Brittney Nial is a third year Communications major at UC Davis and one of our two interns for Fall 2023. In the winter of last year, she decided she wanted to volunteer for something that mattered to her and found Cool Davis. Brittney is grateful for the freedom and trust she’s been given to create and then see real change within the organization and the community.

While there are obvious, tangible ways to improve sustainability, there are also intangible ways that our decisions impact the environment. Last week, February 21, Cool Davis brought in two experts to talk about one important area that we often overlook: our financial investments. The Green Investments: Focus on Finance event, led by Cool Davis Board member Rekha Vaitla, hosted experts Michael Young of US SIF and Todd Larsen of Green America and attracted 62 registrations and 39 attendees.

Investing, for the uninitiated, is most generally the practice of buying stocks or collections of stocks called mutual funds, which equals a fraction of ownership in the issuing entity. If the value of shares increases due to demand, you receive a profit when you then sell those shares. Investments could also take the form of retirement accounts and pensions, and a wide variety of other financial instruments.

The traditional goal of investing is to make more money in the long term than you put in initially. All of this is well and good. But what if lowering global emissions and staving off the climate crisis are also a huge priority for you? If you aren’t watching your investments carefully, you may end up putting money into organizations that do not match your values, such as fossil fuel companies. The good news is, you can both avoid this and make a good profit.

If you are considering making shifts and would like assistance, scroll down to the resources linked at the bottom of this article, which cover most resources bolded in the text.

To watch the video, visit our YouTube channel.

Green Investing

At the event, Michael Young of the United States Sustainable Investment Forum (US SIF), introduced the topic of green or sustainable investing. “The idea is to use [environmentally or socially focused] data points to generate long-term financial returns,” said Young. “If your analysis is good, you are creating a social or environmental impact.”

There are many terms for this kind of investing, and they are often used interchangeably. ESG investing, green investing, socially responsible investing, impact investing, and sustainable investing are all common phrases that refer to similar goals.

“It’s one of the few ways we can engage corporations, industries, and companies with their impact on society… no matter how small you are, you can have an impact,” said Young. “You can make real change.”

Busting the performance myth

Sustainable investing has grown significantly in the past 20 years, and there are special indexes for them so that you are not guessing where to invest. During the event, Young showed a chart representing how one of these indexes, the MSCI KLD 400 Social Index, performed against the regular MSCI USA Index.

“Not only is the MSCI KLD 400 pretty equivalent, but there’s long stretches where it outperformed not just in total return but in risk-adjusted returns,” Young said. “What I think the really important takeaway here is that… incorporating things that matter to us for a sustainable future and a better world doesn’t hurt performance. If we want to improve the world that we live in, the least we can do is ask our managers to consider these risks.”

Michael Young, US SIF, Rekha Vaitla, Cool Davis, and Todd Larsen, Green America.

Managing your assets

Todd Larsen of Green America next delivered an excellent presentation covering different investment methods and how to approach them with a sustainable mindset.  In terms of do-it-yourself investment account tools, he had a great tip: “You can go to any of the platforms, say like Schwab or Fidelity, and find a wide range of socially responsible investment options both in mutual funds and stocks.”

But Larsen discouraged attendees from using Vanguard because of Vanguard’s massive fossil fuel holdings.

You can also pursue more personalized assistance through a financial planner that specializes in socially responsible investing, many of whom can be found on Green America’s Green Business Network or US SIF’s Membership Directory.

Mutual fund strategies and scorecards

In addition to asking questions of the presenters and leading the discussion with participants, Moderator Rekha Vaitla walked participants through a super easy-to-use and informative scorecard for mutual funds created by the organization As You Sow called Fossil Free Funds (www.fossilfreefunds.org). You can also look up scores on other causes like Gun Free, Prison Free, and Gender Equity.

“A number of nonprofit organizations are looking at the largest companies out there and ranking them against their peers [for climate],” Larsen said. “You can go to places like Corporate Knights Clean 200,” a list of publicly traded companies that are leading clean economy solutions.

You can also find a list of mutual funds and EFTs that align with your values using the Natural Investments Heart Rating, US SIF’s Mutual Funds and EFTs page, Morningstar Sustainability Ratings, and MSCI ESG Fund Ratings.

