WEBVTT - Socially Responsible Investing #097 0:00:00.080 --> 0:00:03.000 Welcome to How the Money. I'm Joel, I'm Matt, and 0:00:03.080 --> 0:00:26.439 today we're talking about socially responsible investing. Yeah, Joel, I 0:00:26.480 --> 0:00:29.880 am excited to talk about socially responsible investing. You know, 0:00:29.920 --> 0:00:32.640 we've got so many requests for this topic. As far 0:00:32.680 --> 0:00:34.960 as the questions sent into us, it got up voted 0:00:35.120 --> 0:00:37.680 into a real big boy episode, So we're not taking 0:00:37.800 --> 0:00:39.559 questions on this one. We'll do a real episode on it. 0:00:39.760 --> 0:00:42.840 We'll go full length here, the an entire show dedicated 0:00:42.840 --> 0:00:45.480 to it. And I think socially responsible investing is something 0:00:45.520 --> 0:00:48.360 that is on the mind of a lot of investors. 0:00:48.360 --> 0:00:52.000 In particular, younger investors really are trending towards socially responsible 0:00:52.040 --> 0:00:55.920 investing introves and it's really changing the industry as a whole. 0:00:56.440 --> 0:00:58.800 You know, let's get into that in just a second. First, Matt, 0:00:58.840 --> 0:01:00.560 I wanted to let you know I had to buy 0:01:00.640 --> 0:01:03.640 a new washing machine at a rental property the other day, 0:01:03.680 --> 0:01:06.640 and I have acutely felt the impact of the Chinese 0:01:06.640 --> 0:01:10.600 tariffs that are currently in effect. Man washing machine prices 0:01:10.760 --> 0:01:13.920 and other prices to have gone up just quite a 0:01:13.920 --> 0:01:16.360 bit thanks to the tariffs that our president has levied 0:01:16.400 --> 0:01:18.600 against China and I don't like to get political on 0:01:18.600 --> 0:01:20.920 the show, but it's just worth noting that the tariffs 0:01:20.959 --> 0:01:23.959 have made are making an actual impact in consumer purchases 0:01:24.040 --> 0:01:26.160 right now. You're feeling that, I guess, washing machines are 0:01:26.240 --> 0:01:29.440 made of a lot of steel, so right, you're gonna 0:01:29.440 --> 0:01:31.840 have to get old school and wash your clothes by hand. Yeah, 0:01:32.319 --> 0:01:34.600 like a little wash basin, hang them up. My tenant 0:01:34.640 --> 0:01:36.920 will have to I guess right. I ended up finding 0:01:37.000 --> 0:01:40.000 that actually buying a used washing machine. While that has 0:01:40.000 --> 0:01:42.240 gone up in price too from from where it was, 0:01:42.440 --> 0:01:44.400 it's still it actually made more sense for me to 0:01:44.760 --> 0:01:47.160 go buy a used washing machine because they're just such 0:01:47.200 --> 0:01:49.880 a big difference in price right now because the tariffs 0:01:49.920 --> 0:01:53.280 have made a new washing machine so expensive. Yeah, you know, 0:01:53.320 --> 0:01:55.520 I feel that buying a used washer and dryer set 0:01:56.080 --> 0:01:58.120 is a good way to go if you aren't in 0:01:58.160 --> 0:02:00.440 a hurry, you know, like you see the posted all 0:02:00.440 --> 0:02:03.520 the time on Facebook, Marketplace online. Uh, and folks are 0:02:03.520 --> 0:02:05.360 having to unload them because they're moving for work and 0:02:05.360 --> 0:02:07.320 they can't take it with them. Depends on the situation, 0:02:07.680 --> 0:02:09.920 but yeah, you can really get a good deal on 0:02:10.000 --> 0:02:14.079 like a brand new like fancy front loading sets for 0:02:14.160 --> 0:02:16.280 a fraction of of what it would be new. I 0:02:16.320 --> 0:02:19.639 personally have never purchased a brand new washer dryer ever, 0:02:20.840 --> 0:02:24.240 that probably doesn't surprise folks. Yeah. Well, actually, the set 0:02:24.280 --> 0:02:26.520 that I had in this rental property I got for 0:02:26.600 --> 0:02:29.880 a hundred dollars from a friend who just needed them gone, 0:02:30.280 --> 0:02:32.680 and I moved to myself and put them in the place. 