With Marc de Sousa-Shields, SRI pioneer and Author of Invest Like You Give a Damn: Make Money, Change the World, Sleep at Night
The desire to do the right thing is part of our basic nature and most of us make decisions every day within this framework. In the investing world, it’s no different, which is what led to socially-responsible investing (SRI).
Steve’s guest, Marc de Sousa-Shields, knows a lot about socially-responsible investments, and is the author of Invest Like You Give a Damn: Make Money, Change the World, Sleep at Night, a guide to socially responsible investing.
Marc’s book is geared towards Generation X and millennials based on their appreciation of sustainability, work-life balance, working for the greater good, and the trillions of dollars of assets that they stand to inherit—making them the ideal target group for Marc’s book.
For instance, millennials value their relationships with each other and with their communities, which provides a real opening for a sustainable investment.
Socially Responsible Investments
Marc notes that about $6 trillion of the world’s investments are currently focused on socially responsible investing, as opposed to in tobacco or military companies, and these SR-investments have gone up quite a bit since the 2000s.
In the past, SRI generally did not do as well as the broader market and was not seen as a path to wealth creation. Now, however, things have changed and investors are just as likely to do well, or even better, with SRI compared to other strategies.
Marc de Sousa-Shields also likes a gender-based ETF, the Pax Ellevate Women’s Global Fund, which is ranked 26th out of 1,500 peer funds and focuses on companies that promote employment diversity and leadership for women, such as Unilever, Nie, and Patagonia.
Finding A Good SR Investment
Steve notes that choosing companies to invest in, even amid the domain of SRI, is never easy because one has to look beyond SRI to a company’s ability to generate long-term investment gains.
Marc says there are two approaches in SRI. In one, investors who are passionate about social causes often go right ahead and buy shares of companies they believe are committed to doing right without overly worrying about other investment criteria, such as investing in companies focused on community banking, organic food, sustainable energy, etc. Alternately, investors can look at SRI ETFs that consider a company’s CSR initiatives but also weigh other metrics such as whether the company can deliver competitive returns on investment over time.
Millennials and generations after them are clearly interested in working with and for companies that have a commitment to social responsibility, so the universe of SR companies is widening year on year, with CSR almost a given at most big companies. As a result, SRI is easier to do today that a few decades ago. With SRI opportunities on the rise and with the planet in great need of responsible development, read Marc de Sousa-Shields’ Invest Like You Give a Damn: Make Money, Change the World, Sleep at Night to see if socially responsible investing is right for you.
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Steve Pomeranz: The desire to do the right thing is part of our basic nature and most of us, I think, make decisions every day within this framework. In the investing world, it’s no different and because of that, a large industry of investment choices has been developed to cater to those who want to be socially responsible and foster a more sustainable and responsible investment strategy. Marc de Sousa-Shields knows this industry extremely well as an international investment consultant, and he was the first executive director of the Social Investment Organization of Canada. He’s also the author of a new book, Invest Like You Give a Damn: Make Money, Change the World, Sleep at Night.
He writes that the book is a user-friendly guide to socially responsible investing for investors of limited means and unlimited conscience. I like that. Let’s find out more. Hey, Marc, welcome to the show.
Marc de Sousa-Shields: Yeah, thanks, Steve. I’m happy to be here.
Steve Pomeranz: So, the book is geared towards Generation X and millennials.
What makes these two groups of adults so important?
Marc de Sousa-Shields: Well, it’s more about the different nature or the different characteristics of their financial investment needs that we addressed those two cohorts so to speak. We do know about the millenials that they’re set to inherit many trillions of dollars of assets, so that makes them sort of on the sustainability front very, very important. But at the same time gen X are open to these kinds of ideas and they do control significant assets, obviously. So, we decided just to focus on their specific needs.
Steve Pomeranz: I think those generations, too, have been more exposed to the idea of socially-responsible investing more so than the baby boomers who, even though we kind of come out of a culture of the 60s, many of us, basically put on our three-piece suits and kind of followed a more traditional path.
Marc de Sousa-Shields: Well, in the book, I looked at that specific question. And we found that the boomers actually really wanted to try and do something different from the 1960s and the hippy movement and all that stuff. But you’re right, we put on our suits and sort of moved on.
I’m sort of right at the cusp of boomers/gen X. And we saw that the gen X actually wanted to do a lot more and expressed a lot of ideas about living differently, especially later in our lives with work life balance. But the millennials, it seems are actually, in enough numbers anyways, looking for greater purpose in life.
But I don’t want to confuse that with—and the book doesn’t do this—with saving the world and doing sustainable this or sustainable that. Really what it means is they want and they are actually actuating greater work-life balance. And I think that that’s an opening for sustainability because a lot of the things that we did as gen X and boomers was consume too much without any kind of conscious understanding of what that meant for the world ultimately.
So, we see a lot of millennials hitting the…becoming organic farmers or working part time on purpose or doing the gig economy. And it’s important, their relationships with each other, their relationships with their communities, and that’s a real opening for a sustainable investment.
Steve Pomeranz: Well, let’s talk about the investments themselves.
So how much right now is invested in the SRI, or the socially responsible investing movement, right now?
Marc de Sousa-Shields: Well, the last tally that we have is just over $6 trillion now which is a substantial portion of the-
Steve Pomeranz: Sounds like a lot, yeah, go ahead.