“The advantage [with mutual funds] is that when you put your money into a mutual fund, your money is pooled with other investors, and the mutual fund purchases a wide range of stocks and bonds, so it provides diversification and lowers your risk as an investor,” Larsen added. The downside is that you will not be able to vote directly as a shareholder with mutual funds.

Stocks: Divest or engage?

Larsen and Young also covered holding individual stocks. No matter how you invest with stocks, there are two general ways to approach it: you can divest from companies you dislike by selling any shares you may have acquired, or you can invest and use your shareholder status to pressure them to change their ways. One of the benefits of buying stocks is that you are a direct shareholder, and that gives you a small voice in the company.

“One of the best ways to have a voice is to actually vote in your proxies,” said Larsen. Every year, companies send out ballots to shareowners, and there are usually ESG (environmental social governance) related topics on the ballot. Proxy ballots can seem intimidating, long, and complicated, but there are lots of resources out there to help people vote in line with their values, such as Proxy Review and the app Iconic.

“You can input all your [electronically received] proxy ballots into the apps, and then if you use the screening from one of their partners, say As You Sow or Stand.Earth, those nonprofits will give you recommendations about how you should vote your proxies,” Larsen said. “Green America itself also publishes information each year where we talk to folks about how to vote their proxies and the important shareowner resolutions that year.”

There are also yearly shareowner meetings you can attend. “Almost every year there is some good news that comes out of these annual meetings,” Young added. “[For example], Craft Heinz was approached by shareholders and has now committed to making sure that all of their supply chain considers the protection of forests and more specifically avoids deforestation for things like palm oil. I think that’s a big deal, especially for those of us that like to eat things like Nutella.”

Larsen also suggested checking out Climate Action 100, an investor-led company engagement initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. Their Net Zero Company Benchmark tool assesses 170 companies against three goals: emissions reduction, governance, and climate-related disclosure.

“You can put a lot of pressure on utilities to do an energy transition to wind power and solar power, and because those are actually cheaper sources of energy, as investors you could say, ‘You’re mitigating risk in the marketplace and increasing profits for me as an investor if you make the transition to wind or solar power,’” Larsen added. “It’s a very effective argument that we’re seeing with utilities.”

Retirement and pension plans

Next, the topic moved on to retirement plans. To start, you can check a site called Invest Your Values to see if your employer-offered retirement fund is rated for climate issues like deforestation. The site covers mutual funds, ETFs, stocks, and bonds as well.

Unfortunately, because pension plans and other retirement plans are generally employer managed, your options may be limited. “Great America and a number of other organizations out there are trying to change that,” said Larsen. “We have developed a free guide with Social(k) Corp. Social(k) offers retirement plans that advance social and environmental responsibility, including 401(k), 403(b), profit-sharing plans, and start-up plans with over 500 ESG screened funds and 10,000 traditional funds and ETFs. Social(k) also offers social health savings accounts.

“Basically the idea is we want to encourage more people to approach their employer. … It does really help to be persistent, and some folks have actually succeeded in adding SRI options into their retirement.”

Getting aligned

Ultimately, how you choose to align your investments with your values is up to you. You may choose to divest if you don’t feel that you have the personal expertise, power, or time to convince fossil fuel companies to do better, or you may find more meaning in using your voice as a shareholder to make change within a company.

Resources

Green America’s Green Business Network www.greenamerica.org/finance

US SIF Membership Directory www.ussif.org/AF_MemberDirectory.asp

Climate Action 100 www.climateaction100.org

Corporate Knights www.corporateknights.com/rankings/clean-200-rankings/2024-clean-200/clean-200-green-transition-full-flight

Natural Investments Heart Ratings www.naturalinvestments.com/heart-rating/

US SIF’s Mutual Funds and EFTs page www.charts.ussif.org/mfpc/

As You Sow  www.asyousow.org

Stand.Earth www.stand.earth

Fossil Free Funds www.fossilfreefunds.org

Invest Your Values www.investyourvalues.org

Social(k) Corp www.socialk.com