Sustainable and socially responsible investment (SRI) opportunities are knocking louder than ever, but many individual investors aren't being directed to the door.
Just 20% say their financial advisor proactively brings up the subject of SRI with them, found a 2006 study commissioned by Calvert Group. Additionally, 72% of investors with an advisor who responded to an Allianz Global Investors Survey released in early 2010 indicate that their advisor had never recommended an environmental investment.
Lack of SRI options isn't the problem. Last year, 250 socially screened mutual fund products with $316.1 billion in assets were available in the U.S., up from 55 SRI funds with $12 billion in assets in 1995, according to the Social Investment Forum's (SIF) 2010 Report on Socially Responsible Investing Trends.
"How large the SRI industry is and how much it's under the radar" surprises financial advisor and portfolio manager Art Tabuenca, who's been trying to make it more visible for investors and advisors. His introduction to SRI came while working for a large investment firm in the 1990s. His endowment and foundation clients wanted to screen out investments that weren't socially responsible and Tabuenca, at a loss for such information, started to do research on his own.
In 2000, he launched Blue Marble Investments, a San Luis Obispo, Calif.-based SRI firm which now has about 450 clients. Tabuenca, who says roughly half his business is 401(k) rollovers, initially created a growth portfolio and then added aggressive, balanced and conservative models. Four years ago, he also began offering these SRI EarthFolio portfolio styles through the Envestnet platform.
Blue Marble, which looks at environmental, social and governance (ESG) criteria, takes its name from the 1968 Apollo 8 spacecraft mission which described the earth as a "tiny, lovely and fragile blue marble hanging in the blackness of space." While some negative screens are used [companies that engage in sweatshop labor or have ties to repressive regimes are not allowed], it mostly uses positive screens to seek out corporate leaders in ESG.
Instead of individual companies, Blue Marble invests in baskets of mutual funds and exchange-traded funds (ETFs). Its mutual funds holdings come from SRI leaders [including Calvert, Parnassus and Pax World], as well as from mainstream managers getting into the SRI space [such as Gabelli Funds, Ariel Investments and Neuberger Berman]. Tabuenca started using ETFs about three years ago to highlight a particular sector, such as water or clean energy, or to give a very diverse environmental boost to a portfolio at a low cost.
He looks at risk-based performance, underlying fees, management tenure and performance in an up or down market-traditional portfolio management practices-and also speaks with fund managers. Transparency is very important to Tabuenca.
"Creating an SRI focused investment firm wasn't enough, investors wanted to kick the tires before investing their money," he says. Visitors to the EarthFolio Web site (www.earthfolio.net) can click on the portfolios to see their holdings, check out performance, and evaluate social and environmental impact.
For advisors looking to learn about SRI, Tabuenca suggests making the SIF Web site (www.socialinvest.org), which includes research and tools, their first stop. Advisors also need to think about how they're going to market to customers.
"Blue Marble has clients in 30 states which makes our front door the home page of our Web site and the doorbell our toll-free number," says Tabuenca. He does some advertising on the SIF and SocialFunds.com Web sites and in green trade publications. He also gets leads every week through Google AdWords and works hard on getting referral business.