There is a Strong Business Case for Racial Equity, But Investors Must Look Beyond the Data

By Stephanie Cohn Rupp

George Floyd was murdered by a white police officer on May 25th, 2020–just a few days before the anniversary of the Tulsa Massacre on June 1st. On that day in 1921 a white mob attacked, burned and bombed Tulsa’s Greenwood District; a thriving Black business area known as Black Wall Street. Hundreds of Black Tulsans were murdered and over thirty-five city blocks of homes and businesses were destroyed. Overnight, one of the most prosperous Black communities in the nation was reduced to ash and rubble.

In May of 2021 Viola Fletcher, a 107-year-old survivor of the Tulsa Massacre, testified before a Congressional House Judiciary Subcommittee about how this act of racially-driven violence and destruction has haunted her throughout her long life. “I have lived through the Massacre every day,” she said. “Our country may forget this history, but I cannot. I will not.”1 In the same testimony, Viola Fletcher also shared details of how racially-driven economic oppression has impacted her daily existence. “Most of my life I was a domestic worker serving white families,” she said. “I never made much money. To this day I can barely afford my everyday needs.”2

The congressional testimony of Viola Fletcher, and the confluence of these two horrific anniversaries, the death of George Floyd and the Tulsa Massacre, reminds us how much work we have left to do to dismantle systemic white supremacy in our society and our economy in the United States.

What can investors do to advance racial equity?

I recently participated in an investor dialogue hosted by RFK Human Rights focused on the question “One year after the tragic murder of George Floyd, how can leaders in finance move from talk to concrete actions in their hiring practices, compensation equality, asset allocation, and leadership diversity from a racial equality standpoint?”

I recommend watching the full conversation here, but I thought I would share a few reflections.

Sancia Dalley, Senior Vice President at RFK Human Rights, started off our conversation by citing statistics about the state of the racial wealth gap in this country:

  • Research from the Federal Reserve Bank at St. Louis showed that between 1992 and 2016 college-educated white Americans saw their wealth increase by 96% while college-educated Black Americans saw their wealth fall by 10%.3
  • The Brookings Institute found that the net worth of a typical white family in the United States is 10 times greater than the average net worth of a Black family.4
  • Only 44% of Black households own their homes compared to 73.7% of white families.5

There is arguably greater awareness and more conversation about these statistics and about racial inequality in this country than ever before. But how much of this talk is being backed up by action?

After the death of George Floyd, there was an outpouring of commitments to racial justice from corporates and investors. At the RFK dialogue, panelist Olivia Knight, who is the Racial Justice Initiative Manager at As You Sow, shared that after Floyd’s murder her organization began keeping a racial justice scorecard to measure the actual progress made by S&P 500 companies on racial justice issues. As of March of 2021, As You Sow found that a significant portion of the S&P 500 scored zeros across all of their KPIs. They also found that only 36% of companies had actually given financial support to racial justice causes, much lower than the percentage that made public statements pledging that very support.6

This data indicates that too many public commitments to racial equity and racial justice amount to impact washing–it is more a marketing tactic than an authentic, action-backed commitment to change. To ensure authenticity we must look beyond public statements and seek action and accountability. We must look to see who is in leadership. Is racial equity evidenced in the C-suite or in the boardroom of these corporations? Is pay equity addressed at all levels of the firm? Unfortunately, not a lot has changed on that front.

We, as investors, must demand change and put our dollars into companies that are showing their commitment to building racial and gender equity and dismantling white supremacy. We can use shareholder advocacy to move companies toward action. We can invest in Community Development Finance Institutions (CDFIs) that drive capital and build wealth in Black communities by supporting Black-Owned businesses. According to a CDFI expert at Opportunity Finance Network, Amir Kirkwood, demand for financing of Black-owned businesses in the US outweighs supply of capital by five-fold. We can insist that justice, equity, diversity and inclusion are made a standard part of the due diligence process and that we not shy away from investing in CDFIs – not as philanthropy but as an intrinsic part of the investment portfolio. Our firm can attest that authentic EDI investing is achievable. As a manager of managers, Veris aims to select best in class managers across asset classes and sub-asset classes and we seek to weave justice, equity, diversity and inclusion throughout our due diligence process.

Going beyond the business case for racial equity.

