Category: Bank + Invest

Meet Three Pioneering Women in Impact Investing

You can express your values through many decisions. You care about the health and well-being of your family and planet, so you might decide to buy organic, ride the bike to work, avoid bottled water, recycle, and shop locally.

That?s a great start, but where does your money sleep at night?

?Impact investing? and ?social finance? are shifting the dominant financial paradigm of opaque, anonymous, and indirect investments that is based only on quantification of gain. Three women who are working in this movement are featured here.

?Finance is the mother of all human systems. There is no system that humans have ever built that is faster, more global, or more powerful. Finance is our most effective instrument for catalyzing positive change for people and planet.? ~?Donna Morton, Change Finance

What are two key investment trends?

1. Demographics continue to shift in the financial markets.

In America, there is a massive wealth transfer from older white men into the hands of women, wives, and daughters, including millennials.

Yet the financial industry is dominated by men. Currently, only 2% of CEOs on Wall Street are women, and 78% of management teams on Wall Street are exclusively men. Only 3-10% of venture capital goes to women-led enterprises, although opportunities for women are rising as the power dynamics are shifting and as more girls are encouraged to envision entrepreneurial endeavor.

2. Interest is increasing in investment options that align with values, including environmental and social benefits.

Most significant is the divestment from fossil fuels?$5.5 trillion has already been divested from this sector. Impact investors are no longer okay with simply minimizing harm by screening out oil, guns, and other areas with negative externalities through socially responsible investing. Increasingly, investors are focused on ensuring that they are creating a positive social or environmental impact.

?Money and power are not what make us happy. Love, relationships, and connection is what brings joy.? ~?Deb Nelson, RSF Social Finance

This is not a Zero Sum Game

Initially, it can be painful to uncover the ethical messiness and tangible destruction in the wake of conventional investments. In this game there are winners and losers, more for me is less for you, and we compete for limited resources. It is not uncommon for an investor to discover that some of her money is invested in the production of bombs and bullets. Do not feel guilty or ashamed?transfer the investment and feel enlightened!

?What you can measure you can manage, yet not everything that matters can be measured.? ~?Amberjae Freeman, Swell Investing

In truth our security is interwoven: positive, productive connections and investments are the foundation of true wealth.?When making a financial decision, assess the value of often unmeasured things, like relationships, environmental impact, and health. Money is not the only measure of value.

Amplify the influence of your money with impact investing.

Pioneers in this field are developing financial relationships that are direct, transparent, and personal. At RSF Social Finance, borrowers and grantees are a diverse group of entrepreneurs with one thing in common: a social mission that drives what they do and how they do it. Organizations that borrow from RSF are working toward social, economic, and ecological benefit. Most of their largest investors and donors are women, which has had a large impact on their integrated and collaborative approach.

?An integrated approach to dealing with money is the first step to transitioning from an extractive economy to a regenerative economy.? ~? Deb Nelson, RSF Social Finance

?Integrated capital? refers to the variety of support received, including money, mentors, and relationships. RSF collaboratives use philanthropic funds to provide integrated capital to projects that support purpose-driven entrepreneurs who also value things like fair trade, soil health, women?s leadership, biodynamics, and local food.

Deb describes how her work focuses on ?creating financial relationships instead of conducting financial transactions.?

What are options for investing in alignment with your values?

Socially responsible investing (SRI) is predominantly about screening out ?bad? companies who participate in business that you don?t morally agree with. Impact investing takes screening a step further by analyzing the impact of each company through environmental, social, and governance (ESG) factors. Evidence shows that ESG factors, when integrated into investment analysis and portfolio construction, offers investors long-term performance advantages. Money managers are rapidly expanding research and expertise of ESG factors as tools for analyzing risks and opportunities.

Donna Morton says, ?We are a force that catalyzes financial activists to create this shift to move our money out of harm into healing. Use finance as an instrument for driving change. Where capital flows, momentum occurs. Our fund enables investors to drive impact, creating an economy in service to life through financial activism.?

Consider the following portals to improving the performance and impact of your investments:

  1. Aspiration is offering conscious banking with no fees and amazing impact. Check out their offer and their amazing story.
  2. RSF Social Finance?is a non-profit, financial-services organization offering investing, lending, and philanthropic services to individuals and enterprises. RSF has over one thousand clients and over $200 million in consolidated assets. They have formed a growing community of motivated, values-driven investors, donors, and entrepreneurs. Each dollar that circulates through the relationships created by RSF Social Finance multiplies to create true wealth that is meaningful, because it effects positive change as it creates value. Minimum investment is $1,000. Deb Nelson was interviewed here.
  3. Change Finance is a majority women-owned and -managed financial company offering exchange traded funds (ETFs) that are truly fossil-free. Their methodology is informed by the United Nations Sustainable Development Goals (SDGs). Change Finance provides impact-focused, performance-oriented investments using the SDGs. Donna Morton was interviewed here.

