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Socially Responsible Investing Webinar Transcript

Kristen: Welcome, everyone who has already joined. We will be starting at the top of the hour. In preparation, please familiarize yourself with the Q&A feature in GoToWebinar, as we will be taking questions throughout. Everyone will be muted to help with audio. Also, we’d love to hear where everyone is joining from. Feel free to drop your city and state in the chat feature as well. For those on the line now, I will be repeating this every few minutes until we get started, so apologies for the repetition. Thank you.

Welcome, everyone who has already joined. We will be starting at the top of the hour. In preparation, please familiarize yourself with the Q&A feature in GoToWebinar, as we will be taking questions throughout. Everyone will be muted to help with audio. Also, we’d love to hear where everyone is joining from. Feel free to drop your city and state in the chat feature as well.

Welcome, everyone who has already joined. We will be starting at the top of the hour. In preparation, please familiarize yourself with the Q&A feature in GoToWebinar, as we will be taking questions throughout. Everyone will be muted to help with audio. Also, we’d love to hear where everyone is joining from, so feel free to drop your city and state in the chat feature as well. We’ll be beginning shortly.

Welcome and thank you for joining us. My name is Kristen Comeau, and I’m the moderator for today’s webinar. Our topic for today is how to invest for social and environmental impact. With me is Senior Client Advisor Judy McNary and Managing Director Laura Combs.

Socially responsible investing is a topic that we are extremely passionate about. We’re so excited to share this content with all of you today.

We have two fantastic speakers with us here, and now I would like to introduce you to our first speaker, Laura Combs. Laura has been with Mercer Advisors for over a decade. She lives in Boulder, Colorado with her husband and four children. Laura is a Certified Financial Planner and Managing Director, where she oversees the Denver, Boulder, Omaha, and Chicago branches. Laura is also a member of our Investment Committee.

I’ve been working closely with Laura since I joined Mercer a few years ago, and she is so passionate about helping her clients on their financial journeys, and especially when it comes to socially responsible investing.

Now, to kick it off, I’d like to hand it over to Laura Combs.

Laura: Thank you so much, Kristen, and hello, everyone, and thank you again for joining today’s webinar. It is a privilege to be with you and, like Kristen said, I’m beyond excited to share this topic today and how to invest for social and environmental impact.

But before we jump into today’s topic, I want to provide a little overview on Mercer Advisors and who we are. For many of you, this might be your first interaction with Mercer Advisors. I want to give you a little bit of an introduction.

Mercer was founded in 1985 by Kendrick Mercer, and he founded Mercer on the mission statement that you see here. We are unconditionally committed to work with our clients to create the best context possible for their economic freedom so they don’t have to worry about money. And I love that last line, “so they don’t have to worry about money.”

This rang true in 1985 when Kendrick founded our organization, and this still rings true today. Today, we have over 45 offices throughout the country. We have the privilege and honor of stewarding over $20 billion of our clients’ live savings. We have over 13,000 clients nationwide, and another exciting fact, 45% of our client-facing staff are women.

We also have certified financial planners, chartered financial analysts, estate planning specialists, retirement plan specialists, and a number of other individuals on our team supporting our organization.

So, again, if this is your first connection with Mercer today, I wanted to provide some of the services that we provide. We’re going to be talking a lot about investing today, and how to invest for social and environmental impact, but in addition to investment management, we also provide financial planning for all of our clients as well as tax planning and preparation and estate planning.

We have the ability to draft documents, execute wills and trusts for our clients, as well as prepare and file their taxes. Additionally, we offer corporate trustee services, if that is something that an individual or family might need.

We do this all with a unified approach, and we kind of take a look at the entire picture for our clients in order to make sure that we have a holistic view of their wealth management.

Before I hand it off to Judy again, like Kristen mentioned, we are going to focus on how to invest for social and environmental impact. Today, more and more people are aligning their values with their investments. We see this as a big trend, and with environmental, social, and governance investing, you can now choose companies that also choose to focus on impacting positive change on these environmental and social issues.

To many of us, it can feel like there might be a lot going wrong in the world, but there are ways that we can be an active participant in spreading good, even when it comes to

investing. One of the fastest-growing segments in the investment world is what we’re talking about today, investing for social and environmental impact.

It is my pleasure today to get to introduce Judy McNary, who’s going to be our subject matter expert. Judy is a Senior Client Advisor and a founding member of Mercer’s team on sustainability initiatives. Judy is a Certified Financial Planner, and she also holds an MBA, and a Master’s in Personal Financial Planning.

She’s an entrepreneur who’s founded three different companies, she’s an author and also an adjunct professor at the University of Colorado Leeds School of Business. Judy is an avid traveler, I guess, in most years other than 2020 where we are now. You can often find her skiing, hiking, snorkeling, SCUBA diving…anything outdoors, Judy is probably doing that.