We can offer plenty of data from economists showing that diverse teams outperform homogeneous teams – as diversity of thought yields better risk mitigation and more holistic problem solving. But we need to go beyond proving that diverse teams outperform the market to actually invest in this way. Cynics will always find counter-examples, or make the case that there is insufficient data, in private markets especially, or that we do not have enough business cycles to prove our case. I feel strongly that we should not need to make an economic argument because we do not need a business or economic argument to end human trafficking and slavery. This horrific system was and remains economically beneficial to the few who perpetrate it. So, when a financial professional or fiduciary in the industry asks for the economic benefit or business argument for EDI investing, I reply by asking in return “economic benefit for whom?”

In terms of macro-economic data, there is a huge opportunity cost of racial discrimination. Lack of investment in Black entrepreneurs and communities through business lending, consumer lending and mortgage finance means that the United States loses trillions of dollars of GDP.  A 2020 study from Citigroup found that the U.S. economy lost $16T over the past 20 years because of discriminatory policies surrounding Black wages, education, housing and investments.7 That is a huge opportunity cost, not only for investors, but for the whole economy in this country.

If you’re an investor and you want to back the future of the United States, we believe you need to be growing economic wealth that touches all communities. Investing in all communities helps us avoid this growing wealth gap and wellness gap for the benefit of all of us. This universal approach to wealth creation also will have political ramifications and enable us to become a truer democracy – with power to “all people.” It requires taking a longer-term view as an investor.

All that being said, I believe we have to look beyond both short term and long-term data. There are certain decisions that need to be made simply because they are the right thing to do. We must invest in underrepresented and historically marginalized communities because we care about all of humanity. We should invest in all communities because we believe that, as the late social entrepreneur Leila Janah once said, “talent is distributed evenly, but opportunity is not.”

We cannot undo what was done to George Floyd, Viola Fletcher, the untold numbers of Black Tulsans whose lives and livelihoods were lost and destroyed in June of 1920. But we as investors can put our efforts and our capital towards building an equitable future in which safety, health, opportunity and wealth are equally distributed across all communities in America – without having to necessarily make a business case for doing so. This should be an intrinsic part of our mandate as impact investors, in how we invest and how we operate.

Sources

1https://www.washingtonpost.com/history/2021/05/19/viola-fletcher-tulsa-race-massacre-survivor/

2https://tulsaworld.com/news/local/racemassacre/watch-now—1921-tulsa-race-massacre-107-year-old-bartlesville-woman-other-last/article_17595f86-b7fa-11eb-bbe5-a3aa9185906f.html

3https://research.stlouisfed.org/publications/review/2017/02/15/family-achievements-how-a-college-degree-accumulates-wealth-for-whites-and-not-for-blacks/

4 https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/

5https://www.marketwatch.com/story/black-homeownership-has-declined-since-2012-heres-where-black-households-are-most-likely-to-be-homeowners-2020-06-30

6 https://www.asyousow.org/our-work/social-justice/racial-justice

7 https://www.citivelocity.com/citigps/closing-the-racial-inequality-gaps/

The foregoing reflects the opinions and views of the authors.  All expressions of opinion reflect the judgment of the authors as of the date of publication. There is no guarantee that the views and opinions expressed herein will come to pass. Additionally, this document contains information derived from third party sources.  Although we believe these third-party sources to be reliable, we make no representations as to the accuracy or completeness of any information derived from such third-party sources and take no responsibility therefore.

Shareholder Advocacy Update: Veris Clients Leverage their Equity Ownership to Advance Diversity, Racial and Social Justice, and Environmental Stewardship

By Pat Addeo and Karen Walls

Our shareholder proxy engagement initiative with Aperio and As You Sow this 2020 – 2021 proxy season once again demonstrated that engagement with corporations on ESG issues is an effective tool for bending the arc of capitalism to benefit all stakeholders. This year was a transformational year and shareholders took little time to address issues concerning COVID-19 and the social justice and wage inequities many in our country experienced. The Trump administration also proposed and then enacted changes to the SEC shareholder engagement Rule 14a-8 before the election of a new administration.

Highlights of this Year’s Veris Shareholder Resolutions

Veris clients signed onto 101 shareholder engagement opportunities this proxy season. Top resolutions our clients engaged in focused on Diversity, Equity and Inclusion, as well as the Environment and Climate. Resolutions targeted Amgen, Netflix, Facebook and UnitedHealth Group to urge greater disclosure on diversity data as the groundwork for measuring a company’s progress in hiring, promoting and retaining employees of diverse backgrounds and gender.