Related content: 4 Ways to Make Real Money with Sustainable Investing

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Crystal Arnold is the founder of Money-Morphosis and the Money-Wise Women podcast. After graduating from Southern Oregon University in 2007 with a degree in international economics, she has designed and facilitated workshops, community events, and discussion panels about money. She has inspired thousands of people to have a healthier relationship with money. Her courses serve to financially empower participants. Her written work has appeared in journals, magazines, and in the book called Reinhabiting the Village. She is currently Director of Education at the Post Growth Institute, and coauthoring a book called ?Offers and Needs Markets: A Process to Reveal and Mobilize Community Wealth.? She lives in Oregon with her husband and two children.

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You Asked and We Got it: Socially Responsible Investing in the UK and Canada

 

When we covered?Swell Investing’s impact investing portfolios, some of our readers asked for sustainable investing options in the UK and Canada. We heard you and we’ve got good news. There is a company that is now offering Socially Responsible Investing (SRI) for residents of the UK and Canada.

SRI is ushering in the future we want. Whether it’s green technology, gender parity, affordable housing, or another social impact theme, there are more options today for investing in what matters to you. The good news is that it?s possible to do this and make comparable money to broad market index investing.?

Now Available in UK and Canada

Wealthsimple is a robo advisor that recently launched Socially Responsible Investing options for residents of the UK and Canada.?To be considered socially responsible, the portfolio needs to focus on companies that help lower carbon emissions, promote diversity and ?invest in clean technology for the future.

Related content: 4 Ways to Make Real Money With Sustainable Investing?

Socially Responsible Investing Options

Depending on your location, Wealthsimple offers a portfolio of different Socially Responsible Investing ETFs. With these funds, you can align your money with your values and in the process bring more joy and prosperity to your life.

United Kingdom?

WealthSimple charges 0.7% in fees to manage a diverse portfolio covering*:

  • Global ESG Leaders
  • Clean Energy
  • Sustainable Bonds
  • Gilts

*Note: the underlying assets in this portfolio may have additional fees, these were not immediately available from Wealthsimple.

Canada ETF Options

Wealthsimple charges a flat fee of 0.50%. This is added on top of the expense ratio fee for each of the underlying ETFs*:

ETF Expense Ratio 1 Year Returns 3 Year Returns 5 Year Returns
CRBN-Low Carbon (CRBN 0.20% 12.73% 7.05% N/A
Cleantech (PZD) 0.68% 15.09% 12.63% 11.88%
Human Rights (VIDI) 0.68% 25.85% 8.32% N/A
Environment?(XEN) 0.55% 5.03% 8.12% 4.91%
Government Securities (ZFM) 0.22% -1.63% 0.08% 1.91%

*Your asset allocation across each of these ETFs is based on your chosen risk profile (Conservative, Balanced, Growth).

United States ETF Options

Wealthsimple charges a flat fee of 0.50%. This is added on top of the expense ratio fee for each of the underlying ETFs.

ETF Expense Ratio 1 Year Returns 3 Year Returns 5 Year Returns
Low Carbon (CRBN) 0.20% 12.73% 7.05% N/A
Cleantech (PZD) 0.68% 15.09% 12.63% 11.88%
Socially Responsible (DSI) 0.50% 13.06% 10.03% 12.20%
Gender Diversity (SHE) 0.20% 13.06% N/A N/A
Local Initiatives (BAB) 0.28% 4.54% 3.38% 3.88%
Affordable Housing?(GNMA) 0.12% -0.92% 0.31% 0.93%

*Your asset allocation across each of these ETFs is based on your chosen risk profile (Conservative, Balanced, Growth).

Overview of?Wealthsimple

  • Canada & USA management fee: 0.5% for $0-100k in assets, 0.4% fee for $100k+.
  • UK management fee:?0.7% for??0-?100K in assets;??0.5% for??100K+?
    Note: while these fees seem low (they are certainly reaonsable), be aware that these are in addition to the underlying ETF expense ratio. By comparison, Swell charges a single all-in fee. However, Swell is not available in the UK and Canada.
  • Large variety of account options: Personal, Traditional IRA, Roth IRA, SEP IRA, Joint, Trust, Smart Savings
  • Plan to match your money goals: Conservative, Balanced, Growth allocation profiles
  • Based on Modern Portfolio Theory to help maximizes returns
  • Free portfolio review: money experts available to ask questions ?
  • If you transfer $5,000 or more from another account the will cover transfer fees
  • Good referral and connecting benefits

Note: if you feel comfortable setting up your own investments, you can create your own portfolio of sustainable ETFs and skip the management fee. Just keep in mind that robo advisors also have benefits, like not having trading fees. While some brokers offer commission free ETFs (aka no trading fees), these are usually reserved for the broader market ETFs. Not many sustainable ETFs will be trade fee free.

Start Investing for your Future Today

Let your money make a difference while it is growing. Make the choice to invest for your future and the future of our planet by supporting the companies that are solving the world’s biggest challenges. ?

