Vol. 42 - Socially Responsible Investing through Impact Investing
In this episode, Marie Thomasson of Modern Assets is back to discuss impact investing, how this can be the hardest but also the most impactful in investing to companies that aligns to your values as an investor. We cover:
What is Impact Investing
How this can be the difficult option, but also the most impactful
How mutual funds differ from impact investing
What are the difficulties in impact investing
Examples of Social Venture Capital Funds that help investors and tips in finding one that can help you invest in companies that align to your values
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TRANSCRIPT:
Naseema McElroy: [00:00:00] All right, nurses on fire. We are back with our certified financial planner, Marie Thompson, and we are wrapping up our series on responsible investing. I know don't cry. This has been so good, but it is coming to an end. And thank you so much, Marie, for being here with us and there's some fire and all the wisdom you have imparted because girl, you have been dropping Jim after Jim and I have learned so much and it's really encouraged me to get on the right track as far as making sure my money is going to places where I know I can make a difference.
So I really appreciate you so much, Marie.
Marie Thomasson: [00:00:41] Oh, my gosh, it's been so much fun doing this and talking through all these ideas that just are like bubbling around in my head all day, every day.
Naseema McElroy: [00:00:51] You have ideas per days, girl, and I love it.
Marie Thomasson: [00:00:54] And what, and it was this show. So I actually moved over my business accounts to the self-help federal credit union.
Yay. they've got a new branch in Los Angeles and I moved everything over and it was just so amazing to talk to them and my goal for next year is to get, To, to get six of my clients to move their business accounts or personal accounts over. So
Naseema McElroy: [00:01:18] that's so cool. Wait, so where is it in LA?
Marie Thomasson: [00:01:22] it's it's off of Crenshaw Boulevard.
Naseema McElroy: [00:01:24] Okay.
Marie Thomasson: [00:01:28] the major, streets I want to say, or like Crenshaw and Obama Boulevard.
Naseema McElroy: [00:01:33] Oh, that's a new street girl.
Marie Thomasson: [00:01:36] Well, Obama Boulevard used to be, rodeo. Oh,
Naseema McElroy: [00:01:40] rodeo. I used to live on rodeo. I did, I lived right there on rodeo and Western and rodeo. That's where I used to live girl.
Marie Thomasson: [00:01:50] So just a little bit West.
Naseema McElroy: [00:01:52] Oh, but that's by like one United there's a one United branch over there too. A little bit further down
Marie Thomasson: [00:01:59] there is there is, and I actually had a great conversation with them, talking about the differences between CDFIs and credit unions and how, credit unions are fantastic, but they don't have the same mandate.
they're not there to serve low-income populations the way, a CDFI is. And so, the only way they can lend is if they've got deposits and so. this is why, it makes such a huge impact because they can't lend, if their average deposits are just barely enough, to keep the credit union, to keep it going, they need extra.
And so, if you're saving for a house, if you're, just saving, you've got an emergency fund there's, there's no better place . To store it in my mind.
Naseema McElroy: [00:02:42] So that is, that is awesome. That's a really good idea. And for all my LA people, make sure you guys go check out the self-help credit union on Crenshaw, right?
Offer rodeo, not look Rodale for you. People that don't confuse the two rodeo and road are on two different streets.
Marie Thomasson: [00:03:00] Oh, I got so confused. When I first moved to LA, I was like, this is the end of rodeo.
Naseema McElroy: [00:03:07] No buddy, this is rodeo. Okay.
Marie Thomasson: [00:03:11] Cause you're like, where did it end? Because sometimes like the street will just kinda stop and then it'll pick up again and you're like, wow,
Naseema McElroy: [00:03:19] this, this ended real way differently.
Marie Thomasson: [00:03:25] It sure did it sure did.
Naseema McElroy: [00:03:27] No, but I love that. And that's a great place. Like you said, a CDFI, like self-help is a grace place. If that you're just holding money in an account. And, ladies, which most of us are, we just hold money places, put it in a CDFI. So that, It's making a difference, but that's not even what our episode is about today.