The resolution with UnitedHealth Group requested a report on the company’s diversity, equity and inclusion plan and was successfully withdrawn as an agreement was reached with the company.

Shareholders signed Environmental resolutions for Amazon and Walmart in pursuit of better sustainable packaging policies for plastics. These resolutions were filed and are still pending.

SEC Update

The beginning of 2020 started with a group of Veris clients making their voices heard at the SEC in Washington D.C. to oppose the proposed SEC Rule 14a-8 that called for major restrictions on proxy voting shareholder rights for individual shareholders. The changes to the rule, which were signed into legislation and take effect starting in 2022, increase the requirement for the number of shares owned and the years owned over a 3-year tiered system. Investors must own a minimum of $25,000 of company shares for one year, $15,000 for two years or $2,000 for three years. The thresholds were also raised for resubmission of previously submitted proposals if they did not gain sufficient shareholder support.

Despite the passing of the rule, there is optimism that President Biden is working to take action to overturn the changes and has signaled his support and priority for ESG resolutions. Veris has signed-on to a letter being issued by US-SIF that urges Congress to vote yes on the SJ Res 16 and HJ Res 36 that will nullify the 2020 changes to Rule 14a-8 and revert the shareholder proposal rules back to what they were before September 2020.

Cultural Issues

This year is proving to be a transformational year in terms of cultural issues. Injustices to people of color have propelled the Black Lives Matter Movement. There has been an increase in hate crimes towards Asians and Asian American communities and individuals in the United States. As You Sow introduced “The Racial Justice Scorecard” to track and hold corporations accountable for their policies and initiatives promoting Racial Justice. The pandemic has brought to light the issues of wage disparity, and health and benefit insecurities. Corporate political activity, workplace diversity and board diversity practiced by big corporations are under increased scrutiny.

Climate change and the environment are and will continue to be at the forefront of concerns for clients and shareholders. The U.S. has re-entered the Paris Climate Accord and we expect more government involvement in changing the landscape, but shareholders will still be extremely active in this space.

2021 Outlook

The power to create change with a united collective voice is the benefit of joining shareholder campaigns. We encourage our clients who can participate to join us next proxy season. With the events of the past year, we expect to see an increase in resolutions related to racial justice, diversity in the workplace, board member diversity, corporate accountability and ESG data reporting and transparency. Environmental resolutions will push corporations to report on how they are transitioning to a net-zero carbon plan. Also, we expect continued campaigns to reduce pollution and plastic waste and drive companies to create more sustainable packaging. Social issues will target workplace diversity, wage injustice, health and retirement benefits, safe workplace and supply chain conditions and fair pay.

Veris continues to work with US SIF on initiatives that urge government and businesses to be proactive on various ESG issues. We signed onto three recent letters issued by US SIF:

  • A letter to President Biden with an investor policy recommendation to create a White House Office of Sustainable Finance and Business.
  • A letter to the Biden Administration to advance the policy proposals included in US SIF’s “Toward a Just and Sustainable Economy.”
  • A letter urging the Congressional Review Act to disapprove of the SEC’s shareholder proposal rule amendments.

Veris also reaches out to our clients as we sign on to these letters to call their state representatives and senators to voice their concerns.

We look forward to working with you to create change in the 2021-2022 Proxy Season that begins in the Fall of this year.

A Much Needed Equitable Growth Era for Community Wealth Building

By Michael Lent, Roraj Pradhananga, & Casey Verbeck

Community wealth building solutions aim to help address racial and gender discrimination and spread prosperity while ensuring sustainable economic growth in historically marginalized and under-resourced communities.

Tragically, the COVID-19 pandemic has exacerbated the inequalities and inequities faced by our most vulnerable communities. The poorest populations, both here in the U.S. and globally, have been the hardest hit in terms of disproportionately worse health outcomes and in loss of income, jobs and educational opportunities.1  The World Bank projected in 2020 that extreme poverty and income inequality for low-income and emerging economies, especially communities of color would rise because of the pandemic.2

These impacts have brought more attention to, and growing demand for, community wealth building solutions such as Community Development Finance institutions (CDFIs) and other private market solutions that help economically distressed communities meet their basic needs.