Related Content: Start Impact Investing For As Little As $50


Photo by Anna Jim?nez Calaf

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Forget Tree Huggers: Investing in “What’s Next” is Investing for Good

What images come to mind when you think of investing for good? Tree huggers willing to sacrifice financial returns for purpose, perhaps?

It?s time to bust that myth wide open.?

As it turns out, investing for good can be more profitable than traditional investing. What does that mean for you? Even if your heart isn?t into saving the planet, it still makes financial sense to have a look at socially responsible investing.?

Green Alpha Advisors is a Colorado asset management company taking a bold approach to sustainable investing. Garvin Jabusch (CIO), Betsy Moszeter (COO) and Jeremy Deems (CEO)?sat with us for an in-depth interview to share with our readers why sustainable investing makes sense, even if you?re only looking for better returns.

Because it?s about investing in?What?s Next…

Green Alpha believes that sustainable investing makes more sense than traditional investing. Why? ?Because it?s about what?s next,? says Deems.

Green Alpha?s philosophy is simple: the companies solving the world?s biggest problems are the ones that will drive economic growth. Put another way, there is no commerce without an ecosystem. Those companies tackling the largest global systemic risks such as resource scarcity, climate change and widening inequality are the companies that will thrive in the future.

Q&A with the Green Alpha team

1) Why not just invest in an S&P 500 fund and forget about it?

Garvin Jabusch: The reason why people are in those broad market index funds is that they?ve been told that?s the best way to invest, and also, they?re just ubiquitous, and they have performed well. And they are extremely cheap. On that level, broad market index funds make sense. If you can pay 10 basis points (0.1%) for a fund, I can get why that looks attractive and why I?d want that.

But what if you want to invest in the Next Economy and de-risk your portfolio from resource degradation and climate disruption, how do you make portfolio choices? Well, not by selecting from an index list, but by starting from scratch and building a new model of an economy that works from the floor up…but these portfolios need to, over time, perform the equivalent or better than the index. And that?s the point. The S&P 500 and other legacy economy benchmarks are not the future and therefore not as interesting in terms of returns generation going forward.

2) Why aren’t the S&P 500 and other legacy economy benchmarks the future?

Garvin Jabusch: Because indexing is purely indiscriminate. If you buy an index, it does not matter what a constituent company does. You don?t care in the least what the company does to make money or how they will continue to make money and grow going forward. You just buy it because it?s in the index.

Think about the S&P 500. It contains 60 fossil fuel stocks. If you believe, as we do, that fossil fuels are going to be less and less important as a source of energy for the global economy, then why would you invest in these companies??This is where tree huggery has nothing to do with it. -?Garvin Jabusch

From last year, 2017, when electric vehicles started emerging and growing in a meaningful way, and as renewables continue to take over the power grid, it?s hard to see a source for growth for fossil fuels in the long term. And therefore why would you want to own those?

Well, you own those because you?ve indiscriminately purchased the S&P 500 for years. If you watch any of these finance channels, this is what we?re told:? just buy the cheapest index you can. So this is the paradigm we?ve inherited. Modern portfolio theory and the efficient market theory says you can?t do any better than the index so just find the cheapest index and own it.

But all that disregards the fact that the index is full of the legacy economy and the sources of large-scale systemic risks, that, by definition make poor long-term investments.

3) What?s the Blindfold Test?

Jeremy Deems: Every time investors buy an index, they bid up the prices of those companies in the index. Exxon is trading around 23x earnings yet has had shrinking revenue 5 of the last 6 years. That?s expensive. That?s way too high of a multiple for a shrinking company.

People are throwing gobs of money into the S&P 500. That means 1.5% of every dollar towards the Exxon share price even though it’s a shrinking company. – Jeremy Deems

But a funny thing happens when you blindfold the names of companies in the S&P 500 and start looking at fundamentals. ?On the one hand, here?s Exxon, one of the largest companies in the world. It has shrinking revenues and prospects from an industry standpoint, and it?s trading at a 23x multiple. Is that a buy? The answer from most equity analysts would be “NO.”

Then you hide the name of a Solar company that trades at or below book value and has been experiencing 30% growth, the same analyst would say that?s an undervalued stock. ?Fundamentals matter, both at a macro level as well as a stock-specific level.

4) Won?t Next Economy companies come into the S&P 500 eventually anyway?

Garvin Jabusch: Yes. Index turnover is a thing. These new economy companies will come into the S&P 500 eventually. But if you have a long term investment horizon, wouldn?t you want to own these companies before they get added to the S&P 500, so you get to enjoy the majority of the gains?

The S&P 500 has the 500 largest companies in the U.S. A material portion of their growth phase is behind them by the time they get added to the index. Then, once they are in the index, if they start decreasing in size, they have to shrink quite a bit before they get kicked out.

Betsy Moszeter: Most investors don?t understand that by buying solely the biggest companies, you?ve missed on the growth that got them there. And you lose money on all the shrinkage as index turnover is very slow. Activity in the stock market, in general, tends to lag what?s happening in the economy by a few years. Investing specifically in indexes managed like the S&P 500 lags that even further.