0:02:33.040 --> 0:02:34.960 I was just sad to see that the washing machine 0:02:35.280 --> 0:02:37.640 had kicked the bucket so quickly, you know, within a 0:02:37.680 --> 0:02:40.520 year and a half of me buying it. Yeah, but 0:02:40.600 --> 0:02:42.280 you know what a hundred bucks for the set, you know, 0:02:42.280 --> 0:02:44.400 I still have a working dryer and they're still totally 0:02:44.480 --> 0:02:47.240 worth it, right, But I was able to score a 0:02:47.320 --> 0:02:50.880 six month old, almost brand new washing machine that was 0:02:50.919 --> 0:02:53.720 in really good condition for for three d bucks. So 0:02:53.880 --> 0:02:56.000 not ideal to pay that much. But when I was 0:02:56.000 --> 0:02:58.200 looking at that compared to the prices for new washing 0:02:58.240 --> 0:03:02.320 machines right now, holy mackerel. Big savings, that's for sure. Yeah. So, 0:03:02.360 --> 0:03:04.519 by the way, based on my experience with you know, 0:03:04.560 --> 0:03:06.960 buying a washing machine and seeing kind of how the 0:03:07.000 --> 0:03:11.680 tariffs are impacting different consumer goods that that are sold 0:03:11.680 --> 0:03:13.760 in our society, I just kind of wanted to put 0:03:13.760 --> 0:03:16.160 that in front of people and say that as prices 0:03:16.200 --> 0:03:18.520 of certain goods go up, it makes it even more 0:03:18.560 --> 0:03:22.360 important to shop in the used marketplace because the price 0:03:22.400 --> 0:03:25.000 gap between new and used has just grown a lot 0:03:25.440 --> 0:03:28.200 in certain categories. So yeah, just make sure to shop. 0:03:28.560 --> 0:03:31.040 These tariffs are not ideal for us when we buy items, 0:03:31.160 --> 0:03:32.920 but you know what, they're kind of part of the 0:03:32.919 --> 0:03:34.880 way it is. Right now, let's introduce our beer that 0:03:34.880 --> 0:03:37.360 we're gonna have on this episode. Man. This is Toffee 0:03:37.360 --> 0:03:41.119 Stouts by Carolina Brewery. And this was another beer sent 0:03:41.160 --> 0:03:44.200 to us by Emma, and she's out of Chapel Hill Man, 0:03:44.280 --> 0:03:46.600 and you know when she sent us these beers, she 0:03:46.640 --> 0:03:49.600 also sent these blue cups. And she said that every 0:03:49.640 --> 0:03:52.560 Wednesday they go there and they share a beer. She 0:03:52.600 --> 0:03:54.960 shares a beer with her best friend, and so she 0:03:55.000 --> 0:03:57.120 said that reminded her of us, and that we had 0:03:57.120 --> 0:03:59.600 to have a set of these cups. Super sweet of 0:03:59.640 --> 0:04:01.800 her to think of us. And uh, Emma, thanks so 0:04:01.880 --> 0:04:04.240 much for sending this beer are away. We're looking forward 0:04:04.280 --> 0:04:06.640 to chatting it up at the end of this episode 0:04:07.000 --> 0:04:10.800 and drinking it in in the meantime. Alright, Matt, So 0:04:10.840 --> 0:04:15.000 onto the subject at hand. We're talking about socially responsible investing, 0:04:15.560 --> 0:04:18.719 and man, these socially responsible investing funds have gained some 0:04:18.800 --> 0:04:22.159 major traction over the past in particular five to seven years, 0:04:22.520 --> 0:04:24.720 and in fact, it turns out that one in four 0:04:24.839 --> 0:04:28.960 investing dollars are now being invested in a quote unquote 0:04:29.000 --> 0:04:32.200 socially responsible way. Yeah, that's that's kind of mind blowing 0:04:32.320 --> 0:04:34.440 because there is a lot of money that's being invested 0:04:34.520 --> 0:04:36.919 right now in our country and to think that a 0:04:37.000 --> 0:04:39.279 quarter of that that blows my mind. But yeah, it's 0:04:39.279 --> 0:04:42.560 it's true, right, Yeah, it's kind of just the pace 0:04:42.640 --> 0:04:45.880 of socially responsible investing has just really caught on fire 0:04:46.160 --> 0:04:48.280 and it's pretty incredible. And so this has been the 0:04:48.279 --> 0:04:50.719 most requested topic for us to talk about, and I 0:04:50.720 --> 0:04:52.719 feel like there's a lot to talk about when it 0:04:52.720 --> 0:04:55.240 comes to socially responsible investing. There are terms that we 0:04:55.279 --> 0:04:57.080 kind of need to parse out, but I think there's 0:04:57.080 --> 0:04:59.680 some really good takeaways we're gonna have for folks as 0:04:59.680 --> 0:05:02.279 we kN to get into this a little bit further. Yeah, jel, 0:05:02.400 --> 0:05:04.120 But first, you know, we should ask ourselves the question 0:05:04.160 --> 0:05:06.680 should we even be going down this path? Right? Like 