CDFIs play a crucial role in building community wealth by providing capital that supports businesses that create quality jobs, pay living wages, provide food security solutions, and broaden access to affordable housing options. By offering access to aligned, patient and lower cost capital to small businesses and entrepreneurs in under-resourced communities, CDFIs aim to help reduce the wealth gap equitably.

What We are Doing to Help Meet the Challenges of Today

At Veris, Community Wealth Building is one of our core investable themes. We have consistently sought out and invested in companies and funds that support communities that have been systematically excluded from mainstream economic success. CDFIs have been a particular area of focus for us ever since our firm was founded. Today there are 10 institutions and 13 community loan funds that are part of the Veris Investment strategy.

While CDFIs and specific loan funds have historically addressed broader issue areas and catalyzed transformative changes in under-resourced communities around the country, their focus has shifted as a result of the pandemic.

2020 – 2021 Targeted Issue Areas

  • Immediate infrastructure response to COVID-19
  • Continuing to support hard hit businesses
  • Forbearance and working with borrowers to help them stay in their homes
  • Administering PPP funds to underserved communities

The CDFI Fund, an agency of the US Department of Treasury that provides financial assistance to CDFIs, awarded $204.1 million to 397 CDFIs in 2020.3 We support Opportunity Finance Network’s demand for an additional $1 billion in appropriations for the CDFI Fund in fiscal year 2021. Thankfully, the Coronavirus Response and Relief Supplemental Appropriations Act of 20214 provides $1.25 billion for CDFIs to help communities impacted by the COVID-19 pandemic. The CDFI Fund will award these dollars through a new program called the CDFI Rapid Response Program (CDFI RRP).

Beyond CDFIs, we are paying attention to other innovative approaches that help historically marginalized communities build wealth including new ownership structures such as Employee Stock Ownership Plans (ESOPs), financial inclusion solutions for those who lack credit history, new climate justice influenced affordable housing options and education and upskilling solutions for non-traditional students.

At Veris, when we are constructing portfolios that align with our clients’ values, we may employ a variety of approaches to support community wealth building including:

  • Place Based Investing
  • Social and Racial Justice
  • Economic Viability
  • Access to capital

Asset allocation supporting these efforts are identifiable in our fixed income and public equity strategies and alternative assets.

Let’s Shift Focus from Surviving to Thriving

As we seek to tackle the pandemic and its terrible impact on low-income communities, Veris will be expanding our focus from recovery to building back better. In the pursuit of economic stability, we believe it is crucial to contribute to narrowing the wealth gap. All small businesses and all communities deserve equal opportunity to build wealth and thrive.

Even with the recent additional relief effort from Capitol Hill, we need to see substantial capital flows from private investors in the U.S. in order to address the challenges faced by our most vulnerable populations. Many small businesses in these stressed communities have already shut down or are on the verge and it is likely that we have many months in front of us before we will see a dramatic recovery.

As we look to the future, the impact investor’s mindset must shift from a focus on supporting stability to aligned and equitable growth that ensures households and communities have access to the resources they need to succeed. As a field, let us help people move from surviving to thriving.

In the near future, Veris will be releasing a thought piece further exploring Community Wealth Building.

DISCLAIMER

The information contained herein is provided for informational purposes only, represents only a summary of topics discussed, does not represent personalized investment advice or recommendations, and simply reflects the opinions of the author’s, which are subject to change without notice. Investing involves risk, including the loss of all amounts invested, and readers should be guided accordingly. Additionally, certain information contained herein is sourced from third parties. While we believe such information to be accurate, we make no guarantees as to the accuracy or completeness of such information and make no representations to that effect.

Endnotes

1 https://www.bloomberg.com/news/articles/2021-03-10/covid-pandemic-made-racial-income-inequality-much-worse

2 https://blogs.worldbank.org/voices/what-covid-19-can-mean-long-term-inequality-developing-countries

3 https://www.cdfifund.gov/programs-training/programs/cdfi-program/award-announcement

4 https://www.cdfifund.gov/impact/84

Authors:

  • Michael Lent, Chief Investment Officer, Partner
  • Roraj Pradhananga, Senior Research Analyst
  • Casey Verbeck, Managing Director of Marketing and Business Development, Partner

Optimism that Leads to Achievement: A Letter from Patricia Farrar-Rivas and Stephanie Cohn Rupp

“Optimism is the faith that leads to achievement. Nothing can be done without hope or confidence.” ― Helen Keller.