Garvin Jabusch: As an investor, you?re interested in investing in economic changes, which are happening more rapidly than at any other time in history. The rate of change is increasing, as well as the change itself. For long-term equity growth, it is critical to be on the right side of change.

5) How do you know which Next Economy companies will make it into the S&P 500?

Garvin Jabusch: We don?t know. But we do know what industries and sectors are likely to be represented, so it?s a question of selecting leaders among those that we can get for decent valuations. And we also know that there are 60 or more companies in the S&P 500 that will be shrinking going forward.

6) How about risk? How does your portfolio risk compare with S&P 500?

Garvin Jabusch: This is one of my favorite questions. What we do differently is all about a redefinition of risk.?It?s about ignoring the legacy concept of modern portfolio theory which defines risk very strictly as correlation with the benchmark. Today, almost everyone in asset management very much believes in modern portfolio theory.

But here?s the thing. When the economy was evolving less rapidly, you could say that the economy in the 1950s still looked like the economy in the 1940s. And the economy in the 1960s still looked a lot like the 1950s. Change was happening, but it was slow.

The 1950s is when modern portfolio theory was popularized by a guy named Markowitz and his famous book. And at that time, it did work. You could count on looking back 10 years and seeing what asset mixes looked good and had relatively good risk adjusted returns.

The old way is broken…

Markowitz?s efficient frontier thesis was brilliant, but it has come to be interpreted as ?just index, because you?ll never do better.? So you have the nearly universal belief that indexing is the best way to invest in public markets. So much so that even managers trying to reflect a sustainable economy end up merely trying to hammer an index into something “green.” So in order to arrive at something they can label a “sustainable portfolio,” and also stay correlated with the big benchmark, what they do is peer rank, using a questionnaire, the sustainability of companies in every industry.

This fails of course, because in reality, it’s absolute not relative sustainability that matters. ?Relative rankings are meaningless. It is absolute performance that leads to transformation and drives valuations. If you own big indexes with all of their fossil fuels, you may think you’re investing passively, but in fact you’re not. You are actively betting on systemic level collapse. I wonder if Markowitz would even agree with the present application of his theory.

You can?t just look backwards anymore…

The economy 10 years from now won?t look an awful lot like the economy today. We?ve already seen that happen in the last 10 years. So modern portfolio theory fails and yet we all live by it because it?s the paradigm we?ve all accepted. It?s all we?re taught in business school and it?s all we see on CNBC, and that?s why we remain in broad market indices.

Modern portfolio theory is your daddy?s and your granddaddy?s investing and it?s busted now and it?s time for everyone in GenX all the way to GenZ to throw out the inherited paradigm and start afresh.? -??Garvin Jabusch

7) Then what does redefinition of risk mean?

Garvin Jabusch: There?s this perception that the S&P 500 is the place to go for low risk equity exposure. Yet, if you think about what you are exposed to, you have tons of present and future systemic risk.

A redefinition of risk means no longer defining risk as correlation with the S&P 500. The S&P 500 itself is extremely risky. It is riddled with systemic risk to the global economy, starting with fossil fuels but also including things like glyphosate makers that are depleting farmland with deleterious water practices, and with all kinds of short term resource exploitation as opposed to long term resource management.

It?s time for the definition of risk in investing to correlate with actual risk to the economy, and not with mathematical beta risk to some benchmark. -?Garvin Jabusch

So if the index itself is quite risky in fundamental real terms, not in math correlation terms, but in fundamental real terms, then defining correlation with it as ?low risk? is nonsensical on its face.

This is what we need to subvert and get the whole world to recognize. Risk isn?t volatility versus a benchmark. It?s what actually has the power to undermine the global economy.

8) How do politics come into play?

Jeremy Deems: On the one hand, it doesn?t matter which party or individual in control of an administration or congress. It?s about the economics. ?If a technology makes more economic sense at scale, then eventually, despite best efforts to block progress, better economics wins out. Look at Iowa and many of the Mid-Western states and their mass adoption of wind power due to the clear economic advantage to produce cheap power. Just try to take their wind power away and see what happens.

Above all, it?s about the economics…

We do manage political risk over the medium to long term. How do certain changes affect an industry and its long term innovation curve? This is not a one or two-term thing.?Simply put, our approach is this: In order to have a vibrant economy, we must have a planetary ecosystem that is capable of supporting it. We can?t have any kind of commerce without an ecosystem. We invest in the Next Economy, one in which our footprint is dramatically reduced, therefore allowing our planet to support our economic systems.

It turns out that a petrochemical-based ecosystem is too hard on the planet to support economic growth when you think about the number of people we have to feed and the fact that everyone seeks better standards of living.?You can?t do that with an energy source that you dig up at great expense, burn it once, and don?t get to use again. That is a resource constraint. This is not a left or right issue. That is economics not working. That?s the crux of a Next Economy thesis. It?s got to be a circular economy. Waste has to have value until you literally can?t make anything else out of it.