All right. We are wrapping up our investing part, like, and this is a trickier way to invest socially responsibly. So what are we learning about today, Marie?
Marie Thomasson: [00:03:55] So today we get to the buzzword, we're going to be talking about impact investing today.
Naseema McElroy: [00:04:02] W how we all started, where we started from yes. Bring it right back around.
Marie Thomasson: [00:04:07] Yeah, exactly. And, I think people hear the term impact investing a whole lot without realizing all the other things that we can be doing. Right. everything we've talked about on the past shows, and so, impact investing it is the. Well, first of all, just to kind of break down what it is and isn't, I know we covered this in the very first episode, but you've got impact investing where you're making a very thoughtful choice.
To invest in certain companies that, that promote, something that you value, right? Like maybe it's sustainability, maybe it's gender investing, maybe, it has to do with, race , or sexual orientation, like whatever the layer and the lens that you're, you care about. You can have very, specific impact and by investing in very particular companies.
So. This is huge difference from ESG investing. And that's where you've got like, all the big companies, whether it's Apple, Amazon, Google, GM. And it's like, okay, like, are they doing a little bit better on, on this? Are they doing a little bit better on women on their board? Or, are they doing a little bit better on, allowing employees to unionize that sort of thing or sexual harassment claims, whatever the case may be.
It's just, are they doing incrementally better? Impact investing is like, hell no, I don't want incremental. I want it all and I want it right now. And so that might be investing in a company that, is black owned. It might be investing in a company that's working on new water technology.
that's kind of, generally speaking what we think of when we're talking about impact investing. And so, there's a lot more ways now even than there were a year or two ago to, to do impact investing. So. There are impact funds, where you can, you can just get a mutual fund that, there's a lot actually now that have like a specific value attached to whatever it is that you care about.
So you can have a fund that's specific to, women's empowerment or, a fund or even like a bond fund. there's all these different types of mutual funds that are going to, basically invest in whatever it is that you care about specifically.
So, so wait,
Naseema McElroy: [00:06:32] where do we find these mutual funds? Like where are they like on major investment platforms, like Vanguard or fidelity.
Marie Thomasson: [00:06:42] So, Vanguard does have some. sustainable funds, but Vanguard is huge. Vanguard is the whale. And so Vanguard will never be able to do impact investing. They can't, the vast majority of what Vanguard does, like if they decided to, to like sell off a rounding error in their portfolios, it would move markets, like it's, it's like the 10th decimal place for them to like invest in a company.
And it's an impact investing. Like they buy up like the entire town, of. Of company it's like, you can't, you can't do it with, with a company that, that is basically designed for mass, investing like impact is, like it doesn't exist in that space and not because they don't want to do it, but because they simply can't, when you think about, micro loans and stuff, like, can you imagine if, if Vanguard was, in the micro loan business, like it just, it just wouldn't make any sense.
Naseema McElroy: [00:07:39] It's not, it's no longer a micro loan.
Marie Thomasson: [00:07:43] It is no longer a micro loan. No, exactly. Like it wouldn't, it's not worth their time. So, there's not a lot, but, there are mutual fund companies that have been in this business for a very long time. there's Calvert funds, there's Ariel investments, there's PACS, there's federated armies.
Like there's a number of mutual fund providers who have been in this space, doing this work for a long time. And if you ask for it, And if you work with an advisor, that's the problem, right? Like, you don't know, you don't even know that they're available and unless you're working with somebody who knows all of them and, and that's frankly, it's a lot of work.
you're not going to get a good answer. What you'll get is somebody who's like, like what I talked about in the, in the other episode, ask for ESG, almost any advisor now can get you ESG. like, there is an easy answer for that. but impact investing, it just takes a lot more work and due diligence and understanding exactly like, what's the criteria.
