hasn't raged for

Gabe Rissman  34:08  

for those that are listening, and are maybe buy into what you're saying right now or want to learn more that? What are some things that advisors should look into? What are solutions? What are the educational materials that they should begin with? I think that's you're saying education is number one. What would an advisor listening right now do in your

Unknown Speaker  34:33  

recommendation? So easy tools that are all free? Our a channel hosts our ESG playbook, which we FSC are still available. We'll be adding new content that we did five sessions last year. Get CE credits for and it's free to watch just go to ra chattel look for ESG playbook. The great repricing conference is available through our website at 16 out was content from world leading experts and now suicide just on what we're facing, how to address it companies like federated traders like sports D. Really rich content you can watch for leisure. It's also free and available through our website. And the great repricing paper, which summarizes the conference to great degree is also available for free through our website, get urban wealth.com or get an asset.com. Either one gets you there. Those are great starting points alliancebernstein as an executive course that you can take on climate, the capital markets, which a few of us in the firm have been through, and it's a great course, they do a really good job at explaining the connection between climate and capital markets, right? And how we're already seeing a big impact and just people are just not paying attention to.

Gabe Rissman  35:54  

Can you tell a couple of stories of clients that you have really great conversations with about climate risk? Is that people coming in with a thesis and hearing about your work in your speaking or what is it like when someone comes in they have this interest? How do you ease them into the conversation? If you could tell some stories about that, I think that'd be really helpful.

Unknown Speaker  36:14  

First, this year, we've had a bunch of clients come in and are asked to claim itself to work at different universities. So it's a great target for us because we already work in universities. Now we're also addressing climate and or portfolios. So we've gotten a number of incoming clients because when we speak to clients, clients are, it's interesting. They're not that much ahead of advisors. But they don't have resistance to change. If they're meeting with an advisor, an advisor has to resist change, because he's running 100. coloreds portfolios one way. And were telling him that he should change our heart and do it another one. There's a huge discomfort bias that like this has been working great for since 2009. Why would I want to change I got all these capital gains that it's in the future. This example when a client comes in, and they're meeting with us, they're meeting with us, usually, because there's a dissatisfaction with the current advisor. And we give them a plethora of choices rather addressing these issues. Some clients, especially younger ones, are very adamant, they don't want to own fossil fuels. So we got a lot of depressor, Fossil Free portfolios. The great thing about our portfolios is that you can start out with these ESG, and then allow the clients to lay it on multiple restrictions that they will. So for other advisors that are listening, we've tried to make it as turnkey as possible, we can give you a portfolio of active managers that are running a great ESG portfolio. And then the client can say I want to add these six restrictions to that portfolio. And they're easily put in at the visors up to do anything they get waded out of the portfolio. So it's a really easy natural compensation. And certainly, we use your steak and half the last couple of years to help show the impact of the portfolio on making these decisions. And how can parents, you know, potentially to their current portfolio?

Gabe Rissman  38:22  

It's funny that you mentioned the fossil fuels. We did an analysis recently of all the screens that people looked at on your stake. All of the metrics, we have over 100 metrics, and people are looking at and applying the fossil fuel metric and screen 60% More than any other screen? No, it's really wild. There's probably 10 or so metrics that are really popular ones that are all at a particular level of and fossil fuel exposure is on a level on its own.

Unknown Speaker  38:51  

Yeah, and we'll look at they've had a great year past 12 months, but their tenure performance has been terrible. It's also one of the bad examples in ESG is that people either say performance has been great because of the ESG, which is not true performance has been good because it's overweighted growth tack and it's underweighted fossil fuels. That's the reason most indexes to ESG have had outperformance has nothing to do with the fact that it's ESG helps for the very long term, potentially pick companies that have a better value proposition. But you can't track short term performance and tide tickets to. But fossil fuel reduction as a long term play it seems like a really smart investment. Everyone is pretty much in agreement every country, whether they're acting fast enough or not so long story, but they're all pretty much in agreement that if we burn fossil fuels that are in the ground, we're going to burn the whole planet There's not much disagreement about that anymore. There was five years ago. But that really has been waded out. There's one or two scientists that excellent still has on the books like, argue differently, but but pretty much everyone's in agreement that we can't let the stuff that's in the ground, get mined and processed. And we've got to do something about that. And that's all being valued on the balance sheets of all these fossil fuel companies. So if you draw a line in the sand, even if it's five years or more, or 10 years from now, and stop being willing to value that on the balance sheets, you're here to see a crash in the price of pretty much every fossil fuel company says, I'm not sure why anyone would want to own it. And that's not even a values compensation. That's a valid you compensation to need. There's no value in the future price of fossil fuel costs, based on the risks that we're facing, that we have to address, and that there's more and more of an appetite every day to us. So the Supreme Court just recently overturned the Biden administration's allowance of mining in the Gulf of Mexico, drove it so that mining and drilling of Mexico record overturn it specifically for risks due to global warming, climate change, not and yet, so you have a Supreme Court decision that overturned about the Trump administration, I did illustrations, drilling pieces that were approved in the Gulf of Mexico, were in a whole new world right now. We like to say we're at an intersection where people care more about the investments and products that they're buying. Regulation risk is higher than it's ever been, we have an SEC, it's very pro addressing climate change. The European Commission of this RV is already 10 years ahead of us and Apple, we're following makan steps behind them. litigation risk is at an all time high. There's over 2100 International lawsuits against fossil fuel companies in the court systems right now. And they're losing them on a pretty consistent basis. At the moment, so we've got, and then we have fiscal risks are looking worse every year, we're breaking heat records every year, we're breaking storm damage records every year, we're breaking drought records every year. So we've got these four convergences that are all happening the same exact time to think that's not going to affect pricing the market is it's just ignored.

Gabe Rissman  42:33  

You are leading into my last question, I will want to ask you your thoughts on the future of ESG, where it's headed over the next couple of years. Before that I do want to take a step kind of all the way back to the very beginning. So you dedicate a lot of your time and your energy to raising funds and awareness for autism. How do you think about that? And how does that translate into the way that you look at investments? Are you talking to any fund managers about things on the shareholder engagement side? Are you ever talking to companies about their policies? Or does it play into where you're thinking about? How does that connect the the work that you do outside with your investment side to?

Unknown Speaker  43:16  

Look, I think climate change first and social justice, racial justice issues. Second, when we think about issues that we have to face as a player that because of my work in autism, we get a lot of investment companies much more on the private side, but also on the American Disabilities ETFs that there's one or two out the marketplace right now that people are trying to bring to the market, and activist issues around bringing more people with disabilities into the marketplace. I have an adult son with autism. Unfortunately, he's not at the degree that he could work anywhere, unfortunately, but have lots of friends that have kids that need help adjusting it to the workforce. There are some great companies doing great work Google, it's been great work on. It's more on the Asperger's side of the autism spectrum. But they found is an incredible ability of these kids to sit all day. It's a little computer mind through data that the average human being does not have the mental capacity for him to pay attention for. We're starting to see more and more that being addressed. But I can't say I've tied it directly into my best at this point. But it's certainly something on the private market side that people look at.

