Put your money where your bumper sticker is, Part 1

The first in a two-part series on money.


Thanks to everyone who’s reached out to say hi or with an offer to help. I can’t wait to collaborate with you, and I’ll have news to share about that soon. Until then, the best thing you can do is forward this newsletter to that random celebrity who still owes you for saving their ass in high school. Force them to plaster this across all their social channels. Now is the time to leverage that video.

I started researching this send with a question: What can I, Regular Person, do with my money that will make a positive impact? I was in search of a typical one5c answer: a small act or two that, if performed by enough people, could make a big difference. 

Joe: I’m an optimist! We can do this! 

Money: [fills bucket with cold water and math]

I don’t know why I expected anything about money to be simple. (Probably because I’m an absentminded English major with the business acumen of a rocking horse.) I have two different apps that feed parking meters, use five different services to buy stuff online, and waited four months for our mortgage lender to set up auto-pay. Even modest money-related tasks are hard. 

With that in mind, back to the original question: How can a regular person use regular sums of money to make a positive impact? Huge question, meet complex issue. Let’s break it down.

Here is my understanding of how average people use money:

  • Buy stuff for themselves

  • Invest some

  • Save some

  • Give some away

I need to acknowledge the privilege dripping from this list. Many folks do not get beyond the first item. Financial security is a luxury, and my aim here is to talk about how those of us with that luxury can use our positions of relative comfort to benefit everyone.

I. Buy stuff

Sorry, aspiring one5c-backer, this is not where I drop my affiliate-code-appended list of must-have kitchen gear for cooking climate-friendly and/or vegan cuisine. In fact, I’m not going to spend a lot of time on this section, because the best answer is to buy less crap. 

But if you must accessorize your air fryer, look into the social and manufacturing creds of companies you patronize, and try to minimize how far your goods travel. This is pretty basic, but we are spoon-fed so much of what we know about what we buy, it’s easy to forget to ask a couple questions before clicking “add to cart.”

You’ve heard the expression food miles, which refers to the distance something covers on its way to your tummy. It’s important to keep this in mind when shopping. (Remember the potato?) And if you have access to and can afford local food, this kind of action makes a difference.

But there are also shoe miles and reusable coffee cup miles and lip balm miles and so on, which means for people who live in America, Made in the USA can be a mark of sustainability.

Did you know Nalgene makes its bottles in Rochester, NY? They don’t have to cross any oceans to end up covered in stickers and clipped to your backpack, and that cuts a lot of carbon. Even if you’re on the West Coast, it’s less than half the distance to ship a bottle to you from the Nalgene factory then from the port of Shenzhen, China, where many consumer goods begin their march to our Marts.

And Nalgene the company does seem like a decent corporate actor. Its water fund “supports domestic communities struggling with access to clean water by partnering with grassroots nonprofits to raise funds and awareness,” and it produces a line of bottles made from recycled plastic. Some quick due-diligence Googling (“Nalgene pollution,” “Nalgene environment,” etc.) didn’t pull up any red flags, and last year the company committed to employing post-consumer materials in the production of all its bottles. Good.

Bad: Look at the corporate bullshit language in this “commitment:”

by the end of 2021, we will strive to convert all production of our reusable water bottles to Tritan Renew material, a revolutionary resin made from 50 percent recycled material.

Imprecise date: check. Verb (“strive”) that allows them to not actually accomplish anything: check. Action actually consists of buying someone else’s product: check.

The bad press release is a demerit, but Nalgene still doesn’t seem like the kind of company that would set a shrub on fire to celebrate me buying one of its bottles. What kind of monster picks on Nalgene? Anyway, this information in hand, I got my wife one of their plastic jugs this past spring. I’m not spinning up a Spotlight bureau over here or anything, but that’s the kind of research I often do before I buy something. It takes a few minutes, and it’s more interesting than Instagram. 

This is an easy habit to develop, and if enough people work it into their process, companies will know we’re holding them to account with every purchase. Spike the traffic on the sustainability section of every website. I guarantee you people will notice. 

For what it’s worth, I drink out of a Hydroflask. I love it. It was made in China and its publicly available materials don’t advertise much in the way of conservation efforts beyond a hashtag and a partnership with the Surfrider Foundation. I’ve had it for a few years, though, and I try to use stuff for as long as I can—to better amortize the resources that went in and the carbon that came out of its birth. In short: buy less shit and hold onto it. 

II. Invest some

If you’re fortunate enough to have a job with a 401k or enough extra scratch that you can invest on your own, you might have come across various funds that describe themselves as sustainable. According to investment giant Morningstar [PDF], “72% of the United States population expressed at least a moderate interest in sustainable investing.” Cool. (Also: skeptical emoji that 72% of the population thinks about investing at all.) This kind of fund often carries the label “ESG.”

“ESG stands for Environmental, Social, and Governance,” says Kate Yearwood Young, founder of Yearwood Young Advisors, a fiduciary financial advisory firm. “I think of it as three components that you can look at to see if a company is being a good corporate citizen.” And while you might think an ESG fund holds shares of companies that are making the world a better place (I did), that’s not the case.

