Investing in Retirement in a Socially Responsible Way: Do Well While Doing Good

Many people have a specific cause that pulls the strings of their heart. But can you make money while investing in such a cause? Join us in conversation with financial expert Pam Krueger who has the answers those questions. Enjoy the show!

Margaret Manning:

My guest today is financial and investing expert Pam Krueger. Pam is an author and a co-host of the PBS show MoneyTrack. She’s also created a very interesting online tool, WealthRamp, that connects fiduciary advisors with consumers. Welcome to the show, Pam.

Pam Krueger:

Hi, Margaret. Great to be back.

Margaret:

I love our conversations. Every time I talk with you, we get a lot of comments from the community. When we started Sixty and Me, our pivot points were well-being, financial security, and independence.

We always circle back to the conversation of what’s most important, health or money? To be honest, I actually think that money is really close to health. If you’re healthy and you’ve got your money sorted out, it’s a different life experience in your 60s.

Pam:

Yeah, it goes straight to the well-being part. If you are healthy, and want to experience life, but you have to make sure you have enough money to last until you’re alive.

Margaret:

Here’s a question that’s come up several times, and it’s not surprising to me because a lot of older women want to leave a legacy beyond their families. There’s a lot going on in the world, and we have attached ourselves to causes. We want to be socially responsible.

What advice would you give to someone who wants to invest in socially responsible businesses or causes, but not run out of money? How do you make money while you’re giving money? Is it possible?

Pam:

It is possible. Back in the 90s is when this socially responsible investing movement really started to take off. It kind of poses the questions: Can I do well financially investing and do good at the same time? What do I have to give up in order to support companies that don’t promote child labor, or don’t pollute, or don’t produce cigarettes?

At WealthRamp, people come to me on a daily basis and I connect them to fiduciary financial advisors who are independent and totally competent. I know because I have vetted them myself. Some of them specialize in socially responsible investing, and my statistics show that women are by far more interested in this kind of investing than men.

Since the start of this socially responsible investing trend, we’ve been fortunate to develop, research, and really track the outcomes.

With these investments, like a mutual fund or an index fund that contains a lot of different company stocks in one basket, you’re buying little bits and pieces – shares – from a lot of different companies that are in this mutual fund, or an index fund, or exchange-traded fund. It’s a fund which is different than buying shares from one company.

Some mutual funds and index funds specialize only in companies that are clean, and there are different definitions of clean. But these days, we don’t have “socially responsible investing” as an overarching category. Now, you’ve got two different categories.

Category one includes environmental, social and governmental which means that the companies in that fund have been screened to weed out companies that are not following regulations, especially environmental ones.

Logically, you think that if they’re following the ESG – environmental, social and governance – guidelines, then they’re probably pretty good companies to begin with. They go out of their way to comply with regulations and are definitely right up there with companies that don’t.

Margaret:

Actually, I discovered this myself after posting one of our makeup videos. I was really interested that a lot of our women wanted to know if the moisturizer I’d chosen came from a cruelty-free company. They even knew the websites where to check the statistics, and I was really impressed.

We seem to be very sensitive when it comes to companies that don’t harm the environment or try products on animals. These ‘clean’ companies tend to be ones that are just nice.

Pam:

And you want to put your money where your heart is. So, we’ve got the one category that cares most about environmental, social, and governance qualifications, and that’s one kind of socially responsible investment you can make.

The second category is impact. That means, the companies are actually doing something proactive, and people, especially women, like it when they see companies that are stepping out and taking action.

Look at Amazon. They voluntarily raised their minimum wage, and everybody cheered about it. I’m not saying that’s necessarily impact, but it’s one basic example. So those are the two main categories of socially responsible investing that people are talking about.

Of course, it bears asking, do I have to give up a big part of my financial return to invest in these companies that are really good to the planet, to animals and people? Would that cost me something?

Research over the years is pretty shocking. Compared to the normal stocks that make up the S&P 500, you do just as well. In fact, there have been years when the ESG, especially, are doing better.