Gabe Rissman  44:43  

I didn't know about Google's program, is there some sort of benchmark or industry standard or others doing that? Similarly,

Unknown Speaker  44:51  

a lot of tech companies are doing it the past couple of years. So you can Google it. You'll find it well worth it. But but you can Google it and find out A lot of information bout a lot of these programs. But you're seeing a lot of tech companies, a lot of very bright, smart tech people have self identified as having Asperger's. It just seems to be a very unique ability to look at math and technology from a different mindset. For those that don't understand. There's lots of varied ways that people on the autism spectrum, think differently or perceive the world differently. That if they're social enough to work and function, makes them exceptional at certain jobs and tests. In America, we've always had a problem pigeonholing somebody into a test, we've come out of the 60s with a mindset of you couldn't be any better. That's not really true. I can't be a ballerina, so that they better wait. Where do you draw the line on that, we do not do a pretty good job in this country of identifying a child's kind of hand helping them with a pair, not saying you have to be. But saying your skills lie here, here's the eight paths that would probably really suit your developmental skills and your exceptional abilities. And we just don't do that in our education system, we want lots of average workers who can just go out in the workforce and not be exceptional, don't reward except should be reward average. So they have a broken system, unfortunately, and autism is at such a high rate at its worst thing, to some degree, we look at that system. And that's why a lot of tech companies, I think, are looking at even dropping college requirements and doing their own education programs, you've seen a bunch of companies talk about their way down where they would take kids right out of high school grade to your education programs on campus for them. There's a lot of really valid reasons for that. Not building up a four year debt at an Ivy League school, to not really come with what skills to the job that you are going to doesn't make a whole lot of sense these days.

Gabe Rissman  47:27  

Yeah, that that frame and what you're talking about right now, tech companies putting together programs, I think more and more people are seeing corporations touch our daily lives a lot more, not just seeing it, it's happening, more and more is becoming more of the standard more of the norm. I would love to hear how you think things will change in the corporate landscape in the ESG investing landscape. In the next one to five years. What do you think the world will look like?

Unknown Speaker  48:00  

I think corporations already trying to address issues that our government has had a failure to be able to address because it's too much bipartisanship. So I think you'll see corporations take I think they play a huge role behind the scenes, I think they're realizing that they're wasting a lot of money, trying to lobby for impact, and that they can directly address impact by being stronger on the boards and all the activism they do around the companies they own and certainly very thing. As much as I think Blackrock has issues with a lot of the product they put out there, I think it's been instrumental driving a lot of that because of his annual seal letter, if what he said the future of the market space is so I certainly applaud him for that. I wish he had funds that actually represented what he was saying. So I'm in an alignment of that, but it's a start. So I think you'll see more and more that I think companies are realizing that play to everyone doesn't work anymore. And you're seeing companies come out on all sides. And you're seeing companies be boycotted for making the wrong decision. So I think there's going to be a lot more engagement between society and corporates. They drive the world. They've been doing it behind the scenes for years because they lobby fund everything that the government does. Anyway. So I think bypassing though had a much more direct investor consumer corporate dialogues. And I think the consumer is waking up to realize especially younger people, that they can have a much bigger influence than they can. As much as Macintosh will argue that yeah, they change. It's always been I don't know if you've had this in economics, but we always had the chewing gum example. But if everybody stopped chewing gum tomorrow, get about six months old chewing gum company to be able to bid Since consumers and investors both have a lot of power, and I think they're waking up to that power, so I think you'll see a dramatic shift. And I think ESD will be gone as a term that will just be like diligence. Do your due diligence. Yeah, it's let me see what your diligence it's, it includes all the data that we get our hands on, which is the ESG. So I think that will end but I think climate investing social justice, investing will drive and dominate the market. That's why I think ESG will just be table stakes in five years.

Gabe Rissman  50:43  

I love it. Jeff, thank you so much for joining me today. I want to end my roommate in college was a ballet dancer so I can send over some Catholics. That's

Unknown Speaker  50:54  

awesome. Thanks, Dave. I appreciate that.

Gabe Rissman  50:58  

Weekend and talk soon. Thanks, guys. Take care

“...the publicly traded market was really built off of 19th, 20th century mentality where really, it was just, ‘make the money, be as profitable as you can, be as successful as you can.’ It really only is, I'd say, the advent of the Internet, where people became much more aware of their impact and what's happening and all these negative, extra maladies that can come from mining natural resources overseas, or sweatshop labor...it's still relatively nascent and just growing in this collective society's consciousness, and the market has not quite caught up yet.”

Welcome in to another episode of “YourStake, Your Story,” a podcast dedicated to telling the stories of financial advisors who lead with socially responsible and values-based investing!

Joining us today is Sylvia Panek, AIF®, Investment Advisor & Financial Planner at Natural Investments. She currently holds a Series 65 and Accredited Investment Fiduciary (AIF®) designation with 15+ years of experience in the responsible business and investment industry.

Through socially responsible investment, Sylvia assists in enriching the lives and providing financial empowerment to clients who care about people and the environment. Sylvia’s areas of focus include SRI financial education, energy management strategies, as well as integration of environmental and social strategies in business.

Born and raised in Chicago, Sylvia speaks several languages and was originally pursuing a career in international business. A professor introduced Sylvia to the stakeholder model during her final year of business school, in which a corporation considers the well-being of everyone: employees, customers, community, and society. It was a novel thought that kindled a light in her. 

That lesson instilled in her an enthusiasm that lasted for the duration of Sylvia's career: a company can run on three bottom lines: People, planet, and profit. 

In this episode, Sylvia discusses the steps she takes to serve her clients, customizing a portfolio strategy, ESG investing & more!

Tune into this episode to hear about:

Humble beginnings (5:14)

Investing in regenerative agriculture (14:34)

Direct investment in renewable energy projects (20:58)

Fossil fuel free- all things portfolio strategy (23:09)

The future of ESG (43:33)

Thank you to Sylvia Panek for joining us in this episode! Be sure to tune back in every other week for a new episode of YourStake, YourStory and hear another amazing voice in the industry.

About YourStake Your Story:

YourStake aims to provide advisors with everything they need to understand ESG issues, analyze portfolios, and report to clients. We want to equip you with the underlying data and analysis tools to navigate ESG. The YourStake, YourStory podcast is designed to amplify voices in the financial industry who are leading the charge for socially responsible investing practices.

Each episode, we are joined by experts in the field to hear their stories about what brought them into the industry, why they are passionate about ESG and values-based investing, and much more.

Resources:

YourStake Website

YourStake, YourStory Podcast Home

YourStake YouTube

Natural Investments Website

Sylvia Panek LinkedIn Profile

“I didn’t grow up with wealth, and my friend group, a lot of people didn’t grow up with wealth either. They didn’t grow up with that level of financial literacy or financial exposure that people who do grow up with wealth or work in finance do.”

Welcome in to another episode of “YourStake, Your Story,” a podcast dedicated to telling the stories of financial advisors who lead with socially responsible and values-based investing.

Joining us today is Phuong Luong, CFP®, Principal Financial Planner at Saltbox Financial. She specializes in financial planning for individuals and families as well as sustainable investing, with a focus on ESG investing and regenerative investing in community loan funds, land trusts, and cooperatives -- to shift capital from extractive industries toward building a solidarity economy.

Before joining Saltbox, Phuong was the founder of Just Wealth, a virtual financial planning firm. She is the Chair Emeritus of the CFP® Board’s Council on Education, where she advises CFP® Board staff on the development of education standards and certification requirements for CFP® professionals. Phuong is also a Facilitator for the Boston University Financial Planning Program and a regular contributor to Morningstar, where she writes about financial planning and sustainable investing for an advisor audience.