ESG doesn’t mean give money to companies doing good things. It’s more like avoid the financial risk posed by companies that are doing bad things. Take the environmental aspect as an example: “These issues are going to become more and more regulated, so companies who are doing bad things environmentally may end up being subject to sanctions or fines or government penalties that make it harder to do their business,” says Young. Same goes for companies with bad track records in other pressing areas like social justice, the way they treat their employees, and how they elect their boards. “The idea is that you may do better avoiding those companies, because over the medium to long term, they’ll bring in lower returns,” she says. 

That sounds OK, right? Who wouldn’t rather make money off of companies that aren’t doing bad things? The rub is that “good” and “bad” are subjective, even in these three specific contexts. “Anyone can say they’re an ESG fund, and there’s zero control or regulation around that in the U.S. today,” says a money manager from a significant firm who spoke on condition of anonymity. “All you need are some marketing materials to tell you why the fund is sustainable, even if it’s complete bullshit.”

In the U.S. there is no standard set of conditions a company needs to meet to be included in an ESG fund. Everyone does it differently. Some firms rely on third-party metrics like those compiled by Sustainalitics, which assigns each company a risk score. This is promising, but it also over-simplifies. How do you rate a company that has great environmental cred but earned a rep for treating its employees like garbage and terrible corporate governance? 

You rate it as “medium risk,” because that’s Tesla

It’s a good example of how a company that’s engaged in an environmentally positive business could find itself excluded from a sustainable investment product, and it illustrates one of the limitations of a rating system like this. 

(Tangent: 1-800 Flowers is also a medium risk company. I do not know why, but I am going to find out. Clicking around on sustainalitics.com is a surprisingly fun.)

Other funds select companies thematically, from sectors they deem to be both socially defensible and key to future growth: clean energy, genomics, and healthy eating are examples. A third technique for compiling an ESG fund is negative screening, where you basically take a list of every public company, cross off the ones that meet your definition of bad—like Big Tobacco and fossil fuels—and compile your investment using whatever is left. 

No matter the criteria, ESG funds tend to hold a lot of the same stocks, in similar concentrations. Check out the top 10 holdings in these funds from Fidelity (top) and Vanguard (bottom), two of the largest retail investment firms:

They’re the same companies in slightly different concentrations. Now check out this oil-fired non-ESG S&P index fund from Fidelity:

Eight out of the top 10 stocks—which comprise about a third of the fund’s holdings—are the same. And one of the main differences is that the ESGs have JP Morgan and Home Depot. Why? Because nobody wants to invest in something that loses money, and “if you’re doing ESG right, you’re explicitly leaving money on the table,” says that anonymous money manager. “The products are massaging things around the edges so you don’t notice the return give up.” Yes, those index funds may exclude bad actors and bulk up on “better” companies, but, in the end, both are making their money off of reliable S&P heavies. It’s not like they’re funneling money at scrappy eco-startups who need the cash.

Even if your ESG outperforms a standard index fund, you could end up pocketing less. While the standard S&P index fund carries a fee of 0.03 percent, Fidelity’s ESG fund costs 0.15 percent, presumably because it’s more expensive to manage. On an absolute level, it’s only a difference of 0.12 percent, but you’re still paying Fidelity five times as much to own mainly the same stocks.

Why? Both the money manager and Young used the phrase “make you feel good” a lot when talking about why people would invest in ESG funds. There also may be some value in moving money over to ESGs because of the signal it sends to the market and the financial industry. Just like our water bottle research, companies notice where consumers are focused. 

You might be a little bummed out now. Sorry. On a consumer level, we don’t have access to the kinds of investments that can be both good for the planet and good for our portfolios—directly financing wind farms and the like.

Young, for her part, sees potential in a different approach to sustainable investing that’s starting to gather momentum. “There are activist managers investing in companies that you might say are bad, and they are trying to use the power of shareholders to change how those companies operate,” she says. One group, a hedge fund called Engine No. 1 recently used its holdings to install three members on Exxon Mobil’s board. The aim: reduce the company’s carbon footprint. 

Activist ETFs, take my money. 

III. Save some

Here’s an excerpt from an email I recently received: 

Interestingly, individuals’ bank partners/choice of bank is largest contributor to their personal footprints.The largest 4 Wall Street banks—JPMorgan Chase, Wells Fargo, Bank of America, Citibank—are the top 4 largest financiers of fossil fuels in the world, and their numbers are going up rather than down, even though they have made various net zero pledges, etc. Morgan Stanley & Goldman Sachs also rank at the top of the bad actors list on climate. I’ve been working on this a lot … and am happy to chat more if you’re interested. 

Don’t go yanking your coins out of BofA’s piggy just yet. As with investing, nothing about this conversation is simple. I’ll have more on banking next week in Part II of this series. Cliffhanger!

Take care of yourselves—and the rest of us, too.

Joe Brown


*one5c is a reference to the goal of limiting Global Warming to 1.5 degrees Celsius.