We now have better alternatives to powering our economy from both an economic and environmental point of view. It’s critical to move capital towards these solutions and furthermore, these innovations represent massive levels of wealth creation.? -??Jeremy Deems

9) Has the U.S. lost global clout?

Jeremy Deems: Yes, there are significant U.S. political headwinds. There?s an entrenched interest in Washington to not disrupt the fossil fuel economy. This makes sense. People circle the wagons around what?s worked in the past.

Yet, here we are, with a clean tech revolution. We have the opportunity to take the lead, not only with IP (intellectual property), but also with technology production. Yet we?ve chosen not to. Or we?ll slap tariffs on things and say we can?t compete. Well, the reason we can?t compete is because we chose not to.

How un-American is it to say that we can?t compete with China who did subsidize solar (why is that a bad thing)? That?s why their process is now less expensive. We, on the other hand, choose to subsidize fossil fuels. We made our bed, and now we?re whining about it. -Jeremy Deems

Meanwhile, some folks who aren?t in the fossil fuel business are investing in some of the most efficient solar panels and wind turbines in the world. We should have been investing in this as a nation all along and competing harder.?President Xi has gleefully stepped in as the world leader in renewable energy. He has clearly taken leadership right away from the United States. From China?s point of view, it is gaining credibility, cheap and clean power, and market share, all while attracting new talent. China is now encouraging technological innovation the way the United States had done for most of the 20th century.

The silver lining…

Jeremy Deems: But there?s a silver lining. There?s been an interesting development. And now we have the data to point to it, which we didn?t have a year ago.

  1. People in general have decided that their capital might be more important than their vote. We are seeing a digging in by the most progressive companies in this country to fight for What?s Next. Some of the largest companies in the world are now striving towards. or have already achieved. 100% renewable energy sourcing. This is a tough country to do that in right now, yet it proves that the economics are better.
  2. The cost curve on solar, wind, and storage units has plummeted, despite headwinds to keep it from doing just that.

We?ve definitely seen empirical evidence that what?s happening in Washington is also having a positive impact in the US private sector, but also globally. Some firms are saying:? we?ll do business elsewhere. Others are doubling down on doing things on their own.

In the future, when we look back at this, even the tariffs, we will see that this was fuel on the fire for change more than perhaps it would have been otherwise. -?Jeremy Deems

People have been galvanized into the B Corp spirit – to use business as a force for good. But also, in terms of a cultural and competitive performance point of view, companies and investors want to take a leadership role in investing in What?s Next, in investing for good.

10) How have your portfolios performed over time?

Betsy Moszeter: Our portfolio returns are completely solid. Without a ton of disclosures added, I can?t comment on them specifically in a written interview, so I encourage you to look up the actual results posted on our website.

The Next Economy Index

Our oldest product is 9 years old. ?We call it the Next Economy Index. The Index contains all of those companies we love that are creating solutions to one more of our greatest systemic risks,. They’re well-run companies with strong management teams, that are trading at a good price relative to their peers for their proven and expected good growth rates. The Index itself is a great portfolio; further, the stocks that make it into the Index are then eligible for the rest of our portfolios, which each have unique portfolio construction goals.

Performance figures for the Next Economy Index Portfolio is sourced from the Green Alpha Partners website.

Sierra Club Green Alpha portfolio

We also have a Sierra Club-branded portfolio that is 7 years old. We are the only financial services company allowed to use the Sierra Club proprietary social and environmental screening criteria to build investment portfolios. This is a mash-up of Green Alpha?s forward-looking investment approach, and screens it against the Sierra Club?s rigorous criteria, including evaluation of a company?s operating history.

Historical performance for Sierra Club portfolio by Green Alpha Partners

Performance figures for the Sierra Club Green Alpha Portfolio is sourced from the Green Alpha Partners website.

Growth & Income

Our Growth & Income portfolio is more than 5 years old and it looks at those companies in the Index that tend to be larger cap, stable companies paying higher-than-market dividend yields. This appeals to a wide variety of clients looking to benefit from both the growth of sustainability-oriented companies, and the relatively high dividends that these companies pay out. Most of our clients who select this portfolio reinvest the dividends to benefit from the compounding effect on their wealth creation.

Historical performance chart for Next Economy portfolio from Green Alpha Partners

Performance figures for the Growth & Income Portfolio is sourced from the Green Alpha Partners website.

Shelton Green Alpha Fund

Finally, our the mutual fund that we sub-advise is called the Shelton Green Alpha Fund (ticker: NEXTX) and it is 5 years old. Managing increasingly larger accounts as we grow, our company moves more money in the economy and, therefore, has greater impact. We also strongly believe that every investor should have access to high-quality investment portfolios. While we offer relatively low minimum account sizes on the portfolios I described previously, the mutual fund has our lowest minimums and is our best ?democratizer.? People can start investing with as little as $500 and have a well diversified equity portfolio. It?s also a great option for employers to include in a 401(k) plan, as employees are increasingly demanding access to quality ESG investing vehicles or else they won?t participate in the company?s plan.