YourStake aims to provide advisors with everything they need to understand ESG issues, analyze portfolios, and report to clients. We want to equip you with the underlying data and analysis tools to navigate ESG. The YourStake, YourStory podcast is designed to amplify voices in the financial industry who are leading the charge for socially responsible investing practices.

Each episode, we are joined by experts in the field to hear their stories about what brought them into the industry, why they are passionate about ESG and values-based investing, and much more.

Dive in to this episode to hear about:

• Phuong’s journey to financial planning (0:50)
• When everything came “crashing together” (9:55)
• How not growing up with wealth shaped Phuong’s perspective (13:49)
• Learning about financial history and economic injustice (18:31)
• You need the big three of “Education, Access, Resources” (28:54)
• How Phuong’s “why” drives her on a day-to-day basis (31:35)
• The spectrum of accepting ESG investing (35:20)
• Phuong’s thoughts on the future of ESG (46:14)

Thank you to Phuong Luong for joining us in this episode! Be sure to tune back in every other week for a new episode of YourStake, YourStory and hear another amazing voice in the industry.

Resources:

• YourStake Website
• YourStake, YourStory Podcast Home
• YourStake YouTube
• SaltBox Financial Website
• The Color of Money, by Mehrsa Baradaran

James Brewer

[00:00:00] 

Gabe Rissman: Hello everyone. And welcome to another episode of your Stake, your story of video series, focused on highlighting best practices of financial advisors within the ESG space. Today I'm really excited to have James Brewer here. And James has a pretty good resume. James is an MBA, a CFA CFS LA, a CFP who empowers people to make smarter money choices aligned with their values, goals, and passions, a certified financial planner.

He has been named to the 20 best financial advisors in Chicago by expertise and 20 17, 20 18, 20 21. And now 2022, his, but he many designations include a chartered retirement planning, counselor, charter, divorce, financial analyst, and chartered funding and student loan advisor. So James, I'm really excited to have you on and thanks for joining today.

Thanks 

James Brewer: for having me. 

Gabe Rissman: So James, I just have to say cause I've got my poster behind me when we first met this poster was something that we immediately bonded over. It's a as miles Davis for anyone that might be listening to the audio only. And I would love to hear, just to begin with, if you have any particular stories or things that you want to share about music or miles in particular before we dive into a fit to some of the nitty-gritty on your, your practice.

James Brewer: Well, I he probably was one of the early folks that kind of turned me on to jazz on a drummer, turned into a percussionist later. So I just enjoy people who are quite talented and he's one of the best. And just enjoy knowing that I'm not the only one who appreciates.[00:02:00] 

Gabe Rissman: So now you're an ESU focused financial advisor, like we talked about. And I, what, I'd love to start with this a little bit of your story.

What brought you into financial advice and what brought you into ESG? Did those happen at the same time? It would be great to hear. 

James Brewer: Well it's an interesting story that I went to a national black MBA association meeting that gentlemen spoke at. And I thought, man, this is really amazing.

I really need to go and get an advisor for myself. Meanwhile, my wife and I were kind of recently married. I was reading up on some things and told this one advisor that was the advisor for her set plan that we wanted to embed. And companies that would actually hire me as an MIT, MIT, Sloan MBA.

I had beliefs that I never have a problem getting hired, and yet that wasn't my experience posts post Sloan and a couple of weeks later, he goes, Hey, look, we've got this great portfolio for you and well, you know and then you can give to charity, you're gonna make a lot of money and you can give to charity later on.

And I'm like, wow, dude, you're looking at me. And you're saying that I am a charity and that, you know, me wanting to simply invest in companies that had better diversity practices. So I felt like he didn't hear me at all. So meanwhile, we did hire the other gentleman who happened to be black. And after a couple of meetings, he said, I'd never really had anybody take to this the way that you have.

I do ever consider to getting to the industry. So I had been working for an employer. Things didn't work out well there, and I was trying to figure out what my next move was going to be. So I said, oh, well, maybe my undergrad in finance. And, you know, the, some of the classes that I had at Sloan could work well as being a.

Financial advisor slash wealth advisor. And actually [00:04:00] oddly at Sloan is the first time I'd ever heard of what the phrase wealth management. And I'm like, oh, okay, good. Because nobody ever explained what wealth management was. I dunno why we struggle with, or yeah, we have been struggling and explain what that is.

And that kind of launched me in to the career, started early with Ameriprise. And I was the guy that wanted to, you know, look and find the companies that were actually doing. ESG investing and kind of became Mr. ESG at the office that I was at and people would come to me if they ever had anyone who asks them about ESG, but nobody ever cared to really understand the details I did.

And fortunately the regional vice president from Calvert at the time took a liking to me because of my interest and did some actually some promotion and I got the opportunity to be quoted in one of Ameriprise's magazines because one of the few people I'm like, wow, of all the people in the country, I'm relatively due to the industry and they find me to talk about the topic.

Gabe Rissman: That's amazing. I want to actually touch on a quick thing that you brought up or a little earlier on. You said that what inspired you and motivated you was someone saying, why would you care about ESG? Have the most financial performance and then donate to charity. Is that something that you're still running into?

Are people still saying that, how do you think about and deal with that type of question? 

James Brewer: Well I generally am attracting people through my presentation and my, and my marketing that you're going to hear something about their values. So, you know, one of the things I tell people is I help them make smarter money moves that are aligned with their values.

So like from day one. And what does that mean? So I'm really starting the conversation around. So some people will bring up, well, no, what does it kind of cost me that? And I'm like, well, you know, some of the people catch themselves and say, well, [00:06:00] but shouldn't, I be principally minded, you know, but what about my returns?

And I'm like, well, what if you found out that while you were getting good returns, whatever those are, you could get better returns. So, you know, in the modeling that I started doing you know, we are actually getting better returns than some popular, I'm going to be careful in this podcast, but some, you know, popular off the shelf publicly traded company mutual funds and their asset allocation funds, which I use that as a benchmark for us internally that we're actually getting better returns than those are, are getting.

So. If I were I'm tangibly showing you're getting better returns. Why would you? So I have even some people that, you know, would say, well, I really want to make returns, but I don't think they really understand as much Mike. But what if I told you that every company incorporates some way to determine of all the stocks and bonds they have, how, which ones we're going to invest in and use it.

That secret sauce is never given out. Right? I mean, that's kind of a trade secret, but what if they actually were. And that's how they, that was their secret sauce. It's just that they weren't telling you that was their secret sauce. So it's weird to me that sometimes when people hear well, what if I told you that part of my secret sauce is actually integrating those values?

And it would just only make sense that well companies who would get sued a lot and have lots of PR issues around not hiring women or, you know, every so often the, you know, racist video that seems to show up and, you know, the stock takes a hit for a little bit, you know, so it takes it. So I don't know why people, like, if you explain it that way and so you might not even care, but what you care is the shareholder value.

So companies that tend to care about those things, and we could argue that governance, the G because often when we hear ESG, I think we are hearing E S and we're not hearing the G you know, to me that really is the G part of things. [00:08:00] And maybe G leads you over into. 

Gabe Rissman: Cool. So it sounds like what your case is, is a finished performance case that there's, it's a false trade-off between ESG and charity.

