Financial Advisor contributor Paul Ellis recently interviewed Jane Carten; president, CEO and director, Saturna Capital; to discuss her firm’s commitment to sustainable investing strategies.

Ellis: Jane, as a second-generation owner of Saturna Capital and a portfolio manager for the firm you have been instrumental in developing the firm’s commitment to sustainable investment strategies that incorporate the use of ESG metrics into stock and bond mutual fund portfolios. Tell our readers why you’ve made these choices as an asset manager.   

Carten: I believe that we’ve crossed a chasm from early adopters of sustainable investing to the larger investor community in society, and I think that we’ll see a tremendous uptick towards sustainable investing over the next 15 years.

As investors become more educated about the benefits of good ESG characteristics within a company, the more companies will take that awareness seriously. Investors not only notice that there’s a performance benefit but also the benefit of having a portfolio that’s aligned with what they’d like to be doing in the world. I think that there’s long-term upside in this part of our industry as ESG metrics gradually become embedded in all investment decisions.

Ellis: As a portfolio manager, what kind of ESG metrics do you focus on in stock selection?

Carten: We have a proprietary system that gives the individual securities that we’re looking at an E score, an S score and a G score. Then we have an F, financial score, as well. If they perform well in these metrics, they’ll get a rating of A to F. So, I’m looking for companies that qualify initially on their ESG ratings. Then I’m looking for companies that I think are undervalued and are going to be a good long-term investment for our shareholders.

Ellis: Jane, you started working with the firm in June of 1997. What were your initial responsibilities?

Carten: When I began working for Saturna, my role was systems administrator. I was in-charge of the computer network, being sure that all of them were in working order and had the software they needed to stay current in the industry. I expanded that role into desktop publishing and took care of the website and the marketing materials for the firm. Eventually, I became chief information officer and that expanded my responsibilities to being in-charge of all technology, including the software development portion of our business.

We develop software that we license to other mutual fund firms, so as chief information officer I was in-charge of the technology department and the marketing department. I moved from there to executive vice president for a couple of years to make sure that I was ready to become president and CEO of Saturna Capital, which I did in 2009.

Ellis: What advice do you have for young women who think that sustainable finance might be a good career opportunity, whether it’s marketing, being an advisor, an analyst or managing portfolios?

Carten: It’s a wonderful industry for women to join. I know firms are looking to hire women, and they see the benefit of the diversity of thought. There’s huge opportunity because of that, so it’s a terrific time for women who find this to be an interesting career path.

We can help people in ways that a young woman working in finance may not initially see. The fact that you’re as important as a doctor, for example, because people’s financial health is one of the most telling factors related to how good their quality of life is going to be.

I think a lot of women choose careers because they believe they’re going to make a difference in somebody’s life. Making a difference in people’s financial lives is very important and can be hugely satisfying.

Ellis: Your dad is still chairman, a director, and a portfolio manager for Saturna Capital. What’s it like for you, being the second-generation future chair of the board and a director of the firm, to work with a slew of accomplished and senior male employees?

Carten: I think it solidifies my position on the investment committee, because they really need a woman’s perspective when evaluating the investments that we make. I take that role seriously and I believe that the rest of the investment committee feels that it’s a benefit to have that diversity of thought.

It is difficult to attract other women into executive roles in the financial industry, although we’ve had some success. Our vice president of technology is a very accomplished woman who came to us from E-Trade.

I feel good about building toward a more balanced executive team in the future. And I think being second generation is helpful in my role as CEO because I have been so close to the business my entire life, and have learned a lot of lessons along the way. I saw my parents sell their first investment firm, and I have no desire, based on that experience, to consider selling. I know exactly what it looks like in terms of changing the company and I don’t want to do that. I think that’s the most important thing that I’ve learned from being second generation. 

Ellis: Low cost index and ETF portfolio strategies are gathering a lot of assets and putting downward pressure on management fees in the sustainable investment industry. How does an active manager like Saturna Capital compete with passive strategies? 

Carten: One of the benefits of being an active manager is that we can identify companies that are just turning the page into the future, and realizing how important their part of being on our planet is. We believe that, going forward, they will take that responsibility seriously. Those are the companies we want to find. The ones that are committed to doing the right thing and haven’t yet realized the financial benefits of that, which we are confident will happen. The better corporate citizen a company is, the greater likelihood for it to do well long into the future. A passive strategy has to wait for those metrics to be fully formed. We can identify companies that are just on the cusp. 

Ellis: The Saturna Capital sustainable and ESG funds are available on multiple platforms in the industry. How do you establish new platform and broker-dealer relationships for your portfolios?

Carten: We’re adding platforms for the sustainable funds based on investor and advisor demand. We’re also working with our public relations firm to get the story out there so that advisors and investors can learn about the portfolios.

Our marketing team is working with other ESG and impact-focused asset managers, NGOs and consultants to educate RIA advisors through sustainable investing symposiums. These are convened in cities around the country where there is untapped potential for relationship building with the advisor community. We’ve done four since April with good results.  I’m looking forward to panelling for the upcoming symposiums in Philadelphia on Sept. 12^th and Washington, D.C. on Sept. 13^th.  

Paul Ellis founded Paul Ellis Consulting to work with financial advisors who want to integrate sustainable and impact investment strategies for their clients.