Next Economy Select Pis offered as a separately managed account or as a mutual fund called the Shelton Green Alpha Fund (ticker: NEXTX). Performance figures sourced from Green Alpha Partners’ website.

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How To Reduce Your Tax Bill, Save For Retirement and Save the World

…all in one move.

Want to reduce your tax bill?

Tax time is just around the corner. One of the smartest moves you can make before April 17th to reduce your tax bill is to open a socially responsible traditional IRA. In one update you’ll reduce your tax bill, save for retirement and make impact investments that address global challenges, all while generating returns. Why a traditional IRA? It gives you tax advantages now vs later.

Comparison of Traditional v Roth IRA

*Don’t withdraw money before age 59? because you’ll be taxed on the gains and you’ll pay?a 10% penalty. There are exceptions.

**Roth IRA qualified distributions are tax-free if the account is at least 5 years old and the distributions are either taken at age 59?, upon death, upon disability or as a first homebuyer up to $10,000. Nonqualified distributions of accumulated income are taxed at ordinary rates. Same early withdrawal penalties apply.

Related: Turn Your Side Gig into a Tax Cut

How to Reduce your Tax Bill

Here are three easy steps you can implement today to reduce your 2017 tax bill.

1. Open a Traditional IRA

When you contribute to traditional IRA, your contributions are pre-tax. This means that you can deduct the amount of your contribution from your income, thereby reducing your tax bill now. You won?t pay taxes on your savings and earnings until you withdraw the money in retirement.

2. Allocate your contributions to 2017

If you open a traditional IRA before April 17th, allocate those contributions to 2017. This means you can deduct up to $5,500 off of your adjusted gross income before your tax is calculated ($6,500 if you are over 50). These contributions will decrease the amount of income you are taxed on for 2017 and, therefore, reduce your tax bill.

3. Even better, invest for a better world

Two of our favorite socially responsible investment platforms both offer traditional IRAs.?Aspiration Bank and Swell Investing have traditional IRAs that enable you to save for your future, save money on your taxes and save the planet.

Table comparing Swell and Aspiration sustainable investing options

Aspiration

The Aspiration Redwood Fund is a fossil fuel-free mutual fund that uses Environmental, Social and Governance (ESG) criteria to invest in sustainable businesses.

pyramid showing impact investing (top - most rigorous), SRI and ESG investing at the base.

ESG investing excludes companies that harm the environment (e.g. oil & gas, tobacco, firearms). Top of pyramid: Impact Investing looks for companies with specific and measurable goals (e.g. renewable energy and zero waste).

  • Lets you invest in sustainable companies. These are based on ESG (Environmental, Social and Governance) factors.?
  • Only requires $100 to start
  • Has no account or custodial fees, (which can normally be an average of $25 to $50 each year)
  • Allows you to pay Aspiration whatever you think is fair
  • Caps 3rd party fees at .5%

Swell Investing

Swell’s IRA uses SMAs (Separately Managed Accounts) for investors to create a customized impact portfolio of companies, across a variety of themes. These socially responsible portfolios are all based on Swell?s rigorous criteria for performance and impact.

What we like about Swell: you?legally own the companies listed in their portfolio. By comparison, investments in mutual funds and ETFs are actually investments in an organization which, in turn, owns the securities in the fund.

Swell investors can choose from 6 different themes today. Cool feature: you get to exclude up to 3 companies if you don’t want them in your final portfolio: ?

  • Green Technology?- Think electric cars and LED lights.
  • Renewable Energy?- Think wind turbines and solar panels.
  • Zero Waste? – Think recycling and repurposing.
  • Clean Water? – Think water filters and pipe repairs.
  • Disease Eradication? – Think immunizations and research.
  • Healthy Living?- Think nutritious foods and health centers.

Related:? Start Impact Investing for as Little as $50

Invest for a Better World without Giving Up Returns

You might be wondering: will investing for good mean that I’ll have to give up returns? The answer is no. You don’t have to give up profit for purpose or value for values. There are multiple studies showing that investing for a better world performs just as well (if not better) than regular index investing. Here’s a chart showing the MSCI KLD Index (a long standing socially responsible index) vs the S&P 500.

Chart of SP500 v MSCI KLD Social Index over 25 years

Related:? Growth And Wellness for Everyone:? Aspiration’s Investment Products

Even More Ways to Save on Taxes

If you’re already covered by an employer?s retirement plan, the ability to deduct your IRA contributions on your tax return depends on your income. Here are some guidelines for 2017.

A. If you are covered by your employer?s retirement plan

If you’re covered by an employer’s retirement plan, such as a 401K, check out the adjusted gross income ranges by your filing status in the table below.?Is your adjusted gross income less than the lower income amount in the range below?? If so, you can deduct the full amount of your traditional IRA contributions.