That ESG is going to help you with performance. And also, oh, by the way, you're going to get this great performance. Why not also align your investment with your values? It contributes that way too. I, I love that. That makes sense. So I want to jump back to your story a little bit, too. We left off at a Ameriprise.

How'd you go from Ameriprise to envision? What was that transition? Like? What was that journey? Like? Why did you make the decision and how's it been. 

James Brewer: Man, I love that question. Okay. So so I I'll, this is public disclosure anyway, so I kind of got recruited to a place called BC Ziegler which was a regional broker dealer.

But you know, my desire to actually do financial planning. I've always been a fan of financial planning. And really, we should say, if you're going on vacation, do you just like go to the airport and figure it out or get on a train or get up? No, usually you're like, well, where do I want to go and taking a car or if I'm going to drive or if I'm going to go, right.

Like instead that's not like how we think with money. Well, just invest. So just put gas in the car and go. And if that leads you to the airport, I guess that's okay. Anyway. So like, no, like let's do financial planning and you know, the logo behind me has something to do with. Philosophy that we use in financial planning.

So I go to a place and they're not like really embracing financial planning and the way that I wanted to. And eventually I'm like, you know, this isn't really the right place for me. So I discover LPL financial largest independence. So I go there and at the time I was really thinking that I wanted to do more with retirement plans and help people through their 401k 4 0 3 B 4 57 plan.

And I felt that they had a a [00:10:00] program there that I could qualify for and that I would get the support in being able to do that. Plus I wasn't limited in terms of what I could get in terms of my ESG type investments. So, you know, a lot of people don't realize that. I really say there's open architecture and limited architecture and even open art are open architecture, probably asked some limits, but a lot of advisors don't even know.

I went to a conference where the advisor said, well, the only thing we have on our platform is this Calvert fund or a couple of Calvert funds. I'm like, well, there's a universe, much larger than that out there. So depending upon the firm or they'll, they'll sometimes with one company, I remember, you know, they said they had dimensional fund advisors, but they had one fund.

So they might list like at which marketing-wise seems like, oh, you have the full constellation, but you only have one fund. Right. So then if the advisor goes and looks and says, well see these aren't good investments. Well, they only showed you. So the only, so one how in the heck? Right. So anyway so I go to LPL, have more things going on, but I really was trying to go down that road as, as well.

I got an article that I wrote about incorporating values into 401k menu selection using the accredited investment fiduciary framework. So, you know, I've been doing this in a fiduciary because, oh, geez, y'all want to add these ESG funds in there because then you won't make money again, if you're going to make more money

so I can make a case that it says, well, if I didn't tell you that, that was the reason for my selection and just put it on. And you said, oh, that's amazing. But if I say. Oh, but that's an age old. God, Mike. Well, wait, you know, like [00:12:00] maybe so, you know, if you sort this thing, right. So, so anyway, so I think I can go and dispel a bunch of stuff.

So eventually you know, with LPL, I felt in my case that I wanted to forward this new category called subscription-based financial planning and at where I finally got to, I didn't feel as though that their support of that. Was as awesome as I could potentially go and do it on my own. And there were other ways and other ways I could get access to that.

So I felt that that would be helpful. And as well, I, at some point decided that I didn't like the idea of dual registration. I just want it to be an investment advisor representative and the investments that I could get access to were great. Without needing that dual registration and I didn't really want the kinds of clients that are required more of a, a brokerage kind of a.

Or I should say a stockbroker registered representative. So I said, let's take the plunge and become a registered investment advisory firm. So, you know, I did that in 2018 and really haven't looked back much since then there's a lot easier to do marketing than have the extra layer that I used to have.

So, you know, doing this podcast, for example, I don't have to go and check with LPLs marketing team and I happened to write articles for Forbes now. And someone recently actually did read the one that I wrote about private prisons being in your investments. And so there's things I can say and do now where I don't have somebody else asking me or questioning or telling me no, there were times when LPL would say no, when I felt there was no risk.

Gabe Rissman: And that Forbes article I loved by the way. And I'll, I'll be happy to put that in the description or share that in as part of the content with the podcast, because it was a really good article. And I, I definitely read that. And that was that was really cool. I have [00:14:00] two big questions now on a follow-up from what you just said about starting envision in 2018, the first one is when you started envision, did you start from the beginning, marketing it as an ESG focused firm?

Or was it, Hey, let's take care of your financial planning needs and you're able to have the SG conversation with anyone. Like how much did that feed into your marketing and your branding and your core from the start? 

James Brewer: Well, I like to use the phrase values based financial life planning as a encompassing term.

So in some ways like lead certification, right. For a building. So. Not to already go to the investing side. So if you said, I want to give X amount of money per year to something, if I want to advocate if I want to work for whatever that is with the person, and then trying to figure out, like, how do we infuse their values and every aspect of their life.

Like I have always said it to do a March on Saturday to do, you know, maybe a monthly contribution to some charity. And Monday through Friday trading time, you're doing the exact opposite of those things. It just doesn't seem to make sense. So I would want to say. Let, let me help you. If you want to give more money to something, if you want to give more time.

And then if you want to, Monday through Friday during trading hours, also make sure that your investments are as closely aligned because I really don't think that like the guy said, well, you'll make a lot of money and then give it to charity. Well, you know, but it was king and I'm going to misquote it.

You know, that the very reason that the charity exists is because of the thing that you're doing Monday through Friday. Right. Then it doesn't clean it up. So that's, that's my belief. And, you know, I'm pretty overt with clients and you know, that, that thinking and just [00:16:00] try to encourage them because, you know, often they're hearing noise in the side.

I did have somebody who said, well, yeah, How much will my, you know, I don't know, $500 a month investment change things. Right. And I'm like, but if you're 500 times a million people. You know, like we have a lot of things in life where it's small transactions multiplied by a lot of people, you know, you go buy a happy meal.

That's not too much money. Right. But Hey, they sell a lot of, a lot of happy meals and next thing you know, you're making some money. Right. But, but, but sometimes I don't know, like the world makes people think that I really can't go make a difference. You know, everyone's not going to be the kind of person who's going to be the one who gets into a protest and marches.

Right. Or writes letters and all that stuff I said, but you could be the kind of person who does that through your investing. And I'm even trying to encourage those other people who are doing the protesting and stuff with sometimes I year ago. But you know, like I'm a Vanguard person or I'm a whatever, but if you're with yourself and I'm like, okay, so do you know that Vanguard has choices?

And usually they. Like they only heard that spiel about low cost investing, which often came out of, well, I don't trust an advisor as opposed to, is that the real best thing for you? Right? Like, I don't really trust you. So fixing the trust issue that allows me then to say, you know, really this portfolio allocation, stuff's a lot more complicated.

And if you've never had any classes, you know, in academia or seeking the certified financial planner designation, and even that, if you don't do it really for a living, right? Like how did I stumble upon YourStake? How did I stumble upon Morningstar advisor workstation? We know that the people saying you can do it yourself, don't have those tools.

So how in the world could they actually do better than me? Because not only do I have the tools, but I have, you know, spent time. To even know that I should have a tool like this to then spend [00:18:00] time to know how to use the tool. So, you know ideally through, you know, telling them different things than they've probably heard before trying to build up the trust that then says yes, be encouraged to, to follow your, your values.

