An Introduction to Responsible Investing - Expert Edition Episode 36 (Classic Episode)
Our guest, Marie Thomasson discusses her background as a certified financial planner and her focus on working with women who value responsible investing. She explains the concept of socially responsible investing, tracing its roots back to the 1960s when activists protested against companies supporting the Vietnam War and apartheid in South Africa. Over time, socially responsible investing evolved into ESG (Environmental, Social, and Governance) investing, taking into account climate change, social metrics, and governance. Marie emphasizes that ESG investing is now the baseline and shares how ESG portfolios can match or even outperform conventional portfolios on a real return basis, making it a moral imperative for those who have the means to invest.
About Our Guest:
Marie Thomasson, CFP® is a financial advisor for progressive women. Marie started her journey with a prestigious internship in asset management after studying Applied Mathematics at UCLA. It turned into 13 long years, overseeing over six billion dollars in bonds for pension funds, institutions, and banks. The experience left her with a deep skillset, and a deeper longing to be free of an industry saturated in privilege, misogyny, and self-interest.
https://modernassetsla.com/
—-
Please join me here, and follow me on social media, Instagram, and Facebook.
Need help getting started on your path to financial freedom? Start Here
Join the Financially Intentional Community
Oh and please subscribe and leave a review on whatever app you're using to stream this podcast.
Get my book Smart Money
Subscribe & Review
Love this episode? Please subscribe and leave a review on your favorite podcast platform.
TRANSCRIPT:
[00:00:00] Naseema McElroy: All right, nurses on fire. We are back and we have a special treat. We have a new certified financial planner, Marie Thomason. Hey,
[00:00:19] Marie Thomasson: Marie. Hi, Naseema
. Thank you so much for having me.
[00:00:24] Naseema McElroy: I am so honored for you to be here. So please share with the people a little bit about your background, what you
[00:00:31] Marie Thomasson: do. Sure. So I am a financial planner who works with women with progressive values.
Big emphasis on things that don't usually come into the financial realm, but I believe that you can't really separate economics from your finances. And so what we're talking about today too, with responsible investing.
[00:00:55] Naseema McElroy: Yes. I just barely brushed the surface of financial investing.
I just barely brushed the surface of socially responsible investing. And so I am looking forward to deep diving into this subject with you. Cause I know you have some gems and some really practical tools for
[00:01:13] Marie Thomasson: people. Yeah, absolutely. What I think one of the hardest things about responsible investing is one.
There's all these acronyms and there's so much information, but a lot of it can be really hard to put into action. And so usually when there's, when you're overwhelmed with information, but nothing actionable, then. Then it's really easy to do nothing because you don't even know what to do, where to start, where you have the most impact.
Yes,
[00:01:43] Naseema McElroy: Yes. It is super hard. And I think like the concept is really new to people. Especially my audience, because most people are just really new to investing in general. And so to know that. First of all, there's so many options out there, but to know that their dollars can actually make an impact while helping them build their wealth, I think is like mind blowing to a lot of people.
[00:02:09] Marie Thomasson: Yeah. And generally speaking, the whole idea of responsible investing or whatever you want to call it is actually pretty new. So what I wanted to start with today. Because we're going to do a series on this is just to give a general overview of what socially responsible or sustainable investing is, like where it came from and how it originated and where it is today.
And then what we'll do is as we go through each of the next podcasts is we'll discuss one actionable idea. That I've broken out between spend, save and invest an easy medium hard. So every week we'll talk about something new. But I think that it's really important to just step back a little bit before we do that and have a little context because It is new.
It's like all of a sudden, I remember my kids are 10 and I remember posting pictures to like blogger or something through my email and then all of a sudden it's like Instagram and you're like, where did this come from? That's what Socially responsible investing is it's wait a minute, and I think that, it's it actually has a really interesting history.
And so just knowing and understanding where it came from. I think we'll give you a lot of perspective and it'll make all the acronyms make sense. All
[00:03:32] Naseema McElroy: Let's hear about this history and I love that analogy, by the way.
[00:03:36] Marie Thomasson: Yeah, thank God I don't have to like post through my email anymore.
It was yeah, it was insane and then having to transfer all the photos over is like a whole other issue, but that could be a whole conversation. But responsible investing is equally painful. That's the thing, right? Like we're in the 2010 iteration still.
When you think about it, and so there's a lot that needs to be done in terms of technology and availability and actionability and, government oversight regulation this is a complete shitshow, for lack of a better word. Really, this all started in the sixties and it came about and the original term for it was socially responsible investing.
And it's because people were pissed. This is when people were getting really upset. And there's so many parallels to what's going on today. But people are getting upset about the Vietnam war, about apartheid in South Africa. And they were like, hell no, I'm not going to invest in countries that, or sorry, companies that, that are supporting apartheid in South Africa that are providing defense and weapons, for the Vietnam war that are killing.
