Many consider the greatest challenge in green building to be the choice between the environmental option and the economical one, but that’s a dichotomy that’s consistently been proven false. In the investing world, there’s a similar false dichotomy: making a profit versus being socially responsible. Steve Schueth, the president of First Affirmative
Financial Network and an investment manager with a portfolio of more than $885 million, says it’s possible to do both.
gb&d: What attracted you to socially conscious investing?
Steve Schueth: I’ve been in financial services since 1977, except for a brief three-year hiatus, during which I worked as director of development at the Wharton School at the University of Pennsylvania. While there, I met two Wharton alums who had founded Calvert Investments, a mutual-fund pioneer in the sustainable, responsible, impact-investment industry. In conversation with them, I began to realize that making money just to make money wasn’t all that interesting to me anymore.
Once I moved to Calvert and got involved in conversations with clients about what they care about, I got increasingly excited about helping investors connect the dots between their values and their money, assisting them in embracing their purpose in life and becoming more fully actuated human beings.
I started spending all my waking hours working with investors who are interested in putting money to work to create a truly sustainable future. We are directing the flow of capital in a way that’s transformative.
gb&d: How does your business work?
Schueth: Most clients are introduced to us through a network of financial advisors in local markets. They turn to First Affirmative when appropriate to manage a client’s portfolio. We also work directly with large institutional accounts. For each client, we customize accounts to the best of our ability. For small accounts—$50,000 to $300,000—we will generally recommend a managed mutual fund that will own 18 to 20 funds. We have a variety of models designed for different levels of market risk, and we offer faith-based models and fossil-fuel-free models that more accurately reflect the values and priorities of certain clients. As we get into larger accounts, we have a robust, unified-managed-account program that customizes at three levels. At the first level, we diversify the account across asset classes: large-cap equity, fixed income, real estate, etcetera. At the second level, we allocate assets across investment managers—we have 25 managers and about 75 investment strategies. At the third level, we can add avoidance criteria at the client-account level, so if you tell me you don’t want to ever own a particular company or companies, those companies will never get into your portfolio. Sometimes clients don’t want one stock, like Walmart. Others choose to side-step a larger group of companies, like fossil-fuel-extraction companies.
gb&d: What’s the impact of what you do?
Schueth: Visualize a continuum. On one end, you have directly impactful investments, like putting money into a startup company. That’s risky business. We operate on the other end of the spectrum, populating client accounts with publicly traded securities. There, the impact story is more focused on shareowner advocacy.
When hundreds of thousands of investors vote our proxies in support of key social, environmental, and governance issues, it’s a powerful way to encourage the company to be a more responsible corporate citizen. If we can get 40 percent of the vote, which has happened often this proxy season, that’s meaningful. It gets management’s attention and often results in dramatic changes in the way a company behaves and the impacts on the world around them.
Consider Walmart: It’s still a highly controversial company from a responsible investing perspective, but a few years ago, it started asking its suppliers to embrace sustainability, especially in reducing packaging, and the positive ripple effects have been phenomenal.