And we're never going to be perfect. We're doing the best that we can, but we're going to continue pursue being better. 

Gabe Rissman: I love that. And I would also love to dive in a little bit more to what you're saying in terms of the tools and the actual functioning of this. So I think you nailed the, the messaging that makes a lot of sense to me.

I'm sure it's really compelling as you're talking to people when you're starting your ESG practice. Can you tell me more about what had to go into that and what challenges you ran into? For example, do you just pick a couple of ESG funds and now ESG. Do you need a mission statement or what are all the things that went into actually running an ESG practice instead of financial planning practice that maybe has an ESG fund or to 

James Brewer: let me give you some history to say how we got where we're at today.

Perfect. So in a way I first got into the industry, you know Calvert was the one that threw a mirror prize. That was a biggie. So I learned a few things about what they had, but it, to me, it was always about the portfolio, but I, which I often call these days investment recipe you know, I'm a big cook.

So, you know, the first thing is you want the superior recipe and then the superior recipe, you know, even if I have cheap ingredients or I have the most expensive ingredients, sometimes I don't know that I can discern the tastes of the most expensive. The other is put together well, right. And the incremental costs and all that stuff.

Just take that analogy. So over time on my, but you know, there's a bigger set out there. Well, you know, if you are limited, you might not be able to do fee-based accounts. And at one point you couldn't do the fee-based accounts with the didn't have the letters the, the, the selling letters in place, dah, right.

So you got that [00:20:00] well for awhile, I'm like, you know, should I really be pursuing financial planning more so than investing. So I looked for a couple of partners that could help me do that. And I can outsource to them. Well, eventually with, I started kind of snooping around a little bit more. I mean, we can do really good job with marketing and discovered that one of them, I questioned that they would invest in private prisons.

So they went to their upstream, if you will, mutual fund company. And they said, well, we won't make, we hadn't decided that we won't. We currently aren't probably won't, but we won't for sure. Say that we won't. Oh, along the way, I had a company that says that they're biblically responsible. I happen to be a Christian, so they were Christian and they said they were good with herself.

Oh, okay. Well, I asked them questions about private prisons. You know, Jesus actually said, go visit those in prison. Not go money, make money. I didn't take that as going make money. So, so they said, well, we don't have prison operators, but we have. Prison real estate holdings. And I thought, I'm like, well, I don't want to go tell Gabe who's my client who says, I don't want to be in private prisons.

They go, well, what do you think about real estate versus operators? You know, like it's, it's like, it's the, the mental construct is just way too much, right? So I'm like, no, I'm not. So I that's the reason I didn't do business with that one firm. And when the other told me there, weren't going to do it, I'm like, well, I can't handle that personally.

So I started looking around, well, I. Direct indexing and kind of try to leave out some company names, but one of the companies was all good and then they got purchased by another company. So then I was kind of [00:22:00] lucked out and it was kind of an ugly thing, but it was who acquired them, I think, made it ugly and made them get out of the holdings for many adviser.

And I'm like, well, geez, I wasn't very ESG of you anyway. And the way they do handle loss. So then that made me go and rethink and said, you know, like with all of this going on, what if I just control the whole thing? And like, it's just, it's getting too crazy. So you know, I did my own research discovered that I needed to change the investment recipe a bit, but I kind of blended a few others.

I worked with another well-known person and gave him the idea. And he then created a version of his, that was ESG. And I'm like, okay, I'm glad I did that. So I took all that stuff and then realized, wow, I could actually do this and get returns that most of the time are beating the comparable passive and comparable active by 200 basis points or so like it, and include my feet.

Like that's the part that was blowing or has blown some people's mind. They were like, but that can't be because you add a fee, I'm like, well, why can't it be? And you know, we even did some research. It's kinda crazy. So like in in Morningstar, it's something like this, that the highest Return mutual fund.

I think for the last, it was either last year or last three years was like 60% for large, like for S and P 500 tracking. But then there were a couple that were negative. Right. So I'm just saying, so that disparity, but if you ask most people, they would not believe that the disparity between, you know, mutual funds could be that wide.

So when I tell people like, it's just cause they keep thinking on average, right? Like that, that 10% average return on the S and P 500. And I'm like, but don't you remember 2008 and it was [00:24:00] down negative 50 plus. So why do you keep staring at the 10%? What it was down negative 50? I don't understand. Right.

So, so that's why I encourage people to actually look at what we're doing. So now that, you know, I just decided to take it over and that now I can, you know, question directly to mutual funds or exchange traded fund providers. Why is. You know, you said you were going to do this, or I can go check in, does it say that they can't be in private prisons ever or like I can go in and kind of check the quality more?

So, so you know where before I was kind of believing others. So sometimes when you believe others again, they're kind of good. And I'm not saying it's necessarily always greenwashing, but sometimes you know, your idea of maybe like games idea in my idea may not be the same idea. So one of the beautiful things about your tool is I can encourage people to tell me what is important to them.

So if you tell me you're a health defendant and a planet protector, and somebody else is a gender empower, and that's the thing, the only thing they care about, then their idea. It's two different ideas. So sometimes, you know, we like to just make a circle around everything and say, call it ESG. But you know, what matters to me doesn't necessarily matter to you.

So now, you know, in certain situations I can more tweak to what they wants their idea rather than what my standard idea is. For the, 

Gabe Rissman: I love that I have a few followups from that the first I'd love to dive in to, I think a lot of people have a conception that ESG is ESG is ESG. It's one size fits all.

There's a score. That's what the score is. And then that's, that's what it is. But you're saying that that's not the case that it seems like personalization is where people are going. Can you talk more about maybe problems you've run into with a one size fits all approach or, and [00:26:00] how do you have those conversations to figure out what people care about?

And then what do you do with that information when you realize that people do care about. 

James Brewer: A few years ago, a friend of mine who was in the nonprofit world, but his firm did consulting, but we're having some Indian food, this nice in your restaurant here in Chicago, and this idea came up. So they were kind of like you would think of ESG company.

Well, by the way, none of their 401k stuff was screened. And when I kind of brought it up, it got poo-pooed a little bit because some of the people have this idea of like, well, but isn't cap all capitalism, you know, like it's bad some kind of way, but we kind of deal with it because we're not pro I'm like, no, no, no, no, no.

Well, we got deeper into the conversation and it was very clear amongst four people who were quite vocal that they all did not share the common view of what ESG. Well, and that was very eyeopening for me to the extent of the dissension for people who already worked in the company, but they are, the central was really crazy.

So I'm like, well, okay. But then we didn't really have the tools to necessarily parse it out. So we had companies more kind of giving you an idea, but we didn't have like, let's go deeper insert into certain categories. So one of the things I like about your stuff is that it goes in highlights categories.

We recently had someone who actually ropes in the comments section of the, of the score, wanting to focus on ESG. His other answers, I'm like, well, why did you you're like five categories? Why did you highlight one? I don't know if he fully got it. So we'll be investing his money this week, by the way.

So thank you, Gabe. And into all of the things that he said mattered to him. So I said, you don't have to necessarily choose. And I said, but you know, we do have an investment that if you want to be [00:28:00] well, what do I used to call it more? More more environmentally focused. We can add this one, which you'll just be more to that versus if we don't add that.

And then, and then I then showing you, but if we don't do that, this other one's pretty good at that. And you're going to get better return. So it's up to you. Would you want to be more purest knowing that you're going to give up? I think about 1% in our model still beating the other models. I'm telling you, we benchmark ourselves against.