After a tumultuous 2020, the world saw a shocking beginning to 2021. Despite the heartache and political and economic volatility we have seen signs of resilience that inspire optimism. We are optimistic, but understand we must all do our part to rise to the challenges of this moment. This dark time has led Veris Wealth Partners to become even more staunch in our commitment to growing equity and social justice and environmental solutions through impact investing.

Today, jointly as leaders of Veris, Patricia Farrar-Rivas as founding CEO and Stephanie Cohn Rupp as incoming CEO, we wanted to take stock of this last year and share with you some of the highlights that are fueling our optimism, as well as our vision of what Veris hopes to achieve with our incredible clients, managers and partners in 2021.

Our Efforts In 2020

Externally, Veris:

Internally, Veris:

  • Lived our values by remaining 100% impact focused.
  • Transitioned fully to remote work to protect the health of our staff during the pandemic, while also growing our asset base by over 11%
  • Renewed our commitment to independence in the face of staunch market consolidation to preserve that very mission.
  • Veris has started a complete review of its policies and processes to ensure we are aligned with best practices around Equity, Diversity and Inclusion
  • Finalized an internal succession planning effort by promoting two new Partners as two Founding Partners retired.
  • Successfully transitioned leadership from Patricia to Stephanie after collaborating for over 18 months with dedication and openness to honor our past while investing in our future.

While these may seem like two distinct spheres of our firm – our work externally, and how we run our business internally – they are really two sides of the same coin. We could not be an authentic B-Corp focused on social and environmental impact without concurrently implementing these values internally and staying the course of our ideals.

Unlike many financial institutions, we have recommitted to our long term independence and to remaining focused on solving social and environmental challenges, which requires both financial and business acumen. Veris set an important precedent as a 100% impact focused investment advisor while becoming a profitable business capable of reinvesting in its own growth and maintaining on-going succession mechanisms of retiring partners and advancing employees to become partners. All these goals are intimately linked to protect our independence which allows us to stay true to our mission.

Updated Values and Investment Themes

In 2021 Veris will remain focused on authenticity, independence, and our mission. To better serve that mission, we have updated our firm’s values to better reflect who we are today and demonstrate the principles that guide us. We have also updated and refined our investment themes to better meet the most critical challenges of today. Veris is well known as the first Registered Investment Advisor (RIA) to have led Gender Lens Investing as an approach and now we are working to develop a more robust investment platform with solutions focused on Racial and Gender Equity. We also aim to expand our work around Regenerative Agriculture and Renewable Energy Infrastructure solutions and added a theme dedicated to Community Wealth Building to ensure more emphasis on this challenge and potential solutions.

What We Aim to Achieve in 2021

We aim to grow our impact assets under management in 2021 while we continue to serve our clients with a focus on partnership. We will leverage digital solutions to make the experience of wealth management simpler and more interactive. In partnership with Confluence Philanthropy, USSIF, CERES, As You Sow, RFK, Nexus, GIIN, B Lab and many other crucial players in the sector, we will collaborate extensively with the field of sustainable and impact investing. We believe that to build a more equitable, just and sustainable world, we have the responsibility to leverage not only investing but also shareholder activism, policy and dialogue to ensure we effectively pursue our mission.

We look forward to collaborating with our clients and colleagues in the sector, furthering the mission of our firm and our clients, and continuing to fight for social justice and the environment. Together, we will work to ensure that 2021 yields a brighter future for us all.

 

PG&E, Climate Change and the Sustainable Path Forward

By Anders Ferguson

The failure of Pacific Gas & Electric (PG&E) to provide power safely to Northern California has been a human and economic nightmare, while highlighting the ineffective regulatory oversight of the investor-owned utility.

But as tragic as this has been, the fallout has created new momentum for a safer, greener era of power generation and distribution in the Golden State and potentially elsewhere.

The Path Forward

In our view, the path forward is predicated on two key ideas inspired by innovation and technology:

  • Adopting new models of ownership and governance for regulated electric utilities that move away from monopolies like PG&E and embrace community-owned utilities;
  • Rapid deployment of renewable energy and utility-scale storage technology to reduce reliance on the grid and promote the widespread adoption of solar energy.