When I first met Judy, I had the privilege of meeting her on the side of a mountain in Winter Park, Colorado. I saw there’s some Colorado people on the line today, so welcome. Judy and I met in Colorado on the side of a mountain, and I think I’m a pretty good skier, and Judy said, “Laura, come on, let’s just ski down this slope.” It was a mogul run, pretty steep, and I’m like, okay, I can do this, it’s fine.

Judy just takes off, I’m struggling to get down this…so she’s a phenomenal skier, and I’m hoping that one day I’ll be as good of a skier as Judy is. So, she’s a great connection, again, whether it’s hiking, skiing, or SCUBA diving, you can find Judy doing any of those things.

You’re all in for a real treat today, and by the end of Judy’s talk, it is my hope that you will have a better understanding of what responsible investing is and why its time has come. Knowing Judy, we’ll probably have shared a few laughs along the way, and so, with that, Judy, I’d like to invite you to take it away.

Judy: Great. Thank you, Laura. I’m going to kick things off by asking you to imagine. Imagine it’s 2030, 10 years from today. The world is stable, it’s healthy, it’s thriving, because a lot of positive change happened during the last 10 years. Global warming under control, there’s plenty of ice in the Arctic for the polar bears. Poverty and world hunger, they’re on their way to extinction because more of our planet’s population has access to clean water, sanitation, and food.

The world and the planet are thriving economically. They’re prospering. How does that sound? Does that sound wonderful, maybe a little crazy? Certainly sounds like a nice place. A nice place to live.

What I’ve just described is the vision for the planet for 2030 as laid out by the United Nations, a healthy planet with sustainable growth and development for us all. What does this have to do with you? Well, everything.

A healthy planet is going to come about in large part because of business. Business companies are the drivers of a lot of change that we see on a day-to-day and a year-to-year basis. Companies innovate, they take initiative, and they take action.

Companies like these on the screen, and thousands like them, are doing this right now to get us to a prosperous, healthy 2030. Many of the contributions they’re making are driven by the UN’s goals for sustainable development, but the primary push is actually coming from you, from consumer demand.

You as consumers are more environmentally conscious than ever before, you’re more informed than ever before, and you strongly prefer to put your dollars in alignment with your values. These companies realize that, and they realize they have to adapt in order to work with you, their market, and what you’re demanding.

They’re doing that, and they’re doing it profitably. What they’re working on, what they’re focused on, is the triple bottom line: profits, people, and planet.

What I want to talk to you about today is how you can invest and benefit from these companies and the work that they’re doing, so that you too can reap the rewards of that triple bottom line: profits, people, and planet. We call that responsible investing.

Our agenda today begins with an explanation and overview of responsible investing. As Laura mentioned in her introduction, its time has come, and I want you to see what you can do with responsible investments and how you can align your dollars with your portfolio so that you can have an impact on the world that way as well.

I want to explain what it is, I want to explain some of the different strategies we have available so you can find the ones that fit for you, and then show you how we actually implement that.

Responsible investing, it’s a broad term, it’s why we’ve got an umbrella on this screen. Look at some of the terms underneath. Socially responsible investing, green investing, values, impact, sustainable. If you’re confused about what it actually is, you’re in good company. There’s no consensus on what the terms actually mean. Different people use them in different ways.

But there is a theme, so I want you to think of all these terms as variations on the theme. The theme is that, with responsible investing, you can invest to get a financial return and have an impact with your dollars, so that that impact could be social, environmental, and any which way you want, but you’re getting a financial return, and that’s the focus for responsible investing.

The growth of responsible investing is remarkable. In 2012, there were $13 trillion dollars invested globally in responsible investing strategies such as ESG, as an example, and SRI. That almost doubled by 2016, and then at the end of 2019, we actually had over $40 trillion invested using these strategies around the globe.

So, this is not, as I like to say, a handful of hippies sitting in the corner eating granola. This is a lot of wealth and a lot of investment. It’s one in four dollars, actually, that’s professionally managed is invested in one of these strategies, and we’re quickly headed to that being one in three. Responsible investing, it’s mainstream.

One of the main reasons I’ve told you is that companies are driving change. Well, part of that change is how they’re looking at themselves. Historically, companies have focused on shareholder capitalism, and now there’s a big shift to stakeholder capitalism. I want to explain what those are a little bit.

Shareholder capitalism, it’s really all about the bottom line. It’s where we’re looking at the quarterly results, the quarterly performance, and we’re focused on the short term. The job of the company, its mission, is to maximize short-term profits for the benefit of its shareholders. So that’s shareholder capitalism.

Well, as we’ve discovered over the past several decades, that works well in many situations, but it also creates some pretty unpleasant unintended consequences. And so, over the last 15 years or so, we’ve seen this strong shift to looking at stakeholder capitalism.