Gabe Rissman: Sure. I understand. You're saying that this person came in and they said they want to focus on the environment, but then they took the questionnaire and there were also all these other issues that showed up as important. And you're saying, Hey, yeah, we can focus on the environment for you, but we can also do those, all this other stuff you care about racial justice and gender equality.

We can do that for you too. And that was something that they didn't even realize was possible. 

James Brewer: Yup. Yup. And sometimes it's interesting that people will fill out a survey and what they would have said their score doesn't come back saying the same thing. Their score says something else was more important.

And I think that it's a lot of it, you know, like, Hey, the reason I called you, I read that article on private prisons. You know it and they lose that really got me. Okay. Now I could dive into the pool of private prisons or what we do is no, by sent people through the survey. Okay. So I'm gonna send you through the survey because it might highlight other things.

And I don't want us to be down the road and saying, well, I didn't know you did that. I'm like, no. So that's why we're going to send you through the process, get it all out right now and then say, okay, this portfolio now we had one situation where It's it's a large nonprofit and they're really about like racial justice.

So we took it and we then went heavy to racial [00:30:00] justice and it still gets some of the other in the way that we're investing still gets some of the other things like climate, but it's underneath, like the climate is an issue that is a racial justice issue as opposed to it's climate out front and races back.

So, so I'd say so depending upon your investible amount, we can do different things, but again, fill out the survey so we can have a better idea of what the compensation is. So, so I've enjoyed, you know, kind of a. When I decided that I could take it over, but what I decided I could take it over, you know, I hadn't had my relationship with YourStake.

I hadn't had my relationship with Morningstar and, you know, John Hale, who's been a long time buddy of mine. I you know, hadn't bounced some of the other resources online that are there because I've written another article that talks about some others. So when you discover all these tools, you're like, oh, well, man, I wonder if those other portfolio managers and how they're coming to the screening, but you know, once you understand to me, like, you know, I even tell people, Vanguard has a couple of choices, what percentages you should use.

They don't tell you. But all they did was go find somebody Index and said, we're going to replicate the index. They didn't personally decide. We really care about this. Potentially demand said we should have a couple of choices. I met somebody who worked at burger king and they talked about knockouts.

So, you know, the reason they have certain things on the menu is so well, if Gabe says I want a salad and they [00:32:00] don't have a salad, then you know, the family might not go to that restaurant. So they have some things on there. So they won't get knocked out. Although that's not what they're ever going to say.

We're not the salad place where we do burgers. That's what we do. But we don't even have purpose per se. We do fast food and it's a knockout, right? So our mutual fund company. Kind of doing, you know, is it their heart? So I said, the heart of my company was built from me getting in the industry with my own problem in 2006.

And the reason I've been passionate about this right, has been because I have been one of the effected populations for the very thing. And I said, I think if you're not one of the affected populations, you may not be potentially as passionate. Not to say that you can't be, but you know, it what's driving.

So often people have a personal story of some sort, they go, that story led me into where I'm at today. 

Gabe Rissman: Wow. That knockouts idea that really clicked for me, it makes so much sense. And I think that correct me if if you're seeing something different, but it seems like a lot of fund managers today have that knockout approach, they need to have some sort of ESG fund so that they don't get taken out of the running for people that are looking for some sort of solution.

But that means that while you're talking about before the due diligence, to make sure that this is legit, and this is credible, and they're taking a thoughtful approach, I love that you have this passion and knowledge about prisons and can really dive into deep conversations and press people on it. But for other issues where you're maybe not as much of an expert or for people that aren't experts on some of the social and environmental issues, how do you do that diligence?

How do you find out if the fund manager is doing really thoughtful, good work on these, on these values without knowing everything about the issue? Do you have any strategies? [00:34:00] 

James Brewer: Well I guess I've approached it a couple of ways. So I have talked to. Well, you know, often the approach I'm going to just contrast.

So often the approach would be, you know, pull up your morning star and search for something and put in your portfolio. I've talked to every company that I have, my client's money invested in. So I've had a conversation. Yeah. I can't say that I can rattle off their approach perfectly because it's their approach.

They should be better than me. Right. Like, but I'm the recipe, dude. Like I said, come to me for the recipes. Right. So I'm the recipe guy. And in fact, the first time on, on audio video we're calling our portfolio. Envisioned justice series. So, you know, envisions in the name and we're saying envision justice.

So that's what I'm trying to build. And I've got to go and say, so the recipe, you know, needs ingredients. So if I need a large cap, I need an international, I need a bond, then that's your role subcontractor. If you switch them now just a little bit subcontractor your that's your role to go do that. So however you do your thing, I need to understand that enough that I go, okay.

I feel good about it. Like the one I told you where they told me, well, it could be a real estate, but not an operator. I'm like, okay, I'm glad that we had that conversation because I didn't want to get blind I'm blind side. You know, so anyway, so, so I've had enough conference, so I I've, so people, if.

Some issue comes up and did you need to learn [00:36:00] more or the Y I'm willing to bring them, you know, to a broker, a conversation. I intend to, at some point to bring some of them into my own webinars or podcast to let them talk about their particular elements. So people can get a better sense because, you know, I talked to somebody even this week and she's like, you know, I was looking at my accounts and, you know, the returns were pretty good last and was another one, said the same thing.

And if you knew them both, they are they're in the, you know, they're in a world where they're experts in say racial justice and inequality. So. For them to pause. I was kind of shocked. Like they pause and said, but I'm getting good returns. And I said, don't get framed out of what you told me. So once said to me, well, okay, I guess principal's over returns.

I said, what? You don't even know the returns you could have had with me. You just know the returns that you had as opposed to the returns you could have had with me, by the way, there's the whole volatility argument. So, you know, we're using you know, modern portfolio theory and all those things and that genre of, of, of investing.

So it's not just because, you know, people love to tell you when their S and P is up, but they don't want to tell you about their 50% down. Right. And then they get out and then I said, you never get the return you expect because you don't stay up. So so to, to that, I really just got to say, you know, here is.

Here as you on your values. And at some point, you know, look at any short run period a day, a week, the corner, whatever who knows that, that outperforms, I said, but over time, you know, the consistency and there's just more and more data about, you know, [00:38:00] companies who get the bad press releases and all the other stuff, you know you know, we, we, again, we just love to talk about when stuff's up and not necessarily when stuff's down, generally, I don't have those have those conversations because once people are in it you know, they're at least reminded that their, their values aligned.

I've also started highlighting to them. Like I had a friend of mine once who was concerned that these were nonprofit. Right. I'm just saying like, the ESG has so much education, but if we go to most people have no idea what they're invested in. But early in my career, a woman didn't know a stock from a bond yet.

She was invested in our TIAA Cref account, had no idea stock from a bond. So to bring up ESG and add some more unfamiliar terminology and she doesn't know stock and bond, right. A bit crazy. So I said, so we start to tell people and explain. So I started taking the fact sheets and said, so here's the top 10 holdings.

So if it's apple or DocuSign or zoom or whatever it is now, like, oh, Yeah. Cause see, you see that number 7% minus two, minus 25, whatever the number is. That's what you're seeing. I want you to see it as it's here are the companies. So if you tell me that you think apple is bad, then maybe we have a different conversation.