The good news is that both ideas can be committed to today. They can be implemented step by step over the next 20 years – not sometime in the distant future. Thanks to progressive thinking and the billions of private and public dollars ready to be deployed, we can create our own future and not be condemned to repeat the mistakes of the past.

For impact investors, there will be new opportunities to put capital to work in solutions that will re-engineer the paradigm that has defined energy production and distribution for more than a century.

To read the entire Research Brief, please click here.

Standing For Racial Justice, Equity, Diversity and Inclusion

Standing For Racial Justice, Equity, Diversity and Inclusion

By Patricia Farrar-Rivas

All of us at Veris stand in solidarity with the family of George Floyd, and the many others who have been a victim of police brutality and injustice.

The moment is upon us to realize, once again, that racial injustice isn’t an isolated event. It’s a systemic problem deeply embedded in all aspects of our society, and it is tearing us all apart.

Despite many concerted efforts to foster change, racism and inequality remain the status quo in most cities in America. When another tragic death takes place at the hands of police, we’re reminded how unequally we are treated based on the color of our skin, sexual orientation, gender, disabilities or religious preferences.

We stand with demonstrators across the country who are speaking out against racism.  And we stand by those who believe we must act now. We cannot wait any longer. Our historical behaviors and policies are no longer acceptable. 

Toward A More Just and Equitable Society

What does this mean for each of us?

It means combating racism and inequality in all forms in our personal lives and in our work. It means calling out injustice, leading by example in our communities, and raising awareness about the issues that need to be discussed openly.

At Veris, this means looking at all of our internal and external practices to identify and disrupt implicit biases. It demands that we work within our industry to maintain the commitment to racial justice, and equality at the forefront.

It also means providing financial support to organizations who can make a difference now. We’ve chosen four: Movement for Black Lives, MVP (Movement Voters Project), Equal Justice Initiative, Color of Change, Minnesota Freedom Fund, and NAACP. There are many others that deserve your support, and we urge you to give to the organizations of your choice.

Now is the time for all of us to unite and create a more just, equal and equitable society.

Veris Fights for Shareholder Engagement

Members of the Veris team, along with Veris supporters Laurie Emrich, Ellen Remmer, Caroline Gabel and Jed Sturman, recently met with the SEC to discuss rule changes that will severely restrict shareholder activism. The meeting was one of the only in-person conversations between the SEC staff and investors. This blog discusses the proposed changes.

Big Changes Afoot

The SEC is proposing a new system that will significantly limit the opportunities for non-institutional clients to exercise their shareholder rights in publicly traded companies, according to an analysis from Veris.  

Collectively, the changes would prohibit many Environmental, Social and Governance (ESG) shareholder proposals from being considered or reconsidered. We believe the new rules may also hinder activist shareholders from accomplishing the dual goals of shareholder engagement and portfolio diversification.

Not surprisingly, many public companies and the Business Roundtable support the winnowing of shareholder proposals, yet most companies wouldn’t be significantly impacted. Large companies predominantly receive the majority of shareholder proposals, but even that is infrequent. On average, public companies are presented with a shareholder proposal once every seven years, according to Veris.

At Veris, we believe shareholder engagement has been very productive and effective. It brings clients into the capital markets to make their voices heard. Often, our data and research motivate companies to implement new policies, even if the resolution fails. When we engage with companies early on, corporate accountability increases. Focusing on ESG-related risk that might otherwise be ignored, we believe, ultimately improves financial performance.

It is our role – working with clients and like-minded investors – to demonstrate leadership and promote change. We will continue to collaborate with US SIF and the SEC to uphold the current rights of shareholders. We will strive to maintain a fair balance between investors and company interests. As is important, we strongly believe the rights of individual investors should not be adversely affected.

Investors Who Oppose The SEC’s Changes

Laurie Emrich, Global Fund For Women

I am a long-time advocate working in social justice philanthropy. One of my SEC-related goals is to expand shareholder access and to increase diversity – to give more people a seat at the table. The SEC’s proposed changes will shut down access from shareholders and stakeholders. Instead, the SEC should advocate for more access and more voices. Interestingly, the Business Roundtable and global leaders in Davos this year supported increased corporate social responsibility and inclusion of a much broader range of stakeholders. Importantly, that includes local community members impacted by corporate actions. Unfortunately, the SEC’s proposed changes would take these ideas in the absolute opposite direction – and as such, are unacceptable.