Who are stakeholders? Well, it’s the shareholders and the board of directors, for sure. It’s also management, employees, the communities in which we work, customers like us, anyone who’s impacted by a company’s operations. We’re all stakeholders, and rather than look at the short term, we’re looking at the long-term maximization of the company value.

As kind of an exclamation point put on this, a year ago August when you may remember 181 CEOs of the business round table put their John Hancocks on full-page ads in the Wall Street Journal and the Washington Post, New York Times, and a lot of other publications, saying we realize that stakeholder capitalism is the way we need to be operating. We need to shift from that single bottom line to the triple bottom line. They’re really focused on profits, people, and planet, because it’s the best thing to do.

So let’s take a look at some of the ways we actually take care of doing that. Those terms that I talked about on the page with the umbrella, the slide with the umbrella, they actually boil down to three broad strategies, and I want to talk about each one of these so that you can get a sense for which ones are going to be the right fit for you in your situation.

Let’s start with socially responsible investing. Socially responsible investing, it’s been around the longest. It’s been around since the 1970s. I know, that sounds like a very long time ago. It’s got a lot of history. What socially responsible investing, or SRI as we call it, does is, it takes out…you look at all the companies you can invest in, and you take away certain companies or industries for primarily moral or ethical reasons. That was the historical reason for doing so.

The term that’s use is “negative screens”. I know people eyeroll when there’s jargon. Just a little bit of jargon for you today. So, negative screens, the way I like to think about getting comfortable with jargon is to apply it to something I know much better.

Let’s take food. If I want to apply a negative screen to food, for me personally, I would apply a negative screen to Brussels sprouts. I don’t know why someone decided that was actually food, but I don’t want them on a menu, I don’t want them on my plate, I don’t want to eat them. I have a very strong negative screen toward Brussels sprouts.

So, take that idea of something you really don’t want… I know there’s some Brussels sprouts lovers out there, but take that idea and now it’s easy to see how that might make sense with companies that we would or wouldn’t want to invest in.

From a sustainable investing perspective, I might have a strong negative screen preferences to screen out, say, coal companies or fossil fuel companies. For social, I might screen out tobacco or gambling. The intent here is, we’re taking all of the companies that we could invest in, and we’re specifically saying, “I don’t want those,” and that’s the socially responsible investing strategy.

So then the next strategy that we have is impact investing. Rather than the negative screens for taking things out, Impact investing is actually adding more of what we really like. With food, for example, if you like bacon and eggs and you really like bacon, get a positive tilt, you know, you kind of tilt your head, it makes you smile…positive tilt toward bacon, you will get a healthy portion of bacon with your eggs. It’s more of something you want.

Impact investing, then, some of the kinds of things we can do with that is that we can add extra weight in the portfolio to companies that are, say, doing renewable energy or that are creating big, clean sanitation systems in third-world…you know, some of those types of things, where there are areas we can focus on in positive impact.

One of the really exciting things about impact investing is that it’s not just stocks, it’s also bonds. Just this last week, Verizon actually issued green bonds. This is their second issuance of green bonds, and they issued a billion dollars in green bonds, sold out really fast.

Green bonds, or green anything in investing, is generally with renewable and reducing carbon. Those are kind of the things you want to think about. Their green bonds are going to be used to take their grid and use renewable energy for their network within the next…by 2030.

And so, a billion dollars worth of bonds, so they’re focusing on wind and solar, having a big impact there, and then, on top of it, they specifically chose minority- and women-owned firms to underwrite the bond issuance, so they’re also helping in a social impact way. They actually listed four of the UN goals as part of their mission when they did it.

This is just one example of the kinds of things the companies that I was talking about, that I want you to be thinking about, that we want to invest in, these are the changes that are happening that we get to take advantage of. That’s impact investing.

The last one that we’ve got…I saved it for last because it has the longest name. Environmental, social, and governance investing. It’s kind of a mouthful. We say ESG. If we say ESG, it’s a lot easier. What this is, it’s a little bit different from the…each one of these, of course, has its own focus.

The focus on ESG is that it’s actually a business analysis method so that you’re assessing a company with its risk, its environmental risks, its social risks, its governance risk. So it kind of works alongside the traditional financial analysis that we have, the P&L, the profit and loss statements, the balance sheets, and so on.

ESG has us looking at a company from these different perspectives, and the intent is that these perspectives, these risk perspectives, say climate risk, they can actually impact a company’s future potential and opportunities, so it’s something we want to take into consideration as we evaluate whether or not we want to invest in that company.

The way we do that is through ESG scorecards. You might have heard this term. We’ll go…I have a slide on that, if we want to get to the scorecard slide. There we go.

When we have the focus on shareholder capitalism, we have quarterly reports, quarterly earnings, very easy to interpret. In Q1, we did this, Q2 we did that. With that shift to stakeholder capitalism, we’ve got this long-term maximum value that we want. You need to have measurements along the way, and you need to be able to assess where you are at any given point.