0:05:06.680 --> 0:05:09.719 we've talked about the simplicity of investing, and this in 0:05:09.800 --> 0:05:12.400 fact adds a curveball into the mix. But it's a 0:05:12.480 --> 0:05:15.800 valuable option for many, especially if you have issues investing 0:05:15.839 --> 0:05:19.520 in companies that do business and industries that don't align 0:05:19.600 --> 0:05:22.520 with you personally. Right. You know, we had one listener 0:05:22.640 --> 0:05:25.760 say that he had avoided investing because he didn't want 0:05:25.800 --> 0:05:30.040 to invest in unethical companies. Well, you know, first him specifically, 0:05:30.040 --> 0:05:32.919 and others like them. This, in fact, it really is 0:05:32.960 --> 0:05:34.880 the right path to go down. Yeah, Matt, We've talked 0:05:34.880 --> 0:05:36.920 about so many other things when it comes to investing. 0:05:36.960 --> 0:05:39.120 You know, we've talked about, uh, the simple way to 0:05:39.120 --> 0:05:41.760 do what, we've talked about the fees involved. But if 0:05:41.760 --> 0:05:43.720 those aren't your hang ups, right, if your hang up 0:05:43.960 --> 0:05:45.800 is you want to make sure that you're investing in 0:05:45.880 --> 0:05:48.480 companies that are doing good in the world, and not 0:05:48.640 --> 0:05:51.240 knowing if you can actually make that happen has prevented 0:05:51.279 --> 0:05:54.279 you from becoming an investor, well, it is important to 0:05:54.320 --> 0:05:57.920 note that it is possible, and then it's gotten easier. Right, 0:05:58.000 --> 0:06:02.080 And interestingly enough, the perform mints of socially responsible funds 0:06:02.440 --> 0:06:05.440 have actually been shown to do just as well as 0:06:05.480 --> 0:06:08.240 the index, if not even just a touch better. So 0:06:08.600 --> 0:06:11.520 it turns out there might even be less risk investing 0:06:11.560 --> 0:06:16.200 in companies that have better socially responsible ratings than investing 0:06:16.200 --> 0:06:19.040 in the total stock market as a whole. Obviously, past 0:06:19.080 --> 0:06:23.080 results don't indicate future performance, but since its inception the 0:06:23.160 --> 0:06:28.560 Vanguard FTS Index, the Socially Responsible Index has outperformed Vanguard's 0:06:28.680 --> 0:06:31.720 SMP five hundred index fund, which is important to note 0:06:31.720 --> 0:06:33.680 as we get into this conversation. Yeah, you know, it's 0:06:33.720 --> 0:06:37.400 awesome to see that socially responsible and conscious companies are 0:06:37.440 --> 0:06:39.840 being rewarded for the sort of the good work that 0:06:39.880 --> 0:06:42.640 they're doing and the extra steps that it takes to 0:06:42.680 --> 0:06:45.200 be ranked well. And so these funds are no longer 0:06:45.320 --> 0:06:48.719 a niche product. Socially responsible funds are only going to 0:06:48.839 --> 0:06:52.400 grow and popularity. You know, we have a certain amount 0:06:52.400 --> 0:06:55.120 of power and responsibility in a way to move our 0:06:55.400 --> 0:06:58.960 money in a way that supports and incentivize certain types 0:06:59.040 --> 0:07:01.280 of activity. And so I think it's great that we're 0:07:01.279 --> 0:07:03.120 starting to see that change. We're starting to see that 0:07:03.160 --> 0:07:06.760 shift towards these funds um and and right now just 0:07:06.800 --> 0:07:09.080 in the US alone, you know, we talked about how 0:07:09.160 --> 0:07:12.320 one and four dollars are being invested in a socially 0:07:12.360 --> 0:07:17.400 responsible way. That's twelve trillion dollars like that total invested 0:07:17.440 --> 0:07:20.840 in in socially responsible funds just in the US alone, 0:07:20.880 --> 0:07:22.960 which is a mind blowing amount of money. And so 0:07:23.000 --> 0:07:25.040 I think it's encouraging to see that, and I think 0:07:25.120 --> 0:07:26.800 that a lot of companies are gonna take note and 0:07:26.800 --> 0:07:30.160 they're gonna start changing their behavior and how they respond 0:07:30.200 --> 0:07:32.960 to different issues that we as owners in the company 0:07:33.040 --> 0:07:36.280 right as stockholders begin to present. Yeah, completely agree, it's 0:07:36.320 --> 0:07:38.960 going to change the way companies do