Ellen Remmer, Senior Partner, The Philanthropic Initiative

As a former Madoff investor who was unwittingly defrauded, I wanted to become a more educated investor. Being involved in shareholder engagement has helped me achieve that objective, and it is incredibly powerful. It helps us understand more about our portfolio and a company’s values and priorities. As someone committed to educating investors about gender and climate risk, I believe active engagement promotes a stronger capital system. The SEC proposal works against that.

Caroline Gabel, CEO, Shared Earth Foundation

I very much want my family’s philanthropy and investments to reflect our values. In leading the Shared Earth Foundation and as a member of Rachel’s Network, I support active shareholder engagement. I’m strongly opposed to loss or threatened loss of our voices as shareholders. I don’t believe shareholders should be disenfranchised at the ballot box. 

Jed Sturman, Owner TD Athletes Edge and Consultant, Partner for Growth

As someone who works in private equity and has an MBA, I am troubled by short-term corporate thinking. I would like to see shareowners create long-term shareholder value. Shareholder engagement assures that companies understand shareowners’ desires and needs – and not just the perspective of board members.

 

The information contained herein is provided for informational purposes only and reflects the opinions of the author’s which are subject to change without notice.  Comments provided by Veris clients should not be construed as an endorsement of Veris or a statement of their experience with Veris.

The new SECURE Act: What You Should Know

By Tim Kingsbury, Wealth Manager

The SECURE Act, passed on Dec. 20, 2019, contains some major changes governing IRAs and retirement plans, charitable contributions, 529 plans and college student loan debt, among other financial matters. In this blog, we focus on key provisions of the Act to help you plan ahead.

Required Minimum Distributions From Retirement Plans Raised to Age 72

Previously, the age triggering Required Minimum Distributions was 70½. The good news is the SECURE Act allows savings and investments to grow 1½ years longer in a tax-advantaged retirement plan – if you are born after July 1, 1949. If you are born before that date, you must still take your RMD at 70½. For those born after July 1, 1949, the first RMD must be taken by April 1, 2022.

End of the Stretch IRA beginning January 1, 2020

Non-spouse beneficiaries inheriting a pretax retirement account, such as an IRA, are now required to distribute the full balance by the end of the tenth year after receiving the inheritance (in most instances).  Previously, a beneficiary would calculate a new RMD based on their life expectancy. That allowed the IRA to “stretch” for multiple years or even decades.  The stretch IRA was a valuable estate planning tool, particularly for parents seeking to transfer wealth to their children. The change may necessitate revisiting your current estate plan. 

Roth IRAs & Roth Conversions

The Act increases the attractiveness of post-tax Roth IRA. Having both pre-tax assets (IRA) and post-tax assets (Roth) has always been advantageous. However, with passage of the Act, clients who anticipate having lower income years may want to consider converting pre-tax IRA assets to post-tax Roth assets.  While a Roth Conversion is a taxable event, it may be smarter to take that step in low income years, especially if planned out over multiple years.  Low-income years often occur between retirement and age 70, particularly if you delay receiving Social Security. 

IRA Contribution Age Limits Removed

Previously, no additional deductible IRA contributions were allowed once an RMDs started if the person was still receiving W-2 (payroll) income. That restriction is now gone. You can continue contributing to your IRA and grow those account balances. More good news.

Expanded 529 College Savings Plan Usage

$10,000 of a 529 Plan may now be used to pay down student loan debt. That is a lifetime limit per beneficiary, but a potentially very good use of 529 savings.  Additionally, 529 Plan funds may now be used for expenses incurred with Apprenticeship programs certified with the federal Department of Labor.  

Kiddie Tax Rate Reverts Back To Parents’ Tax Rate

Tax rates on unearned income for minors, also known as the kiddie tax, revert back to that of the parents under the SECURE Act.  In 2018 and 2019, trust tax rates were used for kiddie tax calculations when the 37% bracket kicks in at just $12,750 of income. That’s no longer the case. Please note that the new rules are retroactive for 2018 and 2019. Refiling taxes could make sense if a minor has an especially large UTMA/UGMA account. 