That’s kind of how the scorecards evolved, much like in a football game, the team with the best score wins, so that’s what the scorecards do. They enable companies to measure their own progress, they let companies within industries compare themselves with each other, and they uncover risks that might or might not be disclosed in traditional financial statements.

There is a materiality issue in those, so a lot is, but they help companies think differently or for things they might not have considered before.

I want to give you an example here. If you think of a company that’s just really cool and would probably have a really good ESG score… If I said Patagonia…I can see some heads nodding out there. You would say, yeah, that makes sense. Patagonia, it’s very environmentally conscious, they really believe in you hanging on to their products as long as possible, they have a strong corporate culture, and really good governance. Well, Patagonia has a 98 composite ESG score, with 100 being perfect. So, clearly Patagonia is doing a lot of things right.

Another one, really strong, is LEGO. We all love LEGO. LEGO really minimizes its waste in its manufacturing. It’s actually developing more plant-based plastics, pretty cool, and has a very strong corporate culture. They have an ESG composite score of 100.

There’s two examples of really high, really strong ESG scores. So here’s kind of the downside of that. You know how on those home improvement shows when they take you in that house and you walk around and the people say, “Oh, we love this, this is perfect,” and then they tell them that you can’t have it, you can’t afford it?

That’s kind of what I did just right there to you. You can’t have Patagonia or LEGO stock. Sorry about that. But I wanted to illustrate how good it can be.

If we stay in the toy industry, there are some really good examples that we can look at that you can invest in. If I say Mr. Potato Head, I hope I’ve brought a few smiles to your faces, let’s see, Easy-Bake Oven, Candy Land, Monopoly, Play-Doh. These are all games and toys made by Hasbro.

Hasbro has an ESG composite score of 95. It’s a company that’s reducing waste, trying to be very conscious about its carbon risk and lowering it, has a strong culture, and great governance policy. So it has a very high ESG score.

Now, let me throw out another toy for you. Barbie, or Hot Wheels. A lot of you probably realize that those are manufactured by Mattel. Well, Mattel has an ESG composite score of 57. Not so good. Mattel has actually had some really bad safety recalls and some other issues, and so there are some risks there that, perhaps in discussions with Mattel you can see that they’re making progress to correct those, but if you were looking at a best-in-class ESG fund, you would have Hasbro, but you wouldn’t have Mattel.

If you look at a broad index fund, you would have both, of course, but it also motivates Mattel to see how it can do and be better, because it would want to be in everybody’s best-in-class fund.

So that’s the general sense for the ESG investing. This is actually the largest part, this is the most rapid-growing component of responsible investing of those strategies.

With that, let’s take a look at the three strategies again. Socially responsible, impact investing, and environmental, social, and governance. You can do…notice that the circles in this diagram, they overlap? We do that for a reason.

Typically, when we’re working with you, with your portfolios, we’ll use one, two, or all three of these strategies to optimize the portfolio for your values for social, environmental, and any other concerns and issues you have.

Now, I’ve talked to a lot of socially responsible investing, sustainable, all these variations on that theme I mentioned, and one of the things I’ve realized is that there are some very strong myths surrounding this, and I want to take some time today to do my part to dispel those myths.

First, the first myth I hear is that responsible investing is expensive. Well, let’s take a look. On this slide, we’ve got four of the largest large-cap US responsible investing funds and their traditional investing counterparts. If you look to the right, you can see the annual cost on any one of these, and none of them costs more than a quarter of a percent annually. These are all no commissions, no loads, high quality.

So it’s a fractional difference more to invest in the responsible fund versus the traditional fund, and that extra cost is really because of the extra screening that’s happening and then some of the impact strategies that we’re using.

Now, in 2012, you know, when we were looking at that, when it was a $13 trillion industry, yeah, it was more expensive to invest using responsible investing strategies. But because we have the advancements in technology and access to data, the costs have come way down, so they’re nearly the same.

So now let’s move on to the second myth. Second myth, this one I hear a lot: You have to accept lower returns with responsible investing. So, “I would want to invest that way, but I really need my money to make money. I want to build wealth here.”

Let’s take a look. On this slide, the green line, the mint green line, that’s the S&P 500 over the past…over a 20-year time period. The black line, which you’ll notice is mostly a little bit above it, is the KLD 400 Social Index, and that index is where they’ve taken out…it’s the S&P 500 minus military and weaponry, minus gambling, minus tobacco, alcohol, and some other things. It’s negative screens for the most part. So that’s the KLD 400.

And look what’s happened over time. It’s actually slightly outperformed, for the most part, and when it hasn’t, they’ve been on par. So I think it’s comfortable to say that you

can do as well as, or perhaps even slightly better than, using responsible investing, than you do with traditional investing methods.