Why are these companies in here? what can we measure? What are we shooting for? Like, what are we trying to achieve? And so this is why it's hard because. Your values, are singular. Your values are it's your values, not anybody else's. And so when you want to buy a fund that is aligned with your values, you're like, well, are their values aligned with my values?
I don't know. Gotta dig in. You've got to ask questions. And so that's where doing due diligence and like really understanding the mutual funds and the holdings. And what their goal is with them is super important. if that's the rabbit hole you want to go down, because that really is what it is, right.
It's a rabbit hole. So that's one way though, for just about anybody it's more work, but it's one way for just about anybody to get, access to impact funds. And so, there's a lot more funds nowadays that have these types of, like they call it an overlay for, different types of impact that you want to see, whether that's, social justice, social equity, sustainability, whatever.
Naseema McElroy: [00:09:55] so, but you, I have to go through a financial advisor to get access to these.
Marie Thomasson: [00:10:00] You do not.
Naseema McElroy: [00:10:01] Okay. You do not,
Marie Thomasson: [00:10:02] you would, you would just have to do the work yourself.
Naseema McElroy: [00:10:04] That's why it's hard.
Marie Thomasson: [00:10:06] That's why it's hard. so basically in a mutual fund, it's just a, a bunch of stocks.
ownership, right. So, in the industry, they call it the underlying assets, like what's underneath that mutual fund because that mutual fund is like, shiny wrapping, wrapping paper, and what's inside the box. It's like the stocks of all the funds, I'm sorry, companies, this, like all these companies, stocks or shares.
And so you've got to look at all of those shares and say like, okay, am I diversified with the rest of my portfolio? Am I having the impact that I actually want to have? What are we trying to measure? This is an enormous challenge without tools. and, and that's really what it comes down to.
So, as an individual investor, the best that you can do, and it's, it's definitely a good start is reading the perspectives. like they've got, most of these companies will have webinars talking about their funds. you can get online and, and listen to it. It's just a matter of, will you, and do you have the interests?
Like a lot of people have the interest interest in having an impact, but don't actually have an interest in the work that it takes to do it, to make it happen. And so, this is why we kind of go through easy, medium heart.
Naseema McElroy: [00:11:22] yeah, I'm still a little confused though. So say I want to invest in a fund that only, funds, black owned businesses, black owned FinTech businesses.
Okay. Like very specific. Right. And I know that's my target. Like that's where I want to make my impact. Where do I start?
Marie Thomasson: [00:11:43] Again, if this is why it's so hard, you could look up, I mean, I would go to Google, like, even just going to Morningstar or Sustainalytics or as you, so, these are websites that are, that are free and it's a good start.
but really, like a fund that only invests in black owned businesses. There's not enough SEO in the world for this, right?
Naseema McElroy: [00:12:08] Yes, exactly. Which is sad.
Marie Thomasson: [00:12:11] It is so hard to find. And so. A lot of this information is information that, is done by, financial advisors, investors, where they're just keeping like an Excel database
Naseema McElroy: [00:12:23] of this stuff.
That's so sad.
Marie Thomasson: [00:12:25] Yeah. It is sad. Yeah. or you pay for the tools, for me as an advisor, I pay for the tools to be able to look at all of these criteria. Right.
Naseema McElroy: [00:12:36] Or you just have to like, be in the know, like maybe, that Arlan Hamilton, just because you follow her has like backstage capital.
And then that's like one place like, Jesus, this is so sad in 2020, almost 2021 that this isn't something that we can just ask our friend Google.
Marie Thomasson: [00:12:56] It's not, it's not like if you were to ask me like, black owned, FinTech Calendly, like that's the only one I know of. That's not even FinTech. I mean, it's just tech, right?
Yeah. I don't know if it, the black owned FinTech companies, not to say they don't exist, but I mean, this is the real challenge. And even if you go on Calendly site, so Calendly is a scheduling software.