Is your adjusted gross income more than the higher income amount in the range below?? If so, you can?t deduct any traditional IRA contributions.?If your adjusted gross income is within the lower and higher income range, you can take a partial deduction.

Tax Filing Status 2017 Tax Year
Single or Head of Household $62,000-$72,000
Married Filing Jointly $99,000-$119,000
Married Filing Separately $0-$10,000

Related: Take Control of your 401K

B. If you are not covered by your employer?s retirement plan

If you’re not covered by an employer’s retirement plan, you can take the full IRA deduction unless your spouse is covered by a retirement plan.

Tax Filing Status 2017 Tax Year
Single No Limits
Married Filing Jointly
(spouse has no employer retirement plan)
No Limits
Married Filing Jointly
(spouse has employer retirement plan)
$186,000-$196,000
Married Filing Separately
(spouse has employer retirement plan)
$0-$10,000

Final Tips for a Traditional IRA

  1. Make sure to allocate your IRA contribution to the year 2017 if you want to reduce your 2017 tax bill.
  2. If you already have an IRA, the total amount you can contribute to multiple IRAs can?t exceed the annual limit. For example, if you’ve already stashed away $2,500 for the year in one IRA, you can only contribute $3,000 to any additional IRAs. (If you are over 50, the limit increases to $6,500 total.)
  3. You must be under the age of 70 ?.

You must receive taxable compensation such as:

  • Wages, salaries, and tips
  • Sales commissions
  • Professional fees
  • Bonuses
  • Self-employment income
  1. A non-working spouse can fund an IRA up to the limits as long as the working spouse makes enough taxable compensation to fund both accounts – $11,000 if under 50 yrs of age or $13,000 if over 50.
  2. Your earnings for the year must cover your IRA contributions. For example, if you only make $4,500, you can only contribute up to $4,500 to your IRA.
  3. You must start withdrawing money from your IRA at age 70 ?.

Save for your future. Save money on your taxes. Save the planet.

All in one smart money move.

Related:? Impact Investing Fun (and Easy!)


More from our lawyers: Well Wallet is an informational platform for personal finance, and unless specifically stated otherwise, the content is provided to you without charge. Well Wallet is not a financial planner, broker, or tax advisor. We cannot provide any advice for your specific financial situation. Our goal is to help you understand how to better manage your finances and how your finances affect your life goals, but we can never make any guarantees about your financial future (or present).?The material here is meant for informational purposes only.? It should not be considered legal or financial advice.? See our Terms & Conditions for more information.

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What Holds our Interest Defines our World

Who is Capturing Your Interest?

The word interest is …interesting. There are two definitions:

  1. State of wanting to know or learn about something or someone.
    ?He looked around with interest?
  2. Money paid regularly at a particular rate for the use of money lent, or for delaying the repayment of a debt. “He’s paying 17% interest on his loan.”

If you really think about it, these definitions are more connected that they seem. Why? Because the way we use our money is an expression of who we are.? It is true that what we appreciate, appreciates. Spending time with our kids, putting in the hours to grow a business or volunteering at our favorite charity amplifies all of those aspects of our lives.? And guess what? The interest we give to banks has similar power.

How Banks Use Your Interest

When you place your money in a bank account, it doesn?t just sit there. The bank uses your money by lending it out to others. They make money from lending out YOUR money. And you may not always like where they put it. Some banks invest in things like private prisons and fossil fuels, or engage in shady business practices that hurt customers or communities. ?By the way, the same goes for the interest you pay on your loans.

So… How Much Money are we Talking About?

How big is the impact of your financial interest on the world? In 2017:

  • Global companies borrowed more than?$3.74 trillion dollars?to expand their businesses. Where do banks get the money they lend out to companies? You guessed it: from your deposits.
  • U.S. household debt reached $13 trillion dollars. The banks make money from the interest you pay on your loans, mortgage and credit cards. The average U.S. household paid almost $1,000 of interest just on their credit card balances.

Use Your Money To Express Your Deepest Self

Think about where you put your interest. Money has power. It is a mirror of who you are. It is an instrument that can help you evolve your own view of the world.?When you align your financial life with what you stand for, you will feel truly prosperous.

Start Small for Big Impact

This doesn’t need to be a huge overhaul. You can take small steps toward lining up your existing money (cash, loans, credit cards and investments) with institutions that share your evolving worldview.

No matter how much money you have, you have power to express your deepest self by the way that your money moves in the world.?Take your first step.?Check out these resources:

Wanna Change the World? Change Your Bank

Green Banking: We Found an Amazing Checking Account

4 Ways to make Real Money with Sustainable Investing

Divorce Your Bank in 8 Simple Steps

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How to Incite Change, even as a Small Shareholder

Have you ever wanted to influence Verizon’s decision on net neutrality or McDonald’s recycling policy but didn’t know how? Social media and petitions only get you so far. There is another way to have real impact.