This goes through 6/30 of 2019. You’re probably wondering, well, what’s 2020 shown us? Because especially the first half of 2020 was rocky. Okay, and the second half isn’t any smoother yet either. Soon, please. So, at the end of June this year, according to Morningstar, 56% of the sustainable funds outperformed their non-sustainable counterparts. So, again, equivalent returns, yet you get the benefit of that impact that is priceless.

Let’s take a look, I’ve got one more myth that I want to talk to you about today. And that is, ugh, responsible investing is really just charity. If I had a nickel for every time I hear this, I would have a lot of nickels, which I would, of course, donate to charity.

But it’s not. It’s not. Let me show you. This chart, I think, lays it out really clearly. On the right, you can see we have traditional investing. When we invest, we’re investing because we want a financial return, we want to build our wealth. We’re not investing for impact at all. It’s not on the radar.

You take a look on the far left side, you can see charity and philanthropy. Philanthropy is really charity with more zeroes, or fun. But, anyway, when we’re exercising ourselves to do charity and philanthropy, there’s no financial return involved whatsoever. What we want is the impact, and it’s something that we care about, something we value. That’s what we’re donating to.

Well, responsible investing is the marriage of the two, so you get the financial return, and you also get the benefit of having an impact. So that’s kind of how they all fit together. It’s not just charity. You’re getting that financial return. As we saw in the previous slide, it’s equivalent to what you get if you just focus on the traditional investing.

With that, I’d like to take a pause, check in with Laura. I know she’s had some experience with folks, with SRI, concerned about it being charity, and I didn’t know if there are any questions that folks wanted us to weigh in on, too.

Laura: Judy, while we’re getting some questions brought in, first off, I just want to say I personally love Brussels sprouts, so for all of my Brussels sprouts lovers, best appetizer everywhere, so I’ll go head to head with you on that. Maybe

we need to marry Brussels sprouts and bacon.

[Crosstalk 00:33:50]

Judy: Total positive tilt for you, negative screen for me.

umped out to me, and I often get this a lot when I’m meeting with clients, is that myth #1 that you spoke about, that it is expensive to invest in socially responsible or ESG investing, and I loved that you walked through that it might be a slight higher cost in some areas, but for the most part it’s not astronomically more expensive.

The reason I loved that is because, when surveyed, 70% of millennials say that they want their investments to impact and align with their values, so I loved that that’s something we can now have more access to at a much lower cost for whether you’re just getting started with investments or you’ve been investing for a long time. You can really align those two things, so I loved that you shared that.

While Kristen’s getting some questions coming through, one story I just wanted to share, when I met with a client recently, she had a lot of desire around…she had a lot of animals, a couple of horses, some goats, a lot of cats, and wanted to really make sure that her portfolio did not have any animal testing companies involved, any companies that tested on animals.

So one thing…and she had never really thought about that, but in our discovery process, as we were working together, she said, “That’s really important to me. I’d feel terrible if I know…if I see companies in there that I know is doing that.”

So I was able to set with her, we were able to develop and design a portfolio where we could screen out, to your point, that negative, take everything out that might have had animal testing, and so she had…it was just unbelievable to see her light up and get excited now about putting money now and saving for the future, into that portfolio, knowing that her investments really aligned with her values.

I just wanted to share that, because it was such a beautiful moment in that planning process where you could see it just gave her such peace of mind knowing that her investments were doing good in the world.

Judy: Nice, I love it.

Laura: Kristen, any questions that we have in the queue, Kristen?

Kristen: Yes, we do have a few questions that have come in. First question, who fills out the ESG scorecard?

Judy: The companies themselves actually create…they complete their scorecards, just like they do their own profit and loss statements, financial statements, and then they’re audited. So there is, of course, the opportunity for the companies to paint a better brighter picture than reality. The term we use for that is “greenwashing”.

Actually, since this year, the latest version of that term is “rainbow-washing” because every…you know, there’s been a much greater demand for information on transparency in inclusivity and gender and racial equity.

There is…companies do them themselves. One of the things I think is interesting is that, with the data, with the information now, the asset managers like Vanguard and BlackRock and Dimensional Fund Advisors, three of the ones that we work with, they now go back into the companies and they talk to them and kind of do check-ins on what’s really happening to make sure that the information matches.

Those scorecards are relatively new. It took a long time to get consensus on what actually should be the profit and loss statements, and what the accounting statements were. And those same organizations are actually working to create consensus.

Kristen: Great, thank you, Judy. And a follow-up to that question, are companies required to do ESG scorecards?

Judy: In the United States, no. In Europe, they are, the European Union…the countries in the European Union, that’s a mandate. In general, you know, Europe is a little bit ahead of us on responsible investing implementation and things because there is a lot of data coming in that shows that this is good for business, it’s good to have companies focus on these things.

In the US, it’s optional, but there’s so much peer pressure that nearly 80% of the companies report. When you see your competitors reporting, your shareholders are saying, “Why aren’t you reporting?” that’s been driving them to do it even though it’s not mandatory.