So now, a lot of big pension funds and institutions are taking socially responsible, impact, and ESG investing very seriously. They’re making it part of their requirements because they know they’re covering a lot of people’s pensions, and they know that people care about these causes.

Margaret:

Nowadays, the Internet is full of information that can help us see the outcomes of these companies’ efforts, so we can choose to support them. I think it’s wonderful that older women are taking the lead on this, showing their caring nature in very practical ways.

So, if somebody was to go on WealthRamp, is there a specific question asking them whether they’re interested in a fiduciary advisor who cares about socially responsible investing?

Pam:

There absolutely is. It’s one of my screening questions because I want to make a really good match between you, the consumer, and one of the advisors I vetted on my platform.

On WealthRamp, I have different advisors who specialize in different things. For instance, if I have a mom, or a grandmother who has a child or a grandchild on the autism spectrum, that means they have to save for a third retirement because that child may never grow to care for herself.

So, we have advisors who specialize in special needs planning. We have advisors who specialize in SRI, ESG and in impact investing. If that is important to you, then we’re going to match you to the right advisor.

Let me tell you though, there’s only about 15% of fiduciary financial advisors out there who can actually say that they’re experts in socially responsible investing.

A normal, garden-variety financial advisor who is fiduciary, competent, and qualified is probably going to say, “I’m comfortable, I’m conversant. If someone comes to me, I can show them how companies are screened. I can lead them to index funds and low-class funds that are socially responsible. I can educate them, but it’s not in my wheelhouse. It’s not what I specialize in.”

So, in reality only about 15% of advisors really specialize SRI, and about maybe 40% of advisors are comfortable talking about it.

Many women who come to me looking for socially responsible investing are not necessarily saying that it’s the most important consideration. They indicate it would be a nice-to-have, not a need-to-have.

This industry really has a long way to go, and one of the challenges is that the different funds and companies use different screening qualifications. So, what might be considered socially responsible to one fund might not ever make it in another fund.

Margaret:

The standards are different.

Pam:

That’s right. You can go to a website called Morningstar where you can read, research, and screen for index funds or mutual funds. If you want to make an investment with very little money, you can read about how each company is screened. It’s very important.

If you are working with an advisor, or want to find an advisor, reading about it will help you become educated about the topic. It’s not that much to know, really. But it is surprising to most people that you can make money and do good at the same time with socially responsible investing.

Margaret:

I’m really happy that people like you are around, Pam. You’re making the conversation about money and financial choices easier for people. You’re showing us that we can find people who can support us and help us make financial decisions that are aligned with our values and financial situation.

I know you are doing something new in the next couple of months. It’s a special program I wanted to mention. Could you tell us a bit about your plans for the New Year?

Pam:

Yes, thank you for asking. I have a brand-new, one-hour special that will start to roll out on PBS stations across the United States. It’s called MoneyTrack: Money For Life. We’re aiming the program at people, especially women, who are over age 55.

We’ll be answering questions around, “How am I going to make sure that I’m going to have enough money for the rest of my life?” And, “Who can I turn to if I do want collaboration and/or advice?”

We talk about a lot of things, all related to the different choices that you can make at that point of your life, no matter how little or how much you have in savings and investments.

Margaret:

When does it start?

Pam:

It will begin rolling out on some PBS stations possibly as early as January, 2018. And then each station in the PBS system will run it at a different date, in a different time. On WealthRamp, I’ll have a link to when the show will be airing across the country.

Margaret:

Definitely let us know, and we’ll get you back in because I’m sure there’s going to be some very interesting commentary and follow-up from people who are watching it.

Thank you for being here for our community. We appreciate you very much.

Pam:

I love this community. I love being a part of it. Thank you.

What do you know about socially responsible investing? Does it sound interesting to you? Do you care about certain causes that could make you want to invest in them? Please share where your heart is and where you’d be willing to put your money in.