Our soldiers for a, for a needless war. And so what happened is you ended up with this group of, of activists, investors that sprang out of this larger activism. That's really what happened. So just like today, we've got, the social justice and BLM movement, which is. It is probably moved sustainable investing forward, sadly enough, like a decade, right?
Just because of what's going on. And and this is what happened back in the 60s. This is how it came about because the way our economic system was created and the way capitalism works, it was never intended to be. Account for people's well being it. It's always about the bottom line. That is literally the definition of capitalism is the shareholders best interest.
So that's all fine and good when everyone's a shareholder. But when you look and you look at the demographics and you're like, well, only the top 10% of Americans, Are really like lucky enough to be shareholders. Then, who do we care about here? And so anyways, so let me just, go back before I get on my pulpit there.
But So socially responsible investing it was really what they call a negative screen. So No, i'm not going to Invest in any company that is contributing to war or violence or tobacco or alcohol this is where the Religious based values came into play in a big way. Like no, I do not want to support birth control like the catholic church also trending These days for like very infamous reasons and so it was very much like Hell no, we're not investing in those companies.
So take those companies out of my portfolio and I will take whatever is left. So this is very much like somebody who's willing to die on the sword because you are willing to lose diversification, lose return from companies that are probably killing it by killing people. And say no, like I'm not about this.
And so that's where it got its start
[00:07:14] Naseema McElroy: let me just ask you a question. Why wouldn't people then just take their money out of the market?
[00:07:21] Marie Thomasson: Okay. So this goes back to just basic finance 1 0 1 or personal finance 1 0 1, which is where, It's really tough because if you don't invest in the market, you're going to get killed by inflation and purchasing power.
And specifically, I work primarily with women. Women typically have really much better savers than the men a little more risk aware, I like to call it, as opposed to risk averse because we're not the ones who are like going all in on crypto and losing our houses. And yet, it's the silent killer is inflation.
If you don't invest, then you are likely to live a very unhappy retirement, or whatever you want to call it, because you are not keeping up with your ability to buy a loaf of bread. So this is, it's like a double edged sword. You're damned if you do, you're damned if you don't. And so this is where activists.
Even if you take a lower return, you're still doing much better than doing nothing. And anyways, even if you have your money in a bank what is that bank doing with your money, right? This is a tangled web, and we're really only gonna scratch the surface. At least in this first go round, we can, we can go down the rabbit hole, but this is one of the big challenges is like one question leads to another and leads to another.
And this socially responsible investing, it was just, doing this thing. It was like this edge hippie dippy movement, right? Not a lot of people did it. And your typical, bank advisor or financial advisors like, Whoa, no, like you're going to lose, you're going to lose 2% return.
Why would you ever do that? Yeah. Because also, keep in mind who are, who's working at banks, who are financial advisors, it's the top 10%, right? Like, why would they go against their own best interest? So that kind of just chugged along and it was very much a fringe thing. And then, now starting to get into, a little bit closer into like our life.
Lifetimes is the 1990s is the first time like climate change ever became like a word, right? I think it was Clinton who who started that and incidentally, Moving on to the next phase of sustainable investing which is called the ESG Which stands for environmental social? Governance and it's different Aspects so You know, climate change, environmental people usually get that, right?
So it makes a lot of sense. Don't ruin our planet. And then you have these other metrics, social metrics how well are people paid? How many people are getting hurt on the job? And then the actual overall governance who's on the board? It's the 1%. And that's what it was when this all started.
And this, Idea of ESG came about in 2005. And so it and it was, it was basically of a an evolution of this climate change debate. So suddenly you go from the social responsibility no guns, no birth control, that sort of thing to all of a sudden people are like, Oh climate change, we need to think about this.
ESG investing, it didn't really, it didn't really take off until the Great Recession. And the reason for that is because 2008 2009 if you weren't invested in it, you still know what happened from it, right? Like markets were down, everything was down. People lost their houses it was just a bad time, and what happened at that time is that these socially responsible portfolios they were just they were awful, so the returns on them were Just terrible.
And so now you've got a bunch of portfolio managers like these guys in the ivory towers who are like, well, we need to package this a little bit better because we need better returns. Because we need people buying these things. So this is really where you got the lipstick on the pig packaging coming in because, the recovery, 2010 2011 the driver of the market recovery came from fracking. I don't know if you recall, remember this, but those returns, that was like shale when they were fracking for shale in Texas and North Dakota. And it was all over. And there's all these news about the railroads and the tankers exploding and whatnot, and that's where the driver of returns were coming from.
