May 22, 2023

To Build Wealth in Latinx Communities Across the US, We Need to Invest More Time, Effort, & Money Expanding Access to Financial Education

By Sandra Guerrero, Wealth Manager

For most of their lives, my mother and father worked in the services sector. Driven by their desire to leave a financial legacy for their children and grandchildren, my parents were motivated to learn new skills to acquire and grow wealth. They saved money, sought out learning opportunities, and ventured into real estate. Motivation plus access to financial education gave them the tools they needed to use their hard-earned money to build wealth.

My parents’ story is one of the reasons I believe that growing access to financial education can help solve persistent economic inequities within Latinx and Hispanic communities across the United States.

Financial skills are not born, they are taught. Without access to experienced peers or educational programs designed to teach how to understand and use financial tools, many Hispanic and Latinx families are less likely to grow wealth. Lack of financial education prevents people from using financial tools that can be used as a springboard to financial success.

I believe expanding access to financial education is one of the most powerful ways we can grow opportunities for financial success within Latinx and Hispanic communities in ways that will positively impact the lives of millions of individuals and families for generations to come.

Economic Challenges and Opportunities for Hispanic Americans

Hispanic Americans have been known to be the largest minority group in the United States since 2003.1 The 2020 Census indicated that 18.9% of Americans identify as Latinx or Hispanic2 and our numbers are growing.3 Despite our growing prominence in communities across the US, the Latinx community is too often left behind in terms of economic opportunity and wealth accumulation in this country.

Research from Urban Institute indicates that the average net worth of white families is approximately five times greater that of Latinx families.4 In terms of income, the average Hispanic or Latinx household earns approximately half the income of the average white household. About 70% of white Americans own their home, whereas for Latinx Americans, the homeownership rate is about 48%.5

In terms of wealth accumulation, Research from Urban Institute indicated that the average net worth of white families was approximately five times greater that of Latino families in 2019.6 Only about 6.5% of all businesses in the United States were Hispanic owned in 2020, with a majority concentrated in the construction, warehousing and transportation, and waste management and remediation sectors.7

Immigrants often come to this country driven by dreams of financial success and building a family legacy. In order to achieve their dreams, more Hispanic and Latinx Americans need more than motivation – they need access to both the training and the opportunities to make their dreams a reality.

Investing money in businesses led by Hispanic and Latinx entrepreneurs and in funds that invest in communities of color is one way to create opportunities for wealth building, but that alone will not be enough to narrow the wealth gap. We must also invest in programs that help people gain access to the education and experience they will need to harness the power of their motivation to succeed and be able to capitalize on expanded opportunities created through investment.

Examples of Programs to Support

If you are committed to the idea of building economic racial equity and growing wealth in Hispanic and Latinx communities across the United States, there are numerous programs you can support that are expanding financial literacy and teaching financial skills. Here are a few:

  • UnidosUS, the largest Latino civil rights organization in the US, has made Housing and Financial Empowerment one of their key issues. They offer a range of financial education programs, including workshops, online courses, and one-on-one coaching sessions. Their programs cover topics like budgeting, saving, credit building, and homeownership.
  • Hispanic Federation offers financial literacy workshops and counseling services to help Latino families become more financially stable. Their economic empowerment program offers financial literacy and skill building classes taught by bilingual instructors. topics including budgeting, saving, debt management, and retirement planning.
  • Operation Hope: This organization offers financial literacy programs to Latino and Hispanic communities. Their programs cover topics like credit and money management, banking, and small business ownership.

These are just a few examples of the programs that are expanding financial literacy and teaching financial skills in Latino and Hispanic communities across America. There are many other organizations and initiatives working towards this goal as well.

Sandra Guerrero is a Wealth Manager in the San Francisco office of Veris Wealth Partners. She is passionate about helping individuals, families, and foundations have a positive social and environmental impact with their wealth. Sandra has more than 20 years of experience in the financial services industry. Full bio. 

Sources

1 https://www.nytimes.com/2003/01/22/us/hispanics-now-largest-minority-census-shows.html

2 https://www.census.gov/quickfacts/fact/table/US/PST045221

3 https://www.pewresearch.org/science/2022/06/14/a-brief-statistical-portrait-of-u-s-hispanics/

4 https://www.urban.org/research-action-lab/projects/inclusive-recovery-insights/addressing-the-racial-wealth-gap-for-an-inclusive-recovery

5 https://fred.stlouisfed.org/series/HOLHORUSQ156N

6 https://www.urban.org/research-action-lab/projects/inclusive-recovery-insights/addressing-the-racial-wealth-gap-for-an-inclusive-recovery

7 https://www.census.gov/library/stories/2023/01/who-owns-americas-businesses.html

The information contained herein is provided by Veris Wealth Partners for informational purposes only and reflects the opinions of the author’s which are subject to change without notice. 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.

Veris WP
May 16, 2023

Letter from Stephanie Cohn Rupp: Advocating for ESG Investing to Governor Sununu for a Sustainable New Hampshire

On April 10th, 2023, New Hampshire Governor Chris Sununu signed Executive Order 2023-03, which expresses anti-ESG views and mandates that “Executive branch agencies shall prioritize investment decisions that maximize financial returns and minimize risk.” Veris CEO Stephanie Cohn Rupp wrote the following letter to Governor Sununu in response. As of May 16, 2023, we have not yet received a reply. 