Marc de Sousa-Shields: It seems like a lot.
It’s a substantial portion. But you’re going to understand a lot of that is relatively passive. It doesn’t have a lot of direct and proactive impact, so that would be tobacco screens, military screens, these sorts of things.
Steve Pomeranz: Meaning that you screen out for certain kinds of vice companies and, as you say, maybe armament companies, military and so on.
Marc de Sousa-Shields: Yeah, a screen is simply saying, look, if you have this much in military sales, you’re not going to be invested in.
Steve Pomeranz: Has that 6 trillion, has that risen pretty dramatically over the years?
Marc de Sousa-Shields: It’s been fairly constant to be honest. I think in the early 2000s, it started rising a lot faster than in the 1990s.
And so we started seeing some real assets pile up in the last few years with divestment from coal. But one might argue that just a smart investor would have started from divesting from coal. [LAUGH]
Steve Pomeranz: As a declining industry.
Marc de Sousa-Shields: Absolutely.
Steve Pomeranz: It was pretty obvious to see.
So I’ve been in the business a long time investing. And there used to be a choice that you’d make. Do you want to perform well in the markets or, let’s say, make yourself rich, or do you want to invest in things that do good? There used to be a dichotomy there because the things that you were doing, investing to do good, didn’t necessarily follow the markets or do well.
Has that changed?
Marc de Sousa-Shields: Well, the perception has changed. The evidence has always been that with SRI, just like any other kind of investment strategy, if you picked the right funds or you picked the right investments, you’re going to do as well as or better than whatever your peer competitor fund or stock might be, or security might be.
The Oxford University did a meta study of over 200 rigorous academic studies on SRI and found that to be the case. You’re either going to slightly outperform or you’re going to meet the performance of whatever benchmark investment you’re looking at. If you go onto Morning Star, you can check out any individual SRI fund—they do a fabulous job, by the way, of looking at the sustainability performance of different funds—you’ll find there the evidence is clear, many funds outperform. One of my favorite funds, I have a 15-year old daughter, I want her to have all the opportunities that my boys have, and one of my favorite funds is Pax Ellevate Women’s Global Fund, and it’s 26th out of 1,500 Peer funds.
Steve Pomeranz: All right, let’s get into that for a second because that’s an area that is relatively new, kind of gender based ETFs with a concept that if a company has a very open policy to adding more females to their staff, that this makes a better company more diverse and smarter in some ways. So-
Marc de Sousa-Shields: Yeah.
Steve Pomeranz: So, that’s not your typical remove tobacco, remove gun companies. This is kind of different. Tell about that area a little bit.
Marc de Sousa-Shields: Well, the general idea is that you want to have a stronger impact, so you’re more proactive. Pax Ellevate, for example, looks for companies that have women on their boards.
Now I want to say two things about that. The first thing is the diversity is really, really important as you point out. But the economy is moving towards more and more collaboration between countries, between companies, NGOs, with governments. And women have a skill set in terms of collaboration that men don’t always have.
And so this just makes great business sense as we move towards a more collaborative economy to have greater diversity and to have that skill set become part of the core skills of a company. And you see the companies like Unilever and Nike and Patagonia that are real sustainability icons in business taking that approach, lots of collaboration and lots diversity.
Steve Pomeranz: Interesting. I think there’s some complications in investing in socially responsible companies because many of the companies have both good and bad aspects to them. It’s not quite so simple or so black and white. So how does one make or discern whether a company is acceptable by at least basic standards if they’ve got some good and bad things going on.
Marc de Sousa-Shields: Well, you hit the nail on the conundrum’s head, essentially. Take Walmart, for example. Fantastic environmental approaches to business, really doing great things; they pioneered the square milk box and saved 20% on carbon just like that for their transport and logistics and what not. Yet they got caught out in Mexico with a huge corruption and bribery scandal.
There is kind of two ways to approach it. The first way, if you are an investor and you are passionate about a particular issue, go with that issue and hold your nose on the rest of this stuff. A woman in the book that I interviewed, she loves recycling and environmental issues, and she bought Ford Motor Company because they were playing around with having edible recycled bumpers on their cars. And now Ford’s got $11 billion commitment to electrical cars. So you have to follow your passion and follow the companies and sometimes hold your nose. At a more general level, you can look for these funds that are more, that are trying to have a positive impacts.
So, you look at some, for example, there is a lot of funds that are looking at supporting municipalities and their development efforts, and you can see the impact on the ground. So you can do that. And there’s other financial levers that you can use including banking with your local community credit union which lends to people in your community. And then recently there’s been legislation in the United States to allow non-accredited investors or smaller investors to put up to 10% of their portfolios in all those crazy things that are really changing the world. The social enterprises that are super-local, organic food, organic breweries, all these kinds of wonderful things which I call HUGs, Huge Uncomplicated Gratification investments.
Steve Pomeranz: And so staying local is a probably a good way. So I think it’s investing with a list of tenets that you want to follow and some presence of mind as to exactly where your money is going and what it is doing. My guest is Marc de Sousa-Shields, the book is Invest Like You Give a Damn: Make Money, Change the World, Sleep at Night.
Marc, thank you so much for joining us.
Marc de Sousa-Shields: Thank you very much, Steve.
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