Aligning Financial Goals With Personal Values
We are kicking off a new season of WEALTHTRACK with the first of a two part series devoted to what’s being called “impact investing,” the practice of aligning financial goals with personal values. Impact investing goes beyond what used to be called socially responsible investing, which was designed to avoid certain businesses such as gambling, alcohol and tobacco. It is now pro-active as well, investing in companies that are making a positive impact in a wide range of areas including environmental, societal and governance (ESG).
Our two experts will discuss why impact investing is gaining momentum worldwide and why it makes sense financially. Bill Paul is the founder and editor of Earthpreservers.com, a now twenty year old environmental publication for children. A WEALTHTRACK regular, Bill is also an energy consultant and analyst, and a former energy reporter for The Wall Street Journal. Mary Jane McQuillen is a portfolio manager and Head of the Environmental, Social and Governance Investment Program at ClearBridge Advisors, where she integrates ESG research into the stock selection process. She is on the board, or involved in numerous ESG organizations and was named a “rising star of corporate governance” by the Millstein Center at the Yale School of Management.
WEALTHTRACK Episode #922; Originally Broadcast on June 29, 2012
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What a week! The Supreme Court finally delivered a verdict on President Obama’s health-care law. In the 5-4 decision the majority opinion found that Congress has the authority to require individuals to buy insurance under its power to levy taxes. As a Bloomberg news headline read, “Court Ruling lets $813 Billion in Higher Taxes Proceed.” According to Bloomberg, some of the largest levies will take effect at the beginning of next year. “Married couples earning more than $250,000 a year and individuals earning at least $200,000 face a 3.8% tax on their ‘unearned income,’ including capital gains, dividends and private-equity managers’ profits on leveraged buyouts.” Those same taxpayers will also be subject to an “additional 0.9% levy on their wages exceeding those income thresholds starting next year.”
I talked to influential economist David Rosenberg after the decision. He will be appearing on WEALTHTRACK the weekend of July 13th for an extended conversation. His take was, although the decision is seen as a political win for President Obama, it could end up hurting his re-election chances because of the costs associated with the legislation. We shall see. As Rosenberg recently told clients, “Rarely has the market landscape been so heavily reliant on what policy makers and judges will do or won’t do.”
Speaking of the same, European Union leaders are holding a two day summit in Brussels to ostensibly discuss integrating their banking and fiscal systems. Their most pressing task is alleviating the severe funding crisis affecting Italy and Spain. Late reports are that EU leaders have agreed to spend 120 billion euros, or $149 billion, to stimulate growth. We’ll find out what that means tomorrow.
Today investors decided not to give European leaders the benefit of the doubt. They sold stocks and bought U.S. Treasury bonds. The 10-year note ended late afternoon trading with a yield of 1.59% and the 30-year bond, which Dave Rosenberg favors as an investment, traded at 2.679%
This weekend marks the eighth anniversary of WEALTHTRACK. We feel like the little engine that could. We started on a handful of markets, covering less than 15% of the country. We are now in 140 markets representing 83% of TV households. In that seven year period, the Dow is up a mere 22% from its mid-2005 level of 10,303.44 when we launched. It is 11% lower than its high of 14,164.53 reached in October of 2007. So much for progress!
We are starting our new season with a two part series on what is now being called impact investing: that means having a positive impact with your investments. Was Gordon Gekko inadvertently correct when he said “greed is good?” Can you actually make money while doing good?
That is what we intend to find out over the next two weeks. Interest in aligning one’s values with one’s investments is becoming a global phenomenon among increasing numbers of institutional and individual investors. We want to help you understand this movement and show you strategies to participate in it, if you are so inclined.
According to one study, “nearly one in eight dollars under professional management in the U.S., or about $3.07 trillion, follows investment strategies that consider corporate responsibility and societal concerns.” Wall Street is taking note. Some major firms offer socially responsible and environmental, societal and governance (ESG) screens for institutional and high net worth clients. Morgan Stanley Smith Barney recently introduced an “Investing with Impact Platform” for its individual clients, offering them the opportunity to pick and choose among multiple strategies involving stocks, sectors, mutual funds, and private investments to “align their financial goals and their personal values.”
And therein lies the rub. Is socially responsible investing as profitable as traditional investing? According to numerous research reports it can be. As in every other investment approach, it depends upon who is doing the investing!
This week’s WEALTHTRACK guests are well-versed in the risks and rewards of impact investing. Bill Paul is a familiar WEALTHTRACK guest. He is a Financial Thought Leader in the environmental and energy field, founder and editor of Earthpreservers.com, a now twenty year old environmental publication for children. He is also an energy consultant and analyst and former energy reporter for The Wall Street Journal.
Mary Jane McQuillen is portfolio manager and head of the Environmental, Social and Governance Investment Program at ClearBridge Advisors, where she integrates ESG research into the stock selection process. She is on the board or involved in numerous ESG organizations and was named a “rising star of corporate governance” by the Millstein Center at the Yale School of Management.
As always, if you can’t join us at the appointed hour on your local public television station, you can watch the show on our website as a podcast or streaming video. You can also find the One Investment picks of our guests and my Action Points there.
For those of you who would like to see our program 48 hours in advance of the broadcast, you can subscribe to our WEALTHTRACK PREMIUMsubscription service on the website.
Have a great weekend, a patriotic Fourth of July, and make the week ahead a profitable and a productive one!
Price: $24.47 on 6/27/12
52-week range: $20.25 – $37.30
One company we like is Cree. And Cree is LED lighting, light emoting diode. Many of your viewers may be familiar with light emoting, LED lighting which, as the absorption or the adoption process has been improving, the prices have been stabilizing and the quality or the attractiveness around LED lighting has increased. Right now it’s still, I believe, only four to five percent absorption within the United States for LED lighting compared to conventional technologies such as incandescent and CFL, but what’s interesting about LED lighting is that it requires 85% less energy than conventional lighting and it last on average for 50,000 hours, where conventional lighting lasts 2,000 hours. So you don’t have to necessarily do a lot of math to realize that you could save a lot of money in terms of energy. You could also save a lot of money in terms of going back and forth to the store and buying new bulbs and the amount of waste usage. So Cree has high quality best in class products.”
– Mary Jane McQuillen
“Mine would be Zipcar which is a car sharing service. It started in Europe, as well as on college campuses in the U.S. It is for green kids, basically, except they are now in their twenties and thirties. They do not want to own a car either because it’s too expensive or, in a city like New York, too much of a hassle. The company went public. It has surprised any number of vocal critics along the way because it’s going strong and is showing no signs of running out of gas, shall we say.”
– Bill Paul
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Part One: Investment opportunities in the alternative energy revolution. Financial Thought Leader and energy analyst Bill Paul discusses some surprising developments and overlooked investment ideas.
October 8, 2010
Part Two: Investment opportunities in the alternative energy revolution. Financial Thought Leader and energy analyst Bill Paul discusses some surprising developments and overlooked investment ideas.