Naseema McElroy: [00:13:22] And I didn't know that and I would have switched to account Lindley.
Marie Thomasson: [00:13:25] I know, but it doesn't exist.
This information is not on Calendly Carolyn Lee's website. Even if you go to the about us, it doesn't, there's nothing on there. And so this is where like, Digging for information truly becomes digging. It becomes like investigative.
Naseema McElroy: [00:13:42] Yeah. In order to do this, you basically have to be inspector gadget. And that's why it's so freaking hard.
Marie Thomasson: [00:13:48] Exactly, exactly. And so, once you get past these mutual funds, this is where you start getting into the world of. Being an accredited investor, which means that you either have a certain amount of assets or income to qualify you. there is crowd funding, so you don't have to be an accredited investor.
Arlyn is a beautiful example of somebody who, who does both backstage capital. They have. Crowdfunding options and they have accredited investor options.
Naseema McElroy: [00:14:18] Yeah. Going to say, I mean, that's the only place I can even think of off the top of my head. Like, and kind of like, once you get plugged into those spaces, you're a world might be opened up to other places where you can invest.
But it's so sad that I can just think of one place off the top of my head.
Marie Thomasson: [00:14:36] Yeah. And there are more, but, but in the case of backstage, it's really, it's really unique. like the, I actually don't know of another backstage capital. there's some other funds. and there's one that I know about.
I can't recall the name off the top of my head out in New York. That's a social venture capital fund, by four black men. And they're doing great things. I don't think they have quite the reach that Arland does. And it's very possible that just because I'm LA based backstage, capital's LA based. And so this, this, once again comes down to like, like I know what's in my geographical area because I'm going to these events that I'm talking to these people.
And so you get to know what's going on in LA, what's going on in New York. I don't know as much. So, that's just another reason why, like, if you want, someone's help, you kind of want somebody who's in the location. if you are an accredited investor, if you have large sums of money for impact investing, you kind of want somebody who's like, boots on the ground in wherever it is, like you want to invest in, in bond funds for, for, housing in Baltimore, Maryland, like.
Sure. I can find a companies that do that, but the person in Baltimore probably knows a lot. but so just to give the listeners a little more background on backstage capital backstage capital is what's called a social venture capital fund. And they've opened it up to accredited and non-accredited investors, it means like you can be a regular person and you can invest like a thousand bucks, right?
Like,
Naseema McElroy: [00:16:15] yeah. I think that thousand dollars is the minimum. Which is nothing.
Marie Thomasson: [00:16:20] Yeah. So, and, and basically like they're opening up the world. That was until very recently, like not available to most of us, like you get to invest in a company and a product or an idea or a service. And what's really amazing about backstage is that, I wanna say over 70% of the companies.
that backstage funds are women owned. And I wanna, I like somewhere around 50% are, owned by black women and started by Barclays.
Naseema McElroy: [00:16:54] Yeah. And then, and what's, what's unique about it is like these are companies, these are like really actually good companies, but they have. Been having challenging times securing venture capital because a lot of the venture capital funds, I think what 1% of venture capital funds goes to, people of color or women,
Marie Thomasson: [00:17:16] those two women goes
Naseema McElroy: [00:17:17] to win.
Marie Thomasson: [00:17:17] Oh my God. Yeah. So it's, like the, the world of capital it's, it's an old boys club, an old white boys club. truly. And if you're like a 24 year old, five-year old white guy who decided to drop out from college, like bunny is raining down on you
Naseema McElroy: [00:17:36] que Facebook,
Marie Thomasson: [00:17:39] it's no big deal to get funding.
And for a lot of companies, like you need cashflow, you just need cashflow to get started. And so backstage has a very, Fair, investment, policy for lack of a better word. So basically like the terms for the, for the people who are taking the funding, it's fair. It's not, what we call extractive.
Like you're basically not going to make them more poor, by taking the money than they would otherwise be. And so, you still get returns as an investor. it's not going to be like, payday lending type, learn loans, our terms. And so you can feel kind of good that like, Hey, I'm.