No Changes To Qualified Charitable Distributions (QCDs), Medical Expense Deductibility

After reaching age 70½, up to $100,000 may be withdrawn from an IRA account annually and sent directly via check to a charity. That QCD limitation remains the same under the SECURE Act. In years when someone is subject to RMDs, the QCDs can fulfill that requirement and avoid taxes incurred on the IRA withdrawal. Charitably inclined clients should evaluate the tax benefits of sending a QCD to charity versus gifting appreciated securities to charity. 

There was also no change in medical expense itemized deductibility under the Act. Medical expense deductibility still occurs when reaching 7.5% of Adjusted Gross Income for 2019 and 2020, instead of the proposed 10% hurdle. 

The Bottom Line

The SECURE Act creates some of the biggest changes in decades to retirement plans and savings and may directly impact your estate plan. Please reach out to your Wealth Manager to discuss the best course of action for you and your family.

 

The information contained herein is provided for informational purposes only and should not be construed as the provision of personalized investment advice, or an offer to sell or the solicitation of any offer to buy any securities. Rather, the contents simply reflect the opinions and views of the authors. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change without notice.

Veris 2017 Impact Report

2017: Another Breakthrough Year for Impact Investing

Veris is proud to announce the release of our 3rd annual Impact Report, highlighting the collective achievements of its clients, the Veris team, and the investment managers we work with.

Veris 2017 Impact ReportAmong the milestones of the past year: Veris celebrated its 10th anniversary, reached $1 billion in client assets under management, and was named as a B Corporation Best for the World company for the sixth consecutive year.

The 24-page report describes the environmental and social impact resulting from our clients’ collective investments in our five thematic areas: Climate Change & the Environment, Community Wealth Building & Social Equality, Sustainable Agriculture & Food Systems, Gender Lens Investing, and Mindfulness & Sustainability.

The report also focuses on how Veris measures impact, both quantitatively and qualitatively. As part of our ongoing due diligence, we look at the role public companies, shareholder advocacy, private social enterprises, and community development solutions play in creating a more inclusive and sustainable economy.

Making Progress
We’re pleased to note that we have seen great progress each year in terms of understanding and communicating the impact of portfolio companies.

In 2017, impact reporting took a leap forward with the development of systems-level frameworks, such as the U.N. Sustainable Development Goals. To encourage more common language in impact reporting, Veris also reports metrics established by the Global Impact Investing Network’s (GIIN) Impact Reporting and Investment Standards (IRIS). IRIS facilitates comparison and best practices, transparency, and accountability in impact measurement.

What is also interesting about this year’s report is what it says about the positive direction of impact investing. We’re seeing increased momentum across the field – such as major commitments from conventional investors and growth of the Green Bond market and assets invested with a Gender Lens. If you haven’t seen our 2018 analysis of Gender Lens Investing, please feel free to download it here.

We believe these trends validate what Veris clients and our team have recognized for a decade: that investors can align their wealth with their values. The 2017 Veris Impact Report demonstrates our commitment to delivering the most impactful investment opportunities and supporting the overall growth of sustainable and impact investing.

We hope you will read our report, and we look forward to your feedback.

Click here to download the full report.

Investing with a Gender Lens

On March 5th, Veris Wealth Partners and Criterion Institute hosted the webinar Women, Wealth and Impact: Investing with a Gender Lens. Increasingly individuals, families and foundations are exploring how to use their consumer dollars, philanthropy and now their investment portfolios to address gender inequality.  This webinar outlines several easy steps to shift your investments to support and empower women.

The program starts with Joy Anderson, President and Founder of Criterion Institute interviewing Patricia Farrar-Rivas, CEO of Veris Wealth Partners. Together they explore the webinar’s big take-away — moving beyond the ‘why’ and into the ‘how’ of investing to support women. This is followed by a short presentation and Q&A led by Luisamaria Ruiz Carlile and Alison Pyott, both Certified Financial Planners and Wealth Managers at Veris Wealth Partners based on their recently published thought piece Women, Wealth and Impact: Investing with a Gender Lens.  This paper explores the business case for gender lens investing, but more importantly provides tangible steps you can take to increase gender equality with your investment portfolio.

Watch the webinar

Presented by: Criterion Institute & Veris Wealth Partners