business, this new 0:07:39.000 --> 0:07:42.280 method of investing, right, but just know also at the 0:07:42.320 --> 0:07:45.200 same time that it's going to be difficult to avoid 0:07:45.360 --> 0:07:49.200 all the murky realms of morality that occur when you 0:07:49.240 --> 0:07:52.960 attempt to invest in socially responsible funds. It's kind of 0:07:52.960 --> 0:07:55.120 the wild wild West out there right now when it 0:07:55.120 --> 0:07:58.280 comes to socially responsible funds, and there's a lot of 0:07:58.320 --> 0:08:01.280 marketing involved. Honestly, there are a lot of high fees 0:08:01.280 --> 0:08:03.320 involved in a lot of these funds that are touting 0:08:03.360 --> 0:08:08.200 themselves as investing in only socially responsible companies. We're gonna 0:08:08.200 --> 0:08:10.360 get into that a little bit more, but it's important 0:08:10.360 --> 0:08:12.480 to note on the front end that just because a 0:08:12.560 --> 0:08:16.160 fund is touted as being a socially responsible fund. Well, 0:08:16.160 --> 0:08:19.800 that doesn't necessarily mean that's the case. One person's definition 0:08:19.840 --> 0:08:24.880 of socially responsible might be another person's definition of socially irresponsible. Right, 0:08:24.920 --> 0:08:28.160 So it takes a little more personal involvement and research 0:08:28.360 --> 0:08:31.440 when you're attempting to pick the right socially responsible fund 0:08:31.440 --> 0:08:33.920 for you. Yeah, Joe, that's what makes it so difficult, right. 0:08:33.960 --> 0:08:36.640 It varies from person to person, and it's part of 0:08:36.679 --> 0:08:40.120 why it makes it so difficult to define what social 0:08:40.200 --> 0:08:43.360 responsible investing is. But we're gonna attempt that right after 0:08:43.400 --> 0:08:56.200 the break. Okay, Joe, we're back. Let's talk now specifically 0:08:56.240 --> 0:08:59.240 about some different definitions. That way, we know we're kind 0:08:59.240 --> 0:09:01.800 of all on the same page. Often times you hear 0:09:01.880 --> 0:09:05.280 E s G, you hear s r I, youre impact investing, 0:09:05.600 --> 0:09:09.040 you're all those terms used interchangeably, but in fact they're 0:09:09.080 --> 0:09:12.400 pretty different. Uh. And so first let's talk about E 0:09:12.559 --> 0:09:14.640 s G. All right. So E s G is a 0:09:14.720 --> 0:09:18.239 rankings and evaluation system like you mentioned, Matt, based on environmental, 0:09:18.280 --> 0:09:21.720 social and governance standards. It's the closest that you're going 0:09:21.760 --> 0:09:24.559 to get to traditional investing and the focus of these 0:09:24.600 --> 0:09:27.360 types of funds in particular, is actually to see how 0:09:27.480 --> 0:09:30.440 these different standards of the company might have as they 0:09:30.559 --> 0:09:34.080 raise their levels of commitment towards the environment and towards 0:09:34.160 --> 0:09:38.679 social responsibility, will actually have positive impacts on those stock values. 0:09:38.840 --> 0:09:40.440 So it's kind of like the tail wagon the dog. 0:09:40.520 --> 0:09:43.000 They're more concerned about the value of the company growing 0:09:43.440 --> 0:09:48.920 as those commitments towards sustainability and better corporate governance actually increase. Yeah, 0:09:48.960 --> 0:09:51.040 but because of that, there is some good that comes 0:09:51.080 --> 0:09:53.400 from companies who rank well right when it comes to 0:09:53.400 --> 0:09:56.160 their e s G. So you know, a company might 0:09:56.200 --> 0:09:59.480 pollute less, and while that's good for the environment and 0:09:59.480 --> 0:10:01.880 how that might be good for our ability to breathe 0:10:01.880 --> 0:10:04.240 on this planet, it also is good for the company 0:10:04.280 --> 0:10:06.400 because they're not getting slapped with fines, they're not getting 0:10:06.400 --> 0:10:09.760 shut down different things that might negatively affect that company. 