I'm investing my money directly in a company, like, think about it, how, like, you, you like adopted a pet at, at the zoo or you get like the plaque and you can see, you like, it's got a name or, something like that. You can see the
Naseema McElroy: [00:18:33] glow up. Yes, you can.
Marie Thomasson: [00:18:36] Yeah. And so, I feel like it's, it's obviously you're not adopting a pet, but you're like, you're invested in that company and it's fantastic because you're like, usually you're going to pick it for a specific reason.
So I think one of the ones that, that Arland has been promoting, or there was a recent investment in is, A line of dolls for, for black girls.
Naseema McElroy: [00:18:57] those dolls, man. They are salt out. Like they sold out quick. Like there are no more, but it's crazy that something just that simple dolls for black girls, can you imagine?
Marie Thomasson: [00:19:11] Right. And so it's like, that's like something you can really get behind. and it just, it feels good. And to me, it feels so much better knowing that you're going to have like that direct impact on a company and what the product is and you go to the store and you see it and you're like, Oh yeah,
Naseema McElroy: [00:19:30] are your child is playing with it?
And you're like, this is what it's all about. My child finally has a doll that looks like them, that I know I made happen, And how many other lives is. That is impacted. So, I mean like these things aren't like are impactful on so many different levels and you can't ever return on your investment.
Like you get to you, you get to build wealth at the same time. And I think that. These things shouldn't be overlooked, but yeah, girl, it shouldn't be this hard. It shouldn't be this hard, but thank God for like backstage capital and our land for like actually like stepping up to the plate and doing these things.
But can we get like a hundred thousand more Arlen's
Marie Thomasson: [00:20:18] w yeah, we need, we need a lot more Arlen's and, I actually had this conversation with her and, for me, it's kind of challenging because as much as I love backstage capital, they're funded. By, deep pockets, like where did those people get all that money from?
And so, like part of me is like, well, you've got a bunch of people who, are, are like trying to get a, a deduction or lower their taxes or, they, they've made tens of millions of dollars and now they're ready to invest, but what it's done. And so that part, I don't like, like, that's the part of venture capital that I don't like.
What it's done and what she was like, just wait. That's what she told me. Just wait, what it's done is open up the door to, to smaller investors like normal, regular people like us, right. Who are not accredited investors who can actually now do Crow crowdfunding. And so that's where it's just, I feel like we're just at the beginning of, of this journey of being able to actually really have an impact very directly with your investment dollars.
So that's what I'm super, just super excited about because the more Arlen's, there are then like the ideas will spread and who knows, like, maybe, maybe backstage capital will be the next BlackRock, right? Like,
Naseema McElroy: [00:21:42] yay. Well, not black. I don't really like BlackRock, but yeah, I know what you mean.
Marie Thomasson: [00:21:47] Well, that's the thing, like I want backstage capital to supplant like route let's replace them. That's exactly what I'm talking about. Like, and the more that, focus and attention, and just kind of, grassroots, like us having this conversation, these conversations that happen and people kind of, like support, backstage and the companies that they're investing in because they're doing the due diligence for us.
Right? Like they're doing the hard work, like. They're just, like that's the boots on the ground, like going and talking to people and, vetting the concepts and their business models and all of that. And so you can feel pretty good now I would not recommend, just, you're not even as a financial advisor, but just, like out of prudence, I wouldn't recommend putting all your money into these individual companies because you don't have any diversification.
So, ideally what I would love to see is a world where you can do this so directly, we are not there yet. And so for everybody, it's going to be a matter of, like how much money can you afford for these, kind of basically a direct placement you're directly placing your money with the company because it's going to get locked up.
Like you can't take it back, if you have trouble. you, can't just like, unwinded after three months, if you're like, eh, I teach my mind. And so a lot more thought does need to go into it because usually there's going to be a lockup term, maybe it's five years before you start getting your money back, you don't know.
so that's where it does become more complicated, but it also becomes, honestly just far more gratifying.
