Invest to create the world you want to see

Wealth Matters

Rawson Gulick, CFP, is a certified financial planner at Willow Creek Wealth Management.This is a recurring column by representatives of Willow Creek Wealth Management, willowcreekwealth.com, 707-829-1146.

Read past Wealth Matters columns.

Are you looking for a stronger, more purpose-driven connection with your investments?

In today's climate, everyone is looking to contribute to the solutions needed to make our society work better for more people and the planet.

In the past, we relied on public policy or philanthropy to enact these solutions. These are still useful tools, but the sense of urgency today requires a more effective instrument.

How might you have your voice heard outside of these traditional channels? An easy way to make an impact is through your investment portfolio. Capitalism is alive and well, and the almighty dollar's vote proves to be a force to be reckoned with.

Here's an example. In 2018, following the Parkland mass shooting, Willow Creek Wealth Management received many client calls of concern over what their investment portfolio may be supporting. In turn, we spoke to one of the fund companies we work closely with about the companies that make up their portfolio, and of our clients’ concerns over gun sales and manufacturing. Within two days, the portfolios divested from all domestic gun manufacturers. Just like that.

Further, and where the real power is, that fund company, along with many shareholder advocacy groups, such as the nonprofit organization As You Sow (www.asyousow.org), applied pressure to public companies to change their policies around guns, which is what happened with Dick’s Sporting Goods.

In 2012, after the Sandy Hook massacre, Dick's stopped the sale of all assault-style weapons in their big-box stores. Then, in 2018, following the massive outcry on social media and shareholder pressure, Dick's not only removed these weapons from their inventory in all of their stores, but they destroyed them altogether. Despite the resulting backlash from the gun manufacturers and the NRA, Dick's re-engineered its business.

These examples illustrate how sustainable investing works, giving ordinary investors a more direct route to influencing corporate behavior. Corporate behavior has a material impact on solving the world's most challenging issues. The companies that pioneer a better way of doing business lead the way toward the future we want to see.

Investors have influence over corporate behavior through "voting" with their investment dollars. Unlike socially responsible investing in the past, this approach to investing is about earning a reasonable financial return and supporting the causes that you value.

Here's how it works: An asset manager with a sustainable mandate will begin with a traditional portfolio constructed to meet the financial risk and return goals of the investor. Then a sustainability filter is applied to remove or reduce companies that do not meet specific criteria.

For example, if you are passionate about mitigating climate change, there are three distinct ways this strategy can be implemented.

1. You could choose to invest in a broad fund that uses negative screens, or exclusions, to eliminate any investment in energy companies that utilize fossil fuels, or

2. You could invest in a fund that focuses solely on clean energy.

These two approaches, however, may limit your ability to diversify properly and may not be the best way to make the changes you want to see for your children and grandchildren.

3. You could choose to continue investing in those fossil fuel-utilizing companies, but only those implementing policies toward reducing that usage and creating a cleaner energy future.

This approach provides diversification as well as risk management. As investor pressure increases for corporations to improve their corporate governance, markets will reward those that succeed. Since you have pooled your investment dollars with other investors' dollars, you apply leverage to the shareholder proposals that are presented to a company's board of directors.

Rawson Gulick, wealth adviser, Willow Creek Wealth Management (courtesy photo)
Rawson Gulick, wealth adviser, Willow Creek Wealth Management (courtesy photo)

There are several ways to use your investment dollars to create the world you want. Speak to your financial adviser about sustainable investing to discuss how you can support your values with a solid financial approach that can be more effective than philanthropy or policy.

Wealth Matters

Rawson Gulick, CFP, is a certified financial planner at Willow Creek Wealth Management.This is a recurring column by representatives of Willow Creek Wealth Management, willowcreekwealth.com, 707-829-1146.

Read past Wealth Matters columns.

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