Kristen: Great, thank you. And I do see more questions coming it, but for the sake of time, we can save those for the end.

Judy: Okay, great.

Kristen: Thank you.

Judy: So then let’s resume. I want to talk to you about… First part of the talk today kind of focused on what responsible investing is and why you want it. Now I want to talk to you about how you get it, how we do that. I’m going to explain how it works from a practical standpoint.

First off, I want to talk to you a little about Mercer Advisors’ commitment to responsible investing. I’m really proud of this. We are one of the first registered investment advisories in the United States to be signatories of the UN’s Principles for Responsible Investment.

What this means it that we, at our core, this is who we are, we’re taking responsible investing seriously, and we use the ESG metrics as part of our evaluations for every investment that we’re making for our clients.

It’s really part of our core culture, and we’re also becoming a part of UN’s Global Compact. We see this all as very important to the future, not just of Mercer Advisors, but for our clients and for the planet.

A little bit about how we do investing, we have been in investment management for a long time, as Laura said, decades, and we believe in the science of investing. We’re not looking at the phases of the moon or the hunches or tea leaves. We believe in the research that shows that diversification, investing to set your risk and optimize for return based on the risk that you’re comfortable with, that makes sense for where you are in your financial life cycle and whatever else is going on in the world, those are the kinds of things that we build our portfolios on.

In addition, we take into account the research that shows that certain stocks have characteristics, call them factors, that, over the long run, can help outperform overall market returns, and so we incorporate factor investing, is what it’s called, into our portfolios, whether they’re responsible investing portfolios or our traditional portfolios as well.

When it comes to responsible investing, this is where the fun starts to happen, and that is that we get to look at your values. It’s great to have conversations with our clients. You just heard on animal testing with Laura. But identifying your values, figuring out what’s important to you.

This is a list…this slide, we just wanted to show you some of the opportunities we have available to tailor the portfolios that we can create for you to your values and your needs.

If you value ending hunger and poverty, then we want to make sure we’re including sustainable agriculture investments, and perhaps bonds that are impact bonds, or increase community involvement, maybe better transportation, health care, education, those are kind of the primary areas that we can focus on there.

If you want, if you value a cleaner planet, we can screen out unsustainable palm oil, and we can screen out companies abusing the environment, and we can add positive tilts, you know, that little positive tilt smile, to renewable energy, to anything green.

Green are more efficient buildings, green vehicles are electric, hybrid, hydrogen vehicles, those types of things. So we can build your portfolio that way.

If your faith is very important to you and that’s where you want to have your values reflected with your investments, we can do that, too. We have Catholic values portfolios, we have Sharia-compliant portfolios, and we can screen things for what’s appropriate for your situation.

You can see there’s a long list here, and if you’re just really fatigued right now and you want some peace and harmony, down there, you want the Kumbaya portfolio, we can do that, too. We can screen out weaponry, screen out certain things, so that you can just have a nice happy portfolio.

Lastly, I do want to mention ESG risk. If you really understand, can see how these characteristics of companies for environmental impact, social and governance impact, could weigh in on its ability to thrive in the future, we can also screen for ESG. We can mix and match these, and if you have other things that you want to see, we can probably accommodate those, too.

So then what we do when we have our values is we put together a solution, and we map the values to your investment. We can screen out the things you oppose, we can overweight, add that positive tilt, to the things you really want to see more of.

We do this using combinations of mutual funds, exchange-traded funds, that’s ETFs. We have individual stock portfolios. We call them quantitative portfolios. We can literally get so granular that if there’s a specific company you don’t want in your portfolio, we can screen that out. For example, if you don’t want Apple. Like, why would you not want Apple? But anyway, we could screen Apple out.

And then, as far as impact, we can do it with stocks, but we can also do it with bonds. What we get at the end of the day is a portfolio that’s tailored to your values, that’s diversified. For us, it’s really important that it be a sound portfolio. We’re going to maximize the return and minimize the risk that we can get out of that portfolio, and it’s really going to be crafted to what you want. I think it’s a great solution.

I want to show you a couple of case studies so you can see how this all comes together. These are clients of a colleague of mine, and they wanted their portfolio in alignment with their faith.

In talking with them, some of the things they felt were important to them, they’re concerned about human trafficking. The way we mapped that into the portfolio, we screened out all adult entertainment and child labor. They also were happy to hear that we can do some Kumbaya things, so we screen out military weapons, landmines, firearms, and so forth.

They’re also opposed to contraceptives, abortion, and stem-cell research, so we screen out companies that are involved in those as well.

Those are the negative screens, but then we get to the positive things. What are they keen to have in there? This is where they got really excited. They love the idea of supporting affordable housing, community development, and, again, these bonds pay a good rate of interest. The stocks of the companies that are doing this, they’re doing it profitable.