0:10:09.880 --> 0:10:12.240 So there are some positive outcomes that can be a 0:10:12.360 --> 0:10:15.439 result of being ranked well or being considered an e 0:10:15.600 --> 0:10:18.040 s G fund. But just know, yeah, that their primary 0:10:18.040 --> 0:10:22.280 concerned is the monetary financial value of specific stocks within 0:10:22.320 --> 0:10:25.080 that fund. And the next let's talk about s r I, 0:10:25.280 --> 0:10:29.240 which is just generally speaking, socially responsible investing. Typically these 0:10:29.240 --> 0:10:31.720 funds will strike more of a balance between doing good 0:10:31.720 --> 0:10:34.400 in the world, but at the same time also growing 0:10:34.400 --> 0:10:37.360 your money. They don't often take into account the furthest 0:10:37.360 --> 0:10:42.000 reaches of social and environmental responsibility, but they will, you know, 0:10:42.080 --> 0:10:46.400 purely eliminate certain sin stocks. Yes, stocks and companies that 0:10:46.960 --> 0:10:51.240 oftentimes are look negatively upon, like fossil fuel or oil companies. 0:10:51.440 --> 0:10:53.800 It's pretty easy for those to be filtered out and 0:10:53.840 --> 0:10:55.880 filtering out, I mean, that's honestly a good way to 0:10:55.920 --> 0:10:59.240 think about socially responsible investing. A lot of times these 0:10:59.280 --> 0:11:02.480 are fun that's look a lot like other funds that 0:11:02.520 --> 0:11:04.480 you would normally invest in, but they don't include certain 0:11:04.480 --> 0:11:08.000 stocks and companies that might be a little more controversial. 0:11:08.080 --> 0:11:10.160 So sometimes they can be real similar to the index 0:11:10.160 --> 0:11:12.360 funds that you're used to, but just the cleaned up 0:11:12.440 --> 0:11:15.120 versions of those, all right. At The third major category 0:11:15.200 --> 0:11:17.960 besides E, s G and s r I investing is 0:11:18.120 --> 0:11:21.760 impact investing. So impact investing essentially means that the funds 0:11:21.920 --> 0:11:26.280 primary desire is to see social impact and environmental change. 0:11:26.559 --> 0:11:30.720 That's the top priority, and financial performance is secondary. So 0:11:30.840 --> 0:11:35.079 whereas sr I investing, socially responsible investing might be passive 0:11:35.480 --> 0:11:39.760 by avoiding certain companies. Impact investing actively seeks out companies 0:11:40.120 --> 0:11:44.600 with a mission to accomplish social good It's essentially investing 0:11:44.679 --> 0:11:50.240 your values over investing in value. And it's really interesting 0:11:50.240 --> 0:11:53.280 to see the far reaching impacts that impact investing is 0:11:53.320 --> 0:11:57.160 already taking on. And so, for example, there's a Racial 0:11:57.240 --> 0:12:01.480 Justice Index fund that seeks to investing companies that are 0:12:01.480 --> 0:12:05.200 committed towards creating a diverse workplace environment and they don't 0:12:05.280 --> 0:12:08.120 invest in companies that aren't committed towards that goal. And 0:12:08.160 --> 0:12:10.880 so it is interesting to see the kind of ways 0:12:11.000 --> 0:12:12.680 that you can put your dollar to work when it 0:12:12.679 --> 0:12:15.520 comes to impact investing. Just know that if you are 0:12:15.760 --> 0:12:20.800 choosing that route, you're prioritizing social change over making a profit. 0:12:20.960 --> 0:12:23.520 And I think that is just an important distinction that 0:12:23.559 --> 0:12:27.280 needs to be made, especially since we're the very forefront 0:12:27.640 --> 0:12:30.480 of these type of investment strategies. Yeah, Joe. What might 0:12:30.520 --> 0:12:33.800 be helpful too is to view these terms on a spectrum. 0:12:33.880 --> 0:12:36.000 We have three terms. E. S. G is at one end, 0:12:36.120 --> 0:12:38.920 where the companies are still very concerned with making sure 0:12:38.960 --> 0:12:41.240 that they make a profit. And by the way, if 0:12:41.280 --> 0:12:44.480 what they are doing good things socially in in the environment, 0:12:44.679 --> 0:12:46.720 then great. You know, that's something that we can send 0:12:46.720 --> 0:12:49.160 out a report on, get some press coverage on, makes 0:12:49.160 --> 0:12:51.800 them look good, but they're not actively seeking those things out. 0:12:52.240 --> 0:12:53.600 S RI I is kind of more in the middle. 