The quote to the right of this page highlights a key philosophy of Pearl Wealth.
Making and managing money for the support and sustenance of oneself and one’s family is a necessary and worthy goal. But such a goal ideally is held in concert with a mindful awareness of those less fortunate or without a voice, including nature.
Millenia ago, the Jewish sage Hillel stated "If I am not for myself, who is for me? And being only for myself, what am I? And if not now, when?” This quote goes to the delicate balance humans must play integrating caring for oneself and caring for the broader global community. And it reminds us that there is no better time than the present to start living this precept.
For the same reasons that consumers buy Fair Trade chocolate, organic food or other products that minimize harm to the environment and workers, people are growing in their desire to align their investment portfolios with their values. Pearl Wealth is committed to the diligence and implementation of investment strategies by which clients can earn market rate returns while doing the least harm and the most good for stakeholders with less power.
Five ways Pearl Wealth can help you achieve impact in your portfolio:
If you have an electric car, solar panels on your roof and are careful not to buy GMO foods, you may prefer to not profit from companies engaged in global warming (e.g., Exxon, BP) or those fostering greater use of chemical pesticides in our foods (e.g., Monsanto, DuPont). Screening out – or tilting towards – issues an investor cares about is typically referred to as ESG investing. ESG stands for environmental, social, and governance, and is sometimes used interchangeably with terms like Socially Responsible Investing (SRI).
Clients with taxable fixed income portfolios might invest in companies with high ESG scores. Clients with tax-efficient portfolio might invest in muni bonds from cities that score high when it comes to their approach to education, treatment of homeless populations, economic inequality and climate change.
At Pearl Wealth, we invest in fixed income mutual funds and ETFs which have passed rigorous screens from managers such as Calvert Investments, TIAA CREF and others. We also work with subadvisors to build out individual bond portfolios tailored to the specific tax, financial and impact needs of the client. One such subadvisor is Breckinridge Capital Advisors, a manager focused on investment grade fixed income with more than $36 billion in assets under management as of June 30, 2018.
Many believe that the most powerful way to make an impact is through funding projects outside the public markets. This would be via private equity and/or private debt investments.
Pearl Wealth works with Align Impact to vet private equity investment opportunities. See www.alignimpact.org. Such investments might fund solar farms, sustainable farmland, affording housing projects and/or a myriad of other projects with social and environmental outcomes. Please contact us for more information on examples of private equity managers with whom we have worked.
Note that investing in private deals often requires clients to be either Accredited Investors or Qualified Purchasers. To paraphrase the requirements under Section 2(a)(51) of the Investment Company Act, a “qualified purchaser” means: a person holding not less than $5 million in investments. For a Foundation, this hurdle is higher. Accredited Investor must meet less stringent income and/or net worth requirements.
Impact investing in the real estate market typically includes both (1) affordable housing and (2) environmental impacts. As an example, multifamily affordable housing properties are investments where investors can address both social and environmental issues.
Access to a safe, secure, habitable, and affordable home is recognized as a fundamental human right. Yet, shortage of affordable housing is a critical issue in the United States. The National Association of Home Builders published a report that found that more than 19.4 million households, or 49 percent of total households renting homes in 2010, were “rent-burdened,” or paying more than 30 percent of household income for rent. Cuts to affordable housing in the US have, and will, make the preservation of existing housing stock even more critical.
In addition to maintaining affordability, providing social services such as education, community activities, health services, counselling and senior care through third-party service providers add an additional layer to the social impact investors can have in these properties as owners.
Real estate is a significant user of global energy (40%) and source of greenhouse gas emissions (20%). McKinsey’s widely regarded study on paths to a low-carbon economy shows the importance of investments in real estate such as residential electronics, appliances, HVAC retrofit, LED lighting and insulation retrofit are all abatement measures that generate positive financial returns because of the future cost-savings, and are therefore the easiest to push forward on.
Pearl Wealth helps clients invest in impact real estate in both the public and private markets through REITs and limited partnerships. Types of real estate in addition to multifamily housing include timber, farmland, commercial and industrial buildings.
An additional tool by which to have impact in the public markets is through shareholder engagement.
A shareholder activist is a person who attempts to use his or her rights as a shareholder of a publicly-traded corporation to bring about change within or for the corporation.
Some of the issues addressed by shareholder activists are for social change, requiring divestment from politically sensitive parts of the world — for example, greater support of workers' rights (sweatshops) and/or more accountability for environmental degradation. But the term can also refer to investors who believe that a company's management is doing a poor job. This class of activist investors often attempt to gain control of the company and replace management or force a major corporate change.
Many of the fund managers with whom Pearl Wealth invests engage in dialogue with companies to effect positive social or environmental change. Fund managers see this as a strong lever they can pull to achieve more sustainable outcomes for all stakeholders. We have also worked with As You Sow, a leader in the shareholder advocacy arena. As You Sow’s mission is to promote environmental and social corporate responsibility through shareholder advocacy, coalition building, and innovative legal strategies.
A holistic and integrated approach. We help clients integrate their values across investment platforms. For example, if a private family foundation grants several million dollars per year to causes like The Nature Conservancy and Sierra Club and yet holds several million dollars in Cabot Oil and Gas in their investment portfolio, we may assist them in creating a more consistent approach.