And they also were keen to invest…they really wanted to overweight in the areas of implementing clean water and sanitation systems in underserved communities. So they’re really excited that this portfolio could be tailored to what their preferences really are.

On a shift, on another case study, I want to show you, in this case, we used all three of those strategies. These clients, their concern is climate change, and they want climate solutions.

We started by excluding fossil fuels, that was the main thing. And then, in the middle there, climate risk integration, that was our ESG. We looked and ranked companies based on their carbon risk, and we excluded the dirty ones, the dirtiest of each industry.

Then, lastly, we added that positive tilt. They wanted more renewable energy, and they wanted to be investing in green buildings and green technologies.

The result for them, again, was a portfolio that’s in alignment with their values, and it’s going to generate a positive return, and it has an impact.

I began today by asking you to imagine the world in 2030. Imagine it’s a healthy, thriving planet. Will you play a significant role in making that happen as consumers and as investors?

You can invest in companies that are driving change to make this planet a healthy, thriving environment. These are companies that are maximizing their triple bottom line, profits, people, and planet.

Throughout this webinar, I hope I’ve shown you that investing in alignment with your values is practical, it’s possible, and it’s profitable, and with respect to responsible investing, I hope you can see that it costs the same, the performance is either the same or perhaps slightly better than traditional investing, and it literally makes a world of difference.

With that, I’d like to ask you, why not? Why not take action and use responsible investing?

Laura: Wow, Judy. Thank you for going through that. I hope our audience and listeners have learned something new. I know I have. Before we move on from this, I want to get people to think about 2030. Wow. What would or would could our world look like in 2030 if we changed and shifted some of the way we made investments?

I want people to pause for a moment just to think about that, you know, what would you want our world to look like then in 10 years? I think, again, you’ve gone through a wonderful presentation on describing responsible investing, impact investing, and then how we can do that.

For our listeners here, Mercer Advisors, we are here to help you make your impact on the world. From the 10,000 foot view as we can see here on this slide, I would challenge you to maybe bring things back down and to ensure that you’re grounded in your financial plan.

As I mentioned at the beginning, in addition to investment management, Mercer really provides a holistic approach to wealth management. We look at everything together, from your financial plan to your investments to your estate plan, your tax plan, and we provide not only the responsible investing solutions but really a financial plan that can impact and change your life for the future.

As you’re putting in your last questions…I actually have seen quite a few come in, so I’m glad we have time to answer these. I want to continue to submit these, and while Kristen’s gathering those, I wanted to let you all know, because you’ve attended, there’s an exciting thing that we at Mercer Advisors are going to be doing on your behalf.

We are going to be planting a tree in your name. In the coming week, you will be getting more information. You’ll be getting a packet of information from us, but these trees are going to be planted in your name, and they’re going to be planted in areas that have been impacted by wildfires.

We’ve seen a lot of wildfires throughout the nation the last several weeks, and these trees will help to reforest some of those areas. I wanted to make sure that you knew that as well. Be on the lookout for that as follow-up to today’s webinar.

Kristen, what questions do we have coming through? And I think… Any questions coming in here, too? I know I’ve…

Kristen: Yeah.

Laura: Go ahead.

Kristen: So, first question that came in: Where can we search for ESG companies that we want to purchase from?

Judy: There are some really good mutual funds that have good lists of ESG companies. Dimensional Fund Advisors, Vanguard, iShares are three companies that come to mind. A lot of folks have access to some really good ESG investing funds in their 401(k)s using TIAA-CREF, for example, so they’re widely available.

Laura: I think, too, another thing, Judy, on that, and Kristen, Mercer has a podcast called The Science for Economic Freedom, and Doug Fabian and our chief investment officer, Don Calcagni, recently did a podcast on socially responsible investing and highlighted Morningstar as a place to also be research if people have questions and want to learn more.

Judy: Oh, good point. Great. Yeah.

Kristen: Great, thank you. For next question: I’ve heard the term “greenwashing” and wanted to know how that fits into what we’ve been talking about today.

Judy: Sure. I talked about it a little bit with the ESG investing. Greenwashing is really when someone is painting a better picture, it’s beyond basic window-dressing, but it’s appearing to be doing more to reduce your carbon risk in particular than you really are, or saying that you’re carbon-free when it’s not relevant or applicable.

Greenwashing is a real issue, and that’s why, when the companies like…that’s why, with the data now, the investment asset management companies are going back and saying, “Show us what you’ve really done, show us what you’re really doing.”

Walmart a long time ago, initially, about 20 years ago, claimed that it suddenly had all these recycled products and stuff, and when it actually came out, they didn’t. Like, the paper towels, they said they had recycled paper for paper towels, and it was really the cardboard tube in the middle of the paper towel. The actual paper wasn’t recycled.