Naseema McElroy: [00:23:25] Yes. And I hate to keep on using the word impactful, but like it's just really impactful and yeah, I understand what you're saying. Like, you don't want to put all your investment dollars here.
This is something is falls under the category, which I recommend people like with not with like the 10% of like their investment, whatever they, Are putting aside for investments. Like this is where that little, 10% of like play money goes or something, like put it in there. But yeah, for people who are really looking to make an impact on, businesses are on things that you, that are aligned with your values,
you can really see down the line, the impact that their investment is making like to the community, to your kids, whoever. I mean, I love the dollar example because it's like a really tangible example and sometimes it's hard to get your, your head around impact investing and what that really means.
But you guys like, it's so hard for small businesses to get funding even harder. If you're a minority owned business. And so knowing that your money, your, a little bit of money that you're putting into this and maybe crowdsourcing it with others can, expand these businesses is major like it's major and it's what we need.
It's what we need to shift. Just a lot of the power in our society, because it's all around money. Right. And if we're able to invest in these businesses and they're able to grow, and then we're able to invest through platforms like backstage capital, then they're able to grow and offer it to more people.
And so, like I said, your impact is on so many different levels just from Ivy, like this thousand dollars that you just had sitting in your savings account, that you didn't know what to do with, so, I hope you guys like can really put your head around the importance of socially responsible investing and impact investing, even though it's challenging at the moment, it's probably easier now than it's ever been.
so don't be afraid to jump in and even if you just have. We'll look at backstage capital and maybe Google, like other platforms like backstage capital. Cause I'm sure they're out there, but like just, just like Murray, like I that's all I know because I'm on the West coast, so I'm sure there's other funds out there.
Yeah.
Marie Thomasson: [00:25:50] Yeah. Oh, what? It's Harlem, Harlem ventures. I, it just came to be Harlem ventures is the, is the other, venture capital fund out in New York.
Naseema McElroy: [00:26:00] Nice Harlem, like the city, like the subset of near Harlem. Okay, cool. Cool, cool. Awesome. Yeah. Harlem bencher sounds dope too. Just cousin, her name.
Marie Thomasson: [00:26:13] So, yeah, nobody said it would be easy, but it's possible. And I think that's the big difference, like it's actually possible. Yes,
Naseema McElroy: [00:26:21] yes, yes. Yes. So tap into that. Be one of the early innovators, be the people that are on like. In the grassroots of this, like building it up and then you can say, yeah, I have my money in that when it was only worth X, Y, and Z.
And that's why I'm sitting on so much money right now.
Marie Thomasson: [00:26:43] Exactly, exactly. So, Well, this has been fantastic. I have, we have we missed anything?
Naseema McElroy: [00:26:50] I don't think so. I don't think so. Like, I'm interested to hear if people have questions out there about investing on something, but I feel like we've covered so much and we've given people so many different opportunities of where they can really make a difference and really, be able to.
Affect the things that are important to them. And I think this is especially timely. when COVID is real. a lot of the stuff that's been happening in our communities has been kind of devastating. And to know that we can take that power back and actually affect change. In a tangible way, in a way that we can see right before our eyes, I think gives a lot of people hope.
And so that's why I'm so happy to have you on and to be doing this series because like, it's important. People need to know. People need to know. what's possible for them and people need to get that power back and, shift that relationship. And then you have, I mean, shift that relationship with your money shift, that power relationship, and you then have more control over your life and your kids' life and the people around you.
So you. Do have what it takes to make an impact. So I hope people can take away from this, all the different things that they can do in order to make changes positive changes in their lives and in other people's lives. this has been amazing. Thank you so much, Marie.
Marie Thomasson: [00:28:14] Oh, thank you.
Naseema McElroy: [00:28:16] All
right.
Hey there I’m Naseema
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