0:12:53.640 --> 0:12:56.840 Like we talked about socially responsible investing, and that's a 0:12:56.880 --> 0:13:00.400 way to still earn money in good fun but at 0:13:00.400 --> 0:13:03.760 the same time you're able to exclude some specific companies 0:13:03.840 --> 0:13:06.520 or industries who maybe aren't doing things quiet on the 0:13:06.600 --> 0:13:08.040 up and up in a way that you would like 0:13:08.080 --> 0:13:10.480 to see them done. And then you know, you continue 0:13:10.520 --> 0:13:12.920 down that spectrum and then you have impact investing, right, 0:13:12.960 --> 0:13:15.040 and that's again where they're not really concerned about the money, 0:13:15.040 --> 0:13:17.520 they're focused on that social change. All these terms are 0:13:17.520 --> 0:13:21.480 pretty new, and so it's worth mentioning that oftentimes these 0:13:21.600 --> 0:13:25.440 terms may be used interchangeably and maybe even incorrectly, and 0:13:25.520 --> 0:13:27.959 so because of that, it is up to you as 0:13:27.960 --> 0:13:30.559 an investor to kind of dig into the research a 0:13:30.640 --> 0:13:33.360 little bit and figure out what is included in the 0:13:33.360 --> 0:13:35.960 portfolios are these different funds. It's a little more work, 0:13:36.000 --> 0:13:38.280 but if this is a priority for you, this is 0:13:38.320 --> 0:13:41.120 an important step. Yeah, Matt. In previous episodes, you know 0:13:41.200 --> 0:13:44.160 we've discussed just basic index investing being the kind of 0:13:44.200 --> 0:13:47.000 set it and forget it easy approach, especially for people 0:13:47.040 --> 0:13:50.400 that are in their wealth building years in phase of investing. 0:13:50.840 --> 0:13:54.600 But yes, this path attempting to invest in a socially 0:13:54.640 --> 0:13:58.080 responsible way, it requires more research on the part of 0:13:58.120 --> 0:14:01.960 the investor. So mary for inclusion in a socially responsible 0:14:01.960 --> 0:14:05.400 fund varies from company to company. For instance, Vanguard has 0:14:05.559 --> 0:14:08.720 three hundred different measures for its fund. They look at 0:14:08.800 --> 0:14:12.800 water use, pollution, labor standards, health and safety records. But 0:14:12.800 --> 0:14:15.280 you know what, their standards might not be rigid enough 0:14:15.280 --> 0:14:18.040 for you, and other funds might include companies that you 0:14:18.280 --> 0:14:21.560 might not want to hold, like Wells Fargo or Equifax, 0:14:21.680 --> 0:14:24.640 who have been accused of poor labor practices or sell 0:14:24.640 --> 0:14:27.240 products that you might not agree with. It's really important 0:14:27.240 --> 0:14:29.720 to do your research on the different criteria the different 0:14:29.720 --> 0:14:33.160 funds have that govern which companies can be included in 0:14:33.160 --> 0:14:35.080 that fund or not. And we kind of just touched 0:14:35.080 --> 0:14:37.720 on this, but a lot of times many funds will 0:14:37.760 --> 0:14:41.360 look to mere different indexes that already exist. But again 0:14:41.400 --> 0:14:44.560 we'll exclude the companies involved, say maybe in the coal 0:14:44.800 --> 0:14:49.160 or the tobacco or the weapons guns industries, or even 0:14:49.200 --> 0:14:52.440 companies that have some privacy concerns like Facebook, and then 0:14:52.520 --> 0:14:54.440 some funds will make it really easy for you though, 0:14:54.520 --> 0:14:57.440 you know, and they'll clearly state their focus, including the 0:14:57.440 --> 0:15:00.880 different companies that advanced a particular cause. Joel, you just 0:15:00.920 --> 0:15:03.680 mentioned a racial diversity fund. There's another one out there 0:15:03.840 --> 0:15:07.040 as well that promotes gender diversity on their boards and 0:15:07.080 --> 0:15:09.800 in management positions of companies. What's really cool about that 0:15:09.840 --> 0:15:14.080 fund is their tick or symbol is she It's just 0:15:14.200 --> 0:15:17.360 sh G, which is super cool and very appropriate. And 0:15:17.360 --> 0:15:19.040 what I love about it though, is that it's incredibly 0:15:19.080 --> 0:15:21.800 clear as to what that fund is all about, and 0:15:21.880 --> 0:15:23.880 so it can be tough a lot of times it 0:15:24.000 --> 0:15:27.040 kind of wade through what these funds do, like like, 0:15:27.080 --> 0:15:29.080 how how is this fund any different than some of 0:15:29.120 --> 0:15:32.000 these other funds, except that I see that they cost more, right, 0:15:32.040 --> 0:15:34.240 Like their expense ratios are a little bit more, and 0:15:34.280 --> 0:15:36.800 digging into what it is that sets these funds apart 0:15:37.040 --> 0:15:40.360 falls a little bit more to you as the investor. Yeah, Matt, 0:15:40.360 --> 0:15:42.600 And so a few weeks ago we had an episode 0:15:42.640 --> 0:15:46.240 about the importance of fees when it comes to investing. Well, 0:15:46.240 --> 0:15:48.760 what about the fees when you're trying to invest in 0:15:48.760 --> 0:15:51.680 a socially responsible way. We'll get down to brass tacks 0:15:51.680 --> 0:16:03.920 and discuss that. Right for the break, Let's talk now 0:16:03.920 --> 0:16:07.160 about the next steps. Right, you are researching your socially 0:16:07.160 --> 0:16:09.880 responsible funds, and let's just say you've got two of 0:16:09.920 --> 0:16:12.640 them that look great. They are very similar in what 0:16:12.760 --> 0:16:15.440 they invest in or what they don't invest in. What 0:16:15.560 --> 0:16:17.240 the next thing? You want to look at our fees. 0:16:17.440 --> 0:16:20.080 We've talked before about M one and how they have 0:16:20.200 --> 0:16:23.200 their expert pies. Well, you know what they offer E 0:16:23.360 --> 0:16:27.720 s G funds themselves. Vanguard also has that great Newish 0:16:27.760 --> 0:16:30.840 socially responsible fund as well, and it has fairly low fees. 0:16:31.000 --> 0:16:34.000 Obviously not quite as low as VT sacks, but that 0:16:34.040 --> 0:16:36.720 fund also does better on that spectrum. When as you're 0:16:36.760 --> 0:16:39.800 considering where to push your money, just know that because 0:16:39.960 --> 0:16:42.440 these different funds have grown in popularity over the last 0:16:42.480 --> 0:16:45.400 several years, that fees have come down and will continue 0:16:45.440 --> 0:16:48.000 to see those fees dropped because of competition. Yeah, and 0:16:48.040 --> 0:16:51.600 as you're seeking to be a socially responsible investor, you're 0:16:51.640 --> 0:16:53.640 gonna want to continue to be well diversified at the 0:16:53.680 --> 0:16:57.600 same time, Right, fees are crucial. Diversification is also really important, 0:16:57.920 --> 0:17:00.960 So handpicking just a few stocks that you believe do 0:17:01.120 --> 0:17:04.399 well in regards to their social impact. Well, that's a 0:17:04.520 --> 0:17:07.120 terrible route to go because you don't want all your 0:17:07.160 --> 0:17:10.000 eggs in just a few baskets. But for instance, that 0:17:10.080 --> 0:17:12.879 Vanguard fund that we just mentioned has over four hundred 0:17:12.960 --> 0:17:16.440 companies inside of it. Fidelity has a socially responsible fund 0:17:16.440 --> 0:17:19.280 that has almost three fifty companies inside of it, and 0:17:19.359 --> 0:17:22.360 that's diversified enough, and those funds do pretty well when 0:17:22.359 --> 0:17:24.440 it comes to fees. Will put links to those as 0:17:24.440 --> 0:17:26.720 well as the in one E s G funds in 0:17:26.760 --> 0:17:28.720 the show notes, so that you can kind of start 0:17:28.760 --> 0:17:31.800 to do a little bit of research about particular funds 0:17:31.840 --> 0:17:33.800 that we think will serve you well and see if 0:17:33.840 --> 0:17:36.320 those low fee funds match up with your values and 0:17:36.359 --> 0:17:39.240 how you want to invest. As a contrast, though, it's 0:17:39.359 --> 0:17:42.280 really important to note that there are a lot of 0:17:42.480 --> 0:17:46.000 E s G, s R I and impact investing funds 0:17:46.119 --> 0:17:49.159 out there right now because it's becoming such a popular 0:17:49.160 --> 0:17:51.879 way to invest, and those funds might have a dialed 0:17:51.960 --> 0:17:54.520 in approach when it comes to investing in companies that 0:17:54.520 --> 0:17:57.320 are having good social impacts on the world around us, 0:17:57.640 --> 0:17:59.560 But there's also a good chance that the fees are 0:17:59.600 --> 0:18:02.560 incredib doably high, especially since so many of these funds 0:18:02.600 --> 0:18:05.720 are new. So just be careful as you're digging around 0:18:05.840 --> 0:18:09.159 and