As we enter the holiday season, our more cheery and considerate sides most likely start to show (for most of us that is). We start wearing our festive sweaters and think about next year. In line with this, we may start to look at our bank or investment accounts and start to fall back into depression due to owning some horrible big bank or behemoth oil company. Have no fear. Below are 5 ways to make your dull “80s style cufflink” type portfolio more sustainable and in line with the 2020s. Now go sit back, watch Leonardo DiCaprio’s Before the Flood and then read this:
- Switch to SRI or ESG funds and ETFs
There are now hundreds of mutual funds and ETFs that now do the sustainability screening for you. If you want a “low carbon” ETF, there is an iShares offering. If you would like more gender diversity in your portfolio, SPDR has you covered. The list goes on and on. Don’t think you have to stay in your Vanguard or American Funds because that is what your Dad or the guy who dresses fancy at the coffee shop told you. The options are plethora and they exist in every asset class. You want a fund that has dividend paying stocks that are sustainability screened. Parnassus has you covered. Value-play. Covered. Don’t be told there aren’t enough options. There are many.
- Demand your HR person to have more SRI options in your 401k or 403b
Do you stare at your 401k plan paperwork and end up just picking a fund because it sounds cool? Well, that’s not cool. Part of your Human Resources director’s job is to find a 401k plan that fits it’s employees. Send them an email asking if there are any Sustainable Fund or ETF options and if not, could we please add some. You may be surprised how easy this really is for them to fix. If they say we can’t do that, grab other eco-minded employees and ask again. Then grab a few-more and ask again. It works.
- Get rid of your great grandmom’s Exxon stock
Ok, so you were lucky enough to inherit Grandma Nana’s old Exxon stock she has had since the 60s. And good job Nana on picking the stock when oil was the hip thing to invest in. It’s time to realize that Nana would be totally fine with you divesting of that stock and reallocating into a world where her great-great grandchildren can still breathe. Yes, there may be tax-consequences, but it’s always better to have to pay tax on capital gains, then to not have gains at all. Has anyone seen the revenues of companies like Exxon and Chevron over the last 5 years. It’s not pretty.
4. The board you sit on has a fiduciary duty. If you sit on a board or a finance committee or are part of a family foundation, you may want to listen. As an elected member, you may have a duty to pay attention to how an endowment is invested. Have you checked off the “ESG/Sustainable Screen” on your investments? If not, this may want to be reviewed as one would have to believe that if this is not being done, then there may be a slight breach of fiduciary duty. In other words, if you haven’t checked to see if what % of the endowment is invested in dirty coal or big oil companies, you may want to call your advisor and ask them and then make a note of this. Any big grantor may want to know this information and if you can’t come up with it, then they may take their money elsewhere.
- If you aren’t going to do it yourself, OR if you rely on your Dad’s old Fidelity stockbroker switch to an independent fee-only sustainably focused investment advisor who charges an annual management fee of less than 1% (Yes, that sounded like a plug for Sustainvest, sorry). In all honesty, most people have busy lives and careers and the thought of staring at their Schwab or Fidelity account without much know-how or care doesn’t sound fun. Hence why many investors see the value in paying an advisor to do it for them and do it in line with investors’ risk profile and timelines. All asset classes can be covered with sustainable funds and it’s also nice to know that your money is being managed by a firm or advisor who is personally sustainably focused. Stay away from those firms out there who are doing is a “part” of what they do as that shows they are not fully committed to SRI. Its like saying we are an organic coffee company, but only part of our coffee we are serving you is actually organic. Don’t be swayed by the Morgan’s and Merrill’s and Edward’s who say they are committed to SRI.
Bonus tip: Though unrelated to the investment world, if you still have a bank account with those big evil ones (yes you know the ones I am speaking about), then walk into a local branch or credit union and ask them what it takes to switch over. Remember, the banks were the reason that we all know someone who defaulted or foreclosed on their house from the Great Recession of 2008.