You can bet that somebody with a socially responsible portfolio is like no. Except now, those portfolios have awful returns. So they shifted their marketing. Basically, they repackaged these like idealistic portfolios into something they call ESG and basically it went from being like, no, I'm not going to invest in a company that is supplying guns, for war to being like, well, we're going to pick the best in class.
So like best in class really means like the best of the worst. Because why is X on? in an ESG portfolio. Well, Exxon is in an ESG portfolio because of marketing. That's why. Because somebody's got to make their money. And it's basically this is where shareholder advocacy, really started to bloom.
And I will say that, that enough time has passed that I think despite, I don't, I think this is like unintended consequences to be honest. All the shareholder advocacy and the spotlight on companies and what they're doing, I think it has less to do with ESG portfolios and more to do with social media and people being able to actually understand what companies are up to and what they're doing.
But suddenly now you have. You have this platform a very democratic platform, no matter who you are or how much money you have, you can start talking shit about Nike or Exxon or, whomever it is. And just, I think just because of the times ESG portfolios started to become more relevant.
So when you look at ESG portfolios today. Yes they're better, but there's, they've still got Halliburton in it. That's the defense contractor. They still have Exxon in there and they're like, well, they give their employees 401ks and three weeks of vacation. So there you go.
It's better than the schmuck that, like Amazon, for example, that's got people like sweating in. In warehouses making 11 an hour. And maybe Amazon's not in, in that class, but they probably are like, they probably are in there somewhere because they are doing something okay.
And that's that's the screen for ESG. ESG is really popular today, and I'm not saying all of this to say you shouldn't do it, but it's that's like the, that's like the bare minimum that portfolios should be at it's literally the bare minimum and today, there's no reason not to invest in ESG portfolios because companies that are actually looking at, shocker to all of us, the women on the board have higher returns duh.
We already know that they're probably going to do better. Because the, the companies maybe not completely overran with, sociopath CEOs and so those companies are actually doing much better and because sustainability is becoming a focus. And so now. Now and this was not the case 10 years ago.
ESG portfolios are looking through the sustainability lens. Those companies are actually very competitive and again, I'm not those companies really is just you know, the Oftentimes like the best in class or best of the worst. Is what it is. So that's just baseline.
[00:15:48] Naseema McElroy: But I wanted to know in this. Are you going to highlight returns and fees? Are we doing that?
[00:15:54] Marie Thomasson: Yeah, of course.
[00:15:55] Naseema McElroy: Yeah, I just want you to like, give like a kind of just like sense of inflation versus your regular index fund portfolio without real return versus a ESG portfolio.
[00:16:06] Marie Thomasson: It's really hard to say because there's been all this like monetary policy and the government has just thrown money at markets the last 10, 15 years. But if you say on average, you get, let's call it an 8% return. I think historically, people use like a 9% return, but it seems a little high, especially right now.
And let's say inflation is 2%. So you back that out because that's not really. Money that you're earning, you're just like keeping up. So a 6% return for a conventional portfolio. Nowadays, like ESG portfolios are matching that, on a a real return basis, which means after inflation.
So There's basically no reason not to invest in an ESG portfolio. And a lot of ESG and it depends on the asset class. So this gets a little bit into into the technical details. But, asset class is just referring to it. Are you this mega cap company like Amazon? Or are you a small little, relatively nimble company like Lululemon?
How fast can you pivot? Small companies, Amazon 20 years ago was a small company, had huge monster returns. Now, Amazon of today, they're never going to see that same type of return again, right? It's a matter of always being diversified, but if you look at a diversified portfolio, with, let's call it vanilla or conventional portfolios ETFs, mutual funds companies, it's going to, it's going to match.
An ESG portfolio and an ESG portfolio quite frankly, over the next 10 years, I would not be surprised if it started to beat the conventional. Because companies that are looking at ways to be sustainable, oftentimes they're cutting costs too, right? So they're cutting costs, people care, people talk about it, people are willing to pay more money.
For a company that they know maybe I don't have to throw this thing out in two years because they, like they designed it to explode. There's really no big difference. And that's why I'm very adamant about ESG just being the baseline.
Now, the. Okay. So for the fees, however, fees are, there's more fees for an ESG portfolio. You can't get around it. So
[00:18:24] Naseema McElroy: is it because it's more actively managed because they have to actually go in and make sure that those companies are complying
[00:18:29] Marie Thomasson: exactly.
[00:18:30] Naseema McElroy: This is, you're getting what you pay for.
[00:18:33] Marie Thomasson: Literally you get what you pay for.
So there is no way around it. And we've been brainwashed to, the Vanguard Bogle passive investing. There's nothing wrong with this. There's nothing fundamentally wrong with this approach, but if you care, then. You have to pay you, you're going to have to pay because somebody has to do the work to sit there and sift through the company's 10 K's have, have conversations with investor relations to do their due diligence.