And so they got caught with that, and Walmart’s actually, with respect to the UN and the sustainable development goals, Walmart’s doing amazing things. They have a huge sustainability program. They have Project Gigaton, where they’re working with their supply chain partners to help reduce a gigaton of carbon from the atmosphere in the next couple years. When companies get called on it, they are responding and cleaning things up, literally and figuratively.

Kristen: Thank you. Next question: What would you say to a mid-20-year-old who wants to invest with social impact?

Judy: Laura, do you want to take that one?

Laura: This is great. I think… Sure, absolutely. I would say, start small. Start somewhere. Start thinking about and researching maybe some of the options available.

Many people in their 20s might have an employer plan if you’re working and saving for the future, and there’s a lot of different options that you can look at that might have the tilts that Judy’s spoken about today, and you can do that research, as well as just opening up an IRA account, individual retirement account, or a Roth IRA, and begin to start building a portfolio using…there’s very low-cost, like Judy mentioned, ETF, exchange traded funds, or mutual funds that you can access through an advisors like in Mercer Advisors or you can access through a brokerage account at any custodian.

So, would encourage you to start small and start thinking, and I think, along that line, too, I saw a few questions in the chat around just the percentage of younger people that we are seeing. I mentioned that 70% of surveyed individuals in a survey recently of young people, millennials, said they wanted to invest for impact versus the broad everyone responded 30%. 30% of people said, yes, I want that, 70% of millennials, and actually 90% of women said that they wanted to align their investments with their values.

So, great question on getting started, and I would get started today. It’s like our plant a tree, right? When’s the best time to plant a tree? Today.

Kristen: That’s great, thank you. I think we have time, we’ll do two more questions. Are there companies that focus specifically on inclusive and diverse leadership development in a variety of community settings?

Judy: I think…I’m not sure about focusing exclusively on it. One of the…from an investing perspective, if I could just shift it a little bit, one of the portfolios we have is a Gender Equity portfolio, and there are ESG measurements for how much…what percent of any company’s board is comprised of women or underserved minority groups and so on.

The Gender Equity and the…it’s a diversity portfolio, but the likely, for me, of course, I would assume this, but it’s nice to see it actually happen, but it’s performed really, really well. It only includes companies that have a certain percentage of women in management roles and/or minorities, and those companies are doing great.

There’s a lot of research that’s come out on this because the Boston Consulting Group and Credit Suisse and some other organizations have done extensive research, and when companies diversify their boards, either racially or sexual orientation, any of those things, you get a broader set of ideas coming in, and you get better decisions made and higher quality outcomes.

And so, it’s exciting for me to see the financial returns show that as well. So that’s something that we have available.

Kristen: Great, and thank you, everyone, for these great questions. Last one for today: Can you invest some of your portfolio using these strategies and keep some of your portfolio in regular investments?

Laura: Yes, absolutely. Great question. If you want to, you can separate this out by account. If you wanted to invest a certain portion of your account, maybe an IRA account could be using this strategy for impact, and then you could have traditional as well.

It’s not an all-or-nothing. We can design, and working with Mercer Advisors would allow you to design, a portfolio strategy across all of your different investment accounts that would ultimately meet your goals for those different types of investments in each account. Great question.

Judy: Yeah, it is interesting, even within a household there are different values that people have, and so I think it’s really nice that one of the things we can do is accommodate that with the investments.

Kristen: Yeah, absolutely. There have been a few more questions that have come in about how to connect with our team to learn more about implementing responsible investing. Laura, I’ll let you take us through that part.

Laura: Sure. As we close out our time today, again, I want to thank everyone for spending time with us today. It’s my hope, Judy’s hope, Kristen’s hope, that you learned something learn from today’s webinar. As you think about socially responsible investing in your own portfolio and getting started investing, and even if that is involved with working with Mercer Advisors, I want to leave you with three things today to kind of take with you.

The first thing is, going back to Judy’s slide, what does 2030 look like for you? I’d encourage you to spend some time envisioning that.

The second thing is, if you are interested in learning more about ESG, socially responsible, impact investing, as a lot of questions came up, do some research. Start thinking about what might be appropriate for you. Start looking at what you might have in your portfolio and if you want to make a change with that, or what things you might want to add.

The third thing that we would like to do is invite you to have a conversation. Like Kristen said, if you are interested in learning more about Mercer Advisors, why Mercer Advisors over just an ESG index fund, we’d invite you to have a conversation with us on how you can start implementing socially responsible strategies in your portfolio.

We would encourage you to reach out to our team. You can reach us through our website, merceradvisors.com, or you can also reach us at the number you see here. Feel free to take your phone out, snap a quick picture of that, give us a call. We’d love to be able to set up a conversation to help you learn more about socially responsible investing and how we can align your investments with your values, so feel free to reach us at that number.

Again, we want to thank you for the time today. We appreciate and value you taking time out of your day, and hope you have a great rest of your week. Thanks so much.

Judy: Thank you.

 

 

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