If you?ve ever looked at a large corporation?s power, it may seem impossible to nudge them in a socially-conscious direction. Sure, Amazon, Berkshire Hathaway, and JP Morgan Chase are getting together to work on healthcare. That?s amazing, but how can you influence other companies who aren?t taking those kinds of initiatives? You don’t have to be Google’s largest shareholder to be influential. Your stock ownership and proxy votes could do just that.

How does stock ownership work?

Publicly-traded companies offer pieces of ownership, or shares, in their companies in exchange for money. Selling pieces of their ownership ?pie,? their stock, allows them to raise money as a corporation. Each share may only be a small piece of a company?s total ownership ?pie?, but people with a lot of money can buy a lot of shares in one company.

Once you own a share (or many shares) in one company, you might get paid a little money for each share you hold (these are called dividends). You can also hold onto your shares for a long time and wait for the value of the company to skyrocket. Then you can sell your shares at a higher price than when you bought them and make some money that way, too. Most people understand company ownership as a financial tool for shareholders, but company ownership can include some other perks, too.

Related: introduction to investing

Your Voting Rights as a Shareholder

Some stocks include voting rights, and this is where you can really create your impact. Large publicly traded companies will have boards that they have to answer to. The largest shareholders usually sit on these boards. While you may own .0001% of a company?s stock, these board members may hold 5-15%. The board is the group that provides oversight to the CEO and drives the company in a direction that they believe is best. They will periodically call meetings where they will vote on important issues like CEO changes or new sustainability goals. However, not every shareholder can meet to vote on these issues every time, and now, almost 400 words into this article, we?ve gotten to why you (yes, you personally) are so vitally important.

Related: making real money with sustainable investing

Every Vote Counts!

If shareholders can?t attend a shareholder meeting, they can cast proxy votes instead. Proxy votes are shareholder votes that are cast remotely outside of the shareholder meeting. They are sent to every shareholder with voting rights, so they can vote on the issues that?ll be covered at the shareholder meeting. These may seem like tedious things to take care of, but they can be tremendously important.

Let’s say you care about net neutrality and you own a few shares in Verizon. You can make your voice heard through your right to cast a proxy vote.??You may only hold a few shares of common stock, but each one of those shares may be worth one vote each. Your vote could be the tipping point on important shareholder issues. If you?ve purchased company stock and you?ve got voting rights that come with it, you can vote with more than just your dollars. You can literally cast votes!

Only 29% of retail investors use their power to vote on shareholder proposals. Yet more and more investors are realizing the power they have to impact change through the investments they own. It’s time to make your voice heard.

Related: the new landscape of sustainable investing

But I own a tiny sliver of a GIANT pie!

A lot of you reading this, if you even own stocks, may not be massive shareholders who wield material power over a CEO. However, there may be a bunch of other shareholders like you who own tiny pieces of ownership. Collectively, the tiny shareholders may make up a relevant piece of the pie and carry weight on important issues. You may own .01% of a company, but if there are 5,000 other people who share your values and your ownership percentage. Suddenly, you all own 50% of the company and can vote your values.

Even if your vote doesn’t win a majority vote, you can get the board’s attention and create real change.

Case in point: McDonald’s held a shareholder meeting in 2011 to vote on whether they should eliminate styrofoam cups. Even though the proposal was supported by 30% of shareholders, this demonstrated huge acceptance for an environmental proposal. The result: McDonald’s launched a pilot program to eliminate styrofoam cups.

Related: Read our article on whether an sustainable roboadvisor is right for you

Back in the real world though?

You won?t have 50% ownership unless you?re putting some big money into a startup. If a company even offers 50% of it?s company to the public, large financial firms will take the big pieces and leave slivers for the rest of us to squabble over. However, there could still be 1-10% of the company that?s ripe for squabbling. That?s still a significant piece of the pie in tight votes. The few hundred stocks of Google could be the tie-breaker that decides on a major sustainability initiative. You wouldn?t want to throw that opportunity away, would you?

Remember, getting critical mass of votes, even if they are not the majority vote, will get the board’s attention. Boards hate headline risk. If consumers start posting their views via proxy votes (which is their right as owners in the company), the brands will listen.

Related: what we can learn from cheapskates on the internet (probably the same ones buying stocks with voting rights.)

The Future of Business

Sustainability is the future of business. As consumers care more deeply about the impact they have with their purchases, businesses are moving to meet those demands. Industries like green energy are young and growing, making them breeding grounds for entrepreneurs and promising opportunities for investors. The link in my inbox that spawned this article actually lists upcoming shareholder votes on a wide range of sustainability and ethics initiatives. If you or someone you know has voting rights in these companies, they can cast proxy votes on these issues.

If you have even a passing interest in investing, you should understand the power of shareholder votes (aka proxy votes). You may not be the one shareholder who owns half the company. But you may be a part of the group of shareholders that turns the vote. Don?t throw those proxy votes away. Many votes can be cast online, so it’s convenient. Shareholder votes can influence big companies to do right by the planet and the people living on it.


Photo by?Dylan Hikes

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