This is all very much active management. And a lot of people who are like, I call myself a quasi passive asset manager. I would love to be passive, but you can't be passive unless you don't care. That's just what it is, right? If you don't care, great, be passive.
Nothing wrong with that. But if you care, you can't be passive. We could, relate this to basically life generally but everything that's going on today you can't be passive. So you're going to pay more, but,
[00:19:42] Naseema McElroy: And I say that the easiest way to get to somebody's pockets or to change somebody's opinion is to hit them where the money is hit them in their pockets.
Like you have to, and so investing is your tool in order to do that because now you're a shareholder in these companies. Yeah, we can't be passive and I feel like a lot of us are passionate about issues, but we don't know how to affect change. And I feel like this is a major way that we
[00:20:08] Marie Thomasson: can do that.
It's a major way. And you have to remember that us GDP, it's like basically like the paycheck of the United States, right? Like we're paying taxes and everything. 70% of it comes from consumers, like as consumers. Collectively, like we have all the power. We can change the dynamic. We can totally do it.
But you just have to have enough people, on board and you have and depending on where you're at, you have to make it easy because it's a struggle living in the United States. Like it's 100% a struggle. And I feel like the system is stacked against the average American.
When we talk about freedom, In the U. S. Really, what we're talking about is economic freedom because you don't have social, safety nets. You don't have social supports. You don't have access to, equal health care, equal education, like a lot of these things. And like, how are you going to worry about like sustainable investing when you're just trying to get through the day?
So if you have the means, if you have the means to invest, if you If you have the privilege to be listening to this and be able to take action on it, it is like your moral obligation to do this. That's what I think. Not everybody has this privilege. So if you don't, let's have a conversation.
I was going to say something.
[00:21:45] Naseema McElroy: Something else. No, I get it. I get it. But I know like for me personally, like I haven't because I don't understand it yet. And so that's why I'm so juiced about us having this series because now we get to. Have a deep dive. We can all understand it. And we don't have any more
[00:22:02] Marie Thomasson: excuses there.
There's yes, no more excuses. And a lot of times. So recently, what is the the what do you call it? Like the hot, word is impact investing. Like you hear about impact investing and it's all about social justice, social equity, All these things, environmentalism economic inequality, gender inequality, like looking through those lens, and it really is taking us back to the socially responsible.
It's taken us back to the 60s, right? You had people who were protesting in the street over the Vietnam War, and now we have people protesting in the street over social inequalities that have just become I'd in the last, 40, 50 years. So it's only gotten worse. And so now it's, it, again it, we've come to that point where you're part of the solution or you're part of the problem.
And so impact investing is just like a new way and they break it apart a little bit more a new way of looking at socially responsible investing. So we've come full circle. Thank you. There's a lot of parallels. So just to wrap it up we started with socially responsible investing that began in the 60s as a reaction to things like the Vietnam War and apartheid in South Africa, and it morphed as The environment became a big deal and people started thinking about climate change and today there's really no reason to not invest at the very least, according to sustainable investing principles with ESG a lot of common wisdom will say, just invest the market and then give money where you can, that's all fine and good, but, half the, West Coast is on fire.
So let's, how much good did that actually do us? It is not enough to, to be philanthropic. And that's a good thing. But we have to invest our values. We, we have to use The environment as a baseline. There's no reason not to. It costs a little more, but just like you said, you get what you pay for.
And on an apples for apples basis, the returns are the same, if not increasingly better than a conventional portfolio. We've really come full circle. To with impact investing and basically social responsible investing through these very well defined lenses nowadays of gender, race economic inequality and sexual preferences, you name it.
It's an absolute, it's a moral imperative, and if you're not doing it, why?
[00:24:50] Naseema McElroy: Yes. I love it. Why? Because you can't say that you don't know now, just like I can't say I don't know. And yeah, this is great. This is great. And
[00:24:58] Marie Thomasson: Well, you know the why now. Yes. So now we got to dig into the how.
Yes. Yes.
[00:25:03] Naseema McElroy: Yes. Yes. So that's what we'll be talking about on the next episode. We're going to find out how we can start investing responsibly or impact investing now.
[00:25:16] Marie Thomasson: Absolutely. I can't wait. Okay, Marie. See you back
[00:25:18] Naseema McElroy: in the next episode.
[00:25:20] Marie Thomasson: All right.
Hey there I’m Naseema
My dream is for everyone to know that financial independence is attainable with a little intentionality. Learn how I can help you finally break the cycle of living paycheck to paycheck.
Join the Facebook Community
Join the Financially Intentional community and get access to resources to guide you on the path to Financial Freedom.
Watch these Videos To Learn How to…
Keep Listening
Here are some more episodes you may enjoy…
We chat about what fraud is, how it is different from rip-offs, and ways you can keep your money safe.