you find companies that seem to prioritize investing in 0:18:09.200 --> 0:18:12.280 a way that you align with, because, as we've discussed 0:18:12.280 --> 0:18:15.000 on the show before, fees are crucial when we're talking 0:18:15.040 --> 0:18:18.760 about your investment returns over your investing lifetime. So just 0:18:18.840 --> 0:18:21.640 make sure that that is a point of utmost consideration 0:18:21.680 --> 0:18:24.520 as you're doing your research. Ultimately, there's a way to 0:18:24.680 --> 0:18:28.840 invest according to your conscience while still making sure that 0:18:28.880 --> 0:18:30.840 you're not paying, you know, out the nose when it 0:18:30.840 --> 0:18:33.440 comes to fees. Joel, hearing you mentioned sort of like 0:18:33.480 --> 0:18:35.919 these new kind of socially responsible funds that might be 0:18:35.920 --> 0:18:39.080 crazy expensive makes me think of kind of positioning right 0:18:39.119 --> 0:18:41.320 and branding and how they're kind of selling them themselves 0:18:41.359 --> 0:18:44.360 essentially to the consumer, which, honestly, it kind of makes 0:18:44.400 --> 0:18:47.320 me think of just how it's difficult to know whether 0:18:47.400 --> 0:18:51.280 or not companies are actually doing the socially responsible thing 0:18:51.840 --> 0:18:54.879 um And unfortunately, I think it's easy for us to 0:18:54.960 --> 0:18:57.600 be led into thinking that a company is doing the 0:18:57.680 --> 0:19:00.040 right thing, you know, when in fact that they're not. 0:19:00.480 --> 0:19:03.159 It makes me think of Volkswagen, for instance. Generally speaking, 0:19:03.200 --> 0:19:05.760 I feel like that they've been positioned as this fairly hip, 0:19:06.240 --> 0:19:08.879 kind of in touch company. For the most part, their 0:19:08.920 --> 0:19:12.000 cars are kind of small and environmentally friendly at least 0:19:12.000 --> 0:19:14.600 they look at Yeah, the clean diesel was touted often, 0:19:14.760 --> 0:19:18.160 right and and ads before the emission scanal bro exactly, 0:19:18.200 --> 0:19:20.480 but exactly then the emission scan will happen. And it 0:19:20.520 --> 0:19:22.960 turned out the Volkswagon, starting at a very high level, 0:19:23.280 --> 0:19:25.399 they did not have the environment in mind. And in 0:19:25.440 --> 0:19:28.200 fact we're just looking at the you know, their bottom 0:19:28.240 --> 0:19:32.080 financial line, deceiving folks. Yeah, man, it's it's it's unfortunate, 0:19:32.119 --> 0:19:34.720 but it's true. I think what we can see though, 0:19:34.800 --> 0:19:37.359 moving forward is that a lot more pressure will be 0:19:37.440 --> 0:19:41.439 placed on companies to be transparent and to disclose what 0:19:41.480 --> 0:19:44.680 they're doing in regards to the environment, how they behave socially, 0:19:44.680 --> 0:19:47.560 and how the company governs internally. These are all factors 0:19:47.600 --> 0:19:50.439 that we're gonna be looking to not only as you know, consumers, 0:19:50.480 --> 0:19:53.040 but as investors before we were looking to part with 0:19:53.080 --> 0:19:55.639 our money. Yeah, I think companies that don't do a 0:19:55.640 --> 0:19:59.280 good job in these areas they're gonna see fewer and 0:19:59.280 --> 0:20:01.760 fewer invest and dollars floating their way, and they're gonna 0:20:01.800 --> 0:20:04.720 lose a competitive advantage because of that. But for the 0:20:04.760 --> 0:20:08.960 individual investor, really in this whole space of socially responsible investing, 0:20:09.400 --> 0:20:11.359 it's going to take a bit more work. Especially where 0:20:11.359 --> 0:20:13.960 we are right now, there's still a wild West component 0:20:14.080 --> 0:20:17.120 when we're talking about investing in a socially responsible manner. 0:20:17.440 --> 0:20:20.119 It can be done, and it's getting easy, and I 0:20:20.119 --> 0:20:22.320 think we're gonna see a proliferation in the years to come. 0:20:22.800 --> 0:20:25.200 Fees are gonna come down, Transparency is going to grow, 0:20:25.480 --> 0:20:27.399 and companies are going to change the way they do 0:20:27.480 --> 0:20:31.960 business because people are prioritizing investing in a socially responsible way. 0:20:32.119 --> 0:20:33.919