So for him, the, the, the, the friend I'm like, no, and then I showed him. So like, there was one where you could show like every fund, it was crazy. Like how many thousands it was Mike, you can look at this whole thing, but I'm just giving you an idea of what you're invested in. And I said, cause you didn't know, you were only thinking you heard ESG.

Oh, scary. You turn. You know, so people sometimes get scared about terms. They're even scared. Well, but they put me in a target date fund. [00:40:00] Yeah. And I said, but I did a risk tolerance. Your risk tolerance says you're conservative. And currently you're a target date. Has you integrated. Well, I guess if it's got me an aggressive, maybe that's what I'm supposed to be.

I said, no, that's just what somebody else made a decision when you did make one on your own. I said, but it is considered malpractice. If I don't ask you, like, how did that happen? I can, I can, don't ask them if they're in a 401k, but if they come to me individually, I'm supposed to ask them, then I got to educate them towards what would be right for them.

I said, but maybe if you're really conservative, you just rather save more money instead of seeing it go up and down. And I said, because there are plenty of people that when they see their target date go down, they, they go into cash to. So, you know, so I said, so if we, if we include, I think that ESG is just part of the investing conversation.

So, you know, I started using the phrasing risk, adjusted return, enhanced values, integrated portfolios. I know it's a long phrase, but we like to say it's rare. VIP gave you look like a rare VIP to me. Okay. But, but, but so, but I wanted to say that the risk adjusted return enhanced that is that solid, modern portfolio theory, efficient frontier at all.

That's behavioral, all that stuff into there. That's what that is. And then now let's go and start talking about values and to the extent that I've been able to find out how to take the values inside of the. And actually get even better returns is a plus, but I just don't go with it's about your values and I'm just going to get you into values.

I want people to understand that, you know, it's based upon a solid foundation of academic research and empirical [00:42:00] evidence when all I'm doing is just deciding that, you know, instead of let's say Morton salt, we're using gray salt, you know, it's just like different types of ingredients. I try to find simple analogies for people, right.

So, you know, what kind of tomato sauce or what kind of, whatever you're putting in that you like, and in this case, you said you liked when the values came in birth versus no values at all. 

Gabe Rissman: Yeah. I want to dig into something that you said sometimes your clients hear ESG or think about ESG and they get a little bit of a shock reaction.

Is it, do you think it's the term ESG, are you using different terms? Do you just say values and do you not mention ESG or is that something that is working well? How do you choose your vocabulary to be able to keep people's peace of mind and not dive into things that maybe their preconceptions or myths?

Can you talk about how you navigate that? 

James Brewer: Yes. So I like to just go with values but, okay. So if I take someone who I meet through whatever introduction, it's easy for me to go balance. As opposed to someone who by Google me, right. By find the Forbes article and come because I read your ESG article or I read your, this article or I read about, cause you know, you remember the days it was socially responsible investment, right.

It was Sri. Okay. And then, you know some people are calling it justice and I have another client she's calls it, ethical investing. So there's lots of terms. So like in the article again on Forbes, I throw out all the terms. Right. And my new marketing person is looking at well, what's the SEO, right.

For each one of those. So I'm like, I can kind of think that the people looking for ESG, they're kind of the different type, maybe more, [00:44:00] a little. More educated about the topic in the first place. Maybe do know a little bit more about investing. I think maybe the ad asina is social justice folk. It was justice.

I like justice. I want justice. Right. And maybe they don't know so much about investing. I'm not saying that they do or do or don't, but I'm just trying to visualize, like, where are these people? And then there are the people who say, you know, TB, I'm really concerned that I'm not going to be able to retire because I just don't have enough money.

Yeah. And how much do I need to save it? It's so confusing. And I'm just tossing and turning. And you know, I've been working at XYZ company for 20 or 30 years and I got this, I got that over there. And I say, oh, I get you. I said, but let's start you from the beginning and help me understand your values. Oh, by the way, take my, YourStake survey.

I a, for anyone who thinks I'm plugging, this is truly how we're doing it now. So, so, so take the, YourStake service. Oh, that was interesting questions. We didn't know about that. And I'll say, but I'm going to tell you how this gets integrated into our investments and how we're going to deliver value to you.

Because at the time they didn't specifically come about investing. They came for the problem of a goal that they didn't think that they were going to reach. So depending upon how the angle of the conversation comes, but you know, the gentleman that I told you about earlier that said he was more, he, you know, again, he wrote in on more about climate and I want my investments to align with climate.

You know, he already came in with this notion, the lady who said, I want ethical investment. She already came, you know, because she knew about it. That's what you want to do, but they weren't so focused on any specific goals. So like it wasn't about financial planning. It was more about investing and I'm already [00:46:00] got some capital.

Either I inherited it or I got it some kind of way, and I just want that align. And, and so, so it kind of depends on the audience, but the one to me that gets them all is your values. Because to me that encompasses no matter which other terminology they most or re related to. 

Gabe Rissman: Yeah. That, that makes a ton of sense.

We're seeing a very similar thing we try to on our site, never say the words ESG. It's funny, just in our own marketing. A lot of times we're using ESG because that's a buzzword that people are looking for, but it does also turn people off. And every advisor has a client that is afraid of the word ESG. So I do think talking about values.

I mean, everyone has values when you see the surveys about how many people are looking for. The survey question is, do you want to align your investments with your values? Not do you want to invest in ESG? So I think that's really clever as a, and just a good idea to not put ideas in people's heads before they express what they really care about.

James Brewer: And I think a challenge with the ESG terms. So, you know, if I, if you said, do you believe that companies should have good corporate governance? Yeah. Right. But we don't say that we say he has G and some people wouldn't even know what that is. And you say, do you think that the boards of directors of publicly traded companies should be their frat brothers?

Right. Okay. Do you think that boards of directors should be diversified and have minorities and women, you know, represented? So that's a G now the environmental, some people think that means that I'm going to be in an environmental company. They may not think that that actually means, well, am I driving a Tesla?

I may invest in a Tesla or, you know, what is the building that the corporate offices of this company, you know, they, they they've made it lead platinum. Right. So, [00:48:00] so I think the more we could talk or like private prisons instead of S right. So I think ESG is this term, which is like, you know, one day I realized, what is Tia?

We call it TIAA-CREF who was for the greater good, well, it's the teacher's insurance and annuity association of America. I believe they there's a third day that they don't even have. Right. And I said, so then, you know, well, what if people actually do you're in an annuity for a lot of people that go, I hate annuities, Ken Fisher.

I hate annuities. Well, TIAA it's in the name, but they don't say they don't give you the name. They give you the initials. Right. So I said, maybe we lost something by. You know what Tia get offended. If I say insurance and annuity, you know, are we offended when we say environmental, social and governance, and then maybe a backup is, are you familiar with those terms?

And maybe the person isn't right. So often the things that we don't know, we reject, we, you know, we'd go to a foreign country. We go with know people that we don't know, they don't look like us. We start to reject things that we're just unfamiliar with. So I think that sometimes we have to help the conversation for people and then assessment and maybe, you know, you know, Run in with ESG, like, you know, holding a poster, you know, you walk and, you know, start a conversation and say, you know, like, so what kind of things are you?

What's your philosophy? Which so, oh yeah. Okay. And then, you know, are you familiar again, I've had conversations with people like on Vanguard and said to a guy, well, you know, I just don't have that much money, blah, blah, blah, whatever Solomon. I said, well, and I said, well, you know who I am? And I said, so are you familiar with their, you know KLD investment?

I mean, it was like, of course he didn't right. And I said, well, if I said, I'm going to give you [00:50:00] this one and say, even if you, cause he was a pastor right away. And I said, even if you don't invest with me, I said, at least if you're going to say, because he was not only was he a pastor, he was doing some other kind of social stuff.

And I said, because otherwise you are the. You know, Monday through Friday, I'm supporting the system and Friday night and Saturday, and what Sunday morning, I'm doing something different, but you're investing in the system. That's creating the need for what the work you're doing on Friday, Saturday, and Sunday morning.

But I just, you know, but some of the people, they were afraid, you know, we're afraid of change. Right. I'll never heard of it. Like, I'm like, well, you know, I think it's 248 or something like that, investments that that Vanguard has. And I said, when I hear indexing, well, which one? Like which one they got a lot.

Well, you know, the S and P 500. So I'll use it as one. Like the people that want to act like, oh, I'm so smart. It doesn't beat by one of my, well, you know, there's a lot more than the S and P 500. And why would Vanguard do more than the S and P 500 if that's all there is. And so this, the familiar term that you hear at night, another person, I would say, do you ever hear about the bond returns.

What was the bond index today? No, that's the NASDAQ, the S and P. And I said, I don't really know anybody who invest in the NASDAQ, but they give you the number. And I said, I could even tell you like which one they give by the one that only has 30 with 35 companies, the one that's got, you know, a hundred, the one that I can tell you, which one's going to show the most volatility, but they generally are giving you the volatility.

They're not telling you about, you know, man, the bonds, nobody's excited about bonds. So why aren't we telling anybody about it? I said, but you got bonds in your portfolio. In this case, he had 60% bonds, 40% stock. And he was freaked out over his investments. And I said, so if people are freaked out about investments, even bring it ESG, it terms, I'm not familiar with [00:52:00] Sri terms.

I'm not familiar with right. Socially responsible, like, well, geez, this isn't again, like my friend who bought non-profits like when you can't, she can't investment in our private. But that's what he in and he owns a business. So, you know, you might think, of course he would know, like we have to do these. No, the people don't know they're really coming to us for our expertise.

And sometimes like with my friend, who's a strong Catholic, we went, I'm not a Catholic, but I went to Catholic school for 13 years. I'm like, dude, you can't not do this at firstly, you just reject it. You're the one on your Facebook page talking about, you know, your school and like, and you're not again. So we some, but I think often advisors, sometimes we're afraid and, or either try to take the path of least resistance.

But you know, when you have people invest in their values, when volatility does occur and inevitably he's going. You can at least point to the fact that, you know, when we first started this conversation, you add that portfolio that was invested in all these things that you told me you were against. Yeah.

The market's down, but you know, you're also still invested in companies that you actually care about. And by the way, they generally are the ones who don't have those negative press releases because of bad governance. 

Gabe Rissman: Great. Excellent. So first I love what you're saying, that the examples of people that don't really understand ESG could that be nonprofits and w what's actually going on one of the biggest. Feedback and things that we hear from advisors is they show a client an impact report they start talking about. Yeah. What ESG means the E stands for environment companies are releasing toxic air pollution, including the water. Are you aware of that? And let's see how the companies in your portfolio are doing on those issues.

And, and that's just something that's mind [00:54:00] blowing that they can actually look at issues that impact their daily lives that they think about. And that's tied to their investments too. Holy cow. It's, it's such a cool thing to see people have that aha moment and realize, oh man, now they're now they're awakened.

And they, they started thinking about this. Do you, do you have any stories of that as well? 

James Brewer: W I have a few where, you know, the person, like, kind of just didn't know. Finally, after a few years said, okay. Here, take a look at my portfolio and you know, it first it's a bad portfolio.

Like it has an S&P Vanguard fund S and P 500 and a bit of fidelity as a beat 505. It just give you the extent of bad, but then it has other 18 other investment for like, what would the heck came up with this? So, you know, after a while you kind of know like, well, I saw those two investments already knew that you were going to get some bad outcomes, but, but, you know, I think that it's still, the challenge becomes is the person is still looking for return.

So that's why I think it's take sometimes take return backwards. Right? If you have the portfolio and then go, okay, I'm going to show you a portfolio that according to what you've told me, It's got this return and here's the return of your portfolio. If you have that story and like what? And I said, so did you ever know what was in it?

So you probably related to, again, it said S and P 500 and some other names, do you, can, I know how many it, right. I've always thought about, like, let's go to a bar before anybody started drinking and say, let's take 10 people and see how many of the S and P 500 we can name. And if they got a hundred, I'd be surprised with 10 people.

Right. I'd be [00:56:00] surprised. So when you have people, then it's like, oh 

Gabe Rissman: yeah. 

James Brewer: Right. So people can't do that to say, do you understand volatility? So the us national. It was a financial capability study where most people can't get three out of five. Right. None of all the ask, what is ESG, right. And, and if we ask them, can you make more money or less, you know, will you make less money because of it or whatever it is.

Right. I said, they have no idea. Right. So they're looking at their friends. So often people are going to their friends for portfolios or, you know, their family members. Well, this is what I do. Am I okay? Just because they do it, that means that's right. So, you know, behavioral finance people do the wrong things at the wrong times.

And some people do it wrong, even when they know what right is. So, you know, I just think like putting it in front of them, You know, sometimes they still have to sit back and go, like, I didn't know. But then even after that, some of them still slipped back into, but didn't, they tell me I'm supposed to get the most return.

So one of my questions to, you know, folks is, do you know how much you need to say? And what rate of return for how long to reach your retirement income goal? No one has ever answered. Yes. That was truthful. I caught one who said, and they said, well, yeah, 27 other questions. I just didn't want to answer no, on the first one, I said, okay, you know, so this, just to let you, they were uncomfortable with the truth, but I said, you don't know.

Okay. So when the process of planning and when we say, okay, at some point, what up and down movement are you willing to deal with? As long with your savings rate, then I'm just trying to get you [00:58:00] that portfolio. It no longer should be about which one made more or less. Now that is the technically correct financial planning answer, but it's not usually what most people are thinking even when they get to the rate, but shouldn't, I try to get the most money I can is kind of what I said, but you don't do this on a daily basis.

I try to have quarterly meetings with people. And the answer is no, because invariably more return. Most of the time means you took on more risks. People love crypto and Bitcoin when it's up, they don't even know, you know, they're not calculating down as a, as a possible risk at the time they're talking about it.

Right. So, but that's what we're trying to do. So I think we just have to have, you know, continue to reinforce the message with those who do come in. We come in contact and continue to reinforce the message to help them with those two. 

Gabe Rissman: James, loved having you on. Thank you so much.

Do you have any, any final things that you want to share? 

James Brewer: No. I think you have been one of the best interviewers I've ever had. Oh my 

Gabe Rissman: God. Too kind. And I, well, I'll, I'll spill the beans. I you're the first person I'm interviewing for this series. So I will let you know how you stack up when I've gotten, just passing, but I thought, yeah, those are some great stories.

Really, really loved talking to you. So this is a ton of fun. All right, thanks. Cool. Have a good one, James. 

James Brewer: All right. You too.