Governor Sununu, 

Veris Wealth Partners is a wealth management firm and a long-time employer in Portsmouth, New Hampshire. We also have a 100% focus on impact and ESG investing. We strongly object to Executive Order 2023-03. I wanted to express my concern and offer to meet with you to discuss what ESG investing is and is not. Many Republican officials have been misinformed and do not know that ESG investing can provide a variety of benefits including better corporate governance (and less corporate crises), better long-term financial returns, and better outcomes for the environment. 

I believe you are signing this order at the expense, not only of investors, but all Granite State residents and ecosystems, especially those in coastal communities that are at high risk of damage from climate change driven sea level rise. 

As a firm, Veris believes that the integration of environmental, social, and governance (ESG) principles in portfolio selection can mitigate risk and have a positive impact on investment returns. We serve many New Hampshire residents who want to see their investments help them achieve their financial goals in a way that does not compromise the environment or their values. 

In our view, Executive Order 2023-03 provides no benefit to our state or its citizens and misleads Granite Staters about what it means to consider ESG factors in the investment decision-making process. The Order states the following premises:  

“WHEREAS, fiduciaries’ investment decisions based on non-financial considerations may fail to meet the financial needs of the State and its citizens; and WHEREAS, investment decisions based on non-financial considerations may include environmental, social, and governance (ESG) criteria which have shown to produce lower returns compared to investment decisions based on financial considerations alone; and WHEREAS, the pursuit of ESG goals may result in suboptimal investments that fail to meet the fiduciary obligations that State entities investing taxpayer and beneficiary funds owe to their investors.” 

We believe your presumption that consideration of ESG criteria in the investment making process equates to an abandonment of fiduciary duty that produces “lower returns” is not supported by the preponderance of evidence. I serve on the board of The Forum for Sustainable and Responsible Investment (US SIF), which has a repository of studies showing that, “sustainable investment funds on average over the long-term achieve comparable or even better financial returns than conventional investments.”¹ 

Our firm’s investment philosophy is centered on our belief, based on our own research and experience, that ESG integrated investing is an approach that can yield positive outcomes of a portfolio while achieving the performance of the representative asset class. 

ESG is a lens applied to investment due diligence that integrates real world impacts. New Hampshire’s state retirement system can adhere to its fiduciary duty to obtain market rate returns while also considering the short- and long-term material impacts of those investments on the environment, workers, and members of the communities in which those investable businesses operate. 

It appears that this anti-ESG Executive Order is either based on misunderstandings about the practice of ESG or it is an exercise in partisan politics. Your Order mandates that:

“Executive Branch agencies that are permitted to invest funds shall review their investments and pursue any necessary steps to ensure that no funds or state-controlled investments are invested with firms that invest New Hampshire funds in accounts solely based on ESG criteria. 

The word “solely” seems to have been chosen very carefully here. Considering ESG criteria in the investment decision-making process does not mean an abandonment of traditional quantitative analysis of financial risk and return. There are very few, if any, instances of funds that are assembled solely on the basis of ESG criteria. 

We hope that you reconsider your position on ESG and I invite you to meet with me to discuss this issue. I believe it would be helpful for you to hear perspectives other than those issued by partisan critics. In any case, please look to other states that have already enacted anti-ESG legislation to see what may come of it. The editorial board of the Miami Herald pointed to losses already seen in other states in a recent opinion that called the Florida Governor’s “assault” on ESG investing “exceptionally nonsensical.”² They opined that pending Florida legislation banning local government entities from investing in funds or purchasing bonds based on social, political or ideological interests, “stands to harm Florida pensioners and taxpayers across the board.”³ 

There is already evidence that residents of states that have passed ESG bans are paying a financial cost for the shortsighted actions of their legislators. To cite one example, a recent study found that anti-ESG laws in Texas were linked to higher costs for Texas borrowers in the millions of dollars.4 By banning certain financial options and certain financial firms – Texas decreased competition available to their pension systems and paid a very heavy price. Especially in a State whose motto is “Live Free or Die,” I find it incongruent to ban any financial option, especially one that provides more information on the real-world impacts of finance. You are not banning an ideology – but banning a methodology which is meant to empower investors. 

We hope that New Hampshire does not go down that path. Barring retirement plan fiduciaries from considering ESG factors, as New Hampshire’s House of Representatives just considered, would have likely to expose New Hampshire’s pensioners to risks that may come with a high cost. 

With climate change posing future threats to coastal states, we believe New Hampshire’s pensioners are not the only residents of the state who would be exposed to greater risks in the absence of ESG investing. According to a report by the New Hampshire Coastal Risks and Hazards Commission, the NH seacoast is likely to see its relative sea level rise up to 1.3 feet by 2050 and up to almost 3 feet by 2100 if global greenhouse gas concentrations stabilize.⁵ NH’s own Fish and Wildlife department has published projections that changes due to sea level rise are likely to create more damaging storms that threaten to destroy coastal infrastructure, recreational areas, and opportunities for economic growth through tourism and fishing.⁶

Again, we hope you will think deeply about the long-term implications of what ESG means and reconsider your position. I am available to meet with you to discuss any of the above or answer any questions you may have on the topic of ESG investing. 

Sincerely, 

Stephanie Cohn Rupp

CEO, Veris Wealth Partners

 

References

1 www.ussif.org/performance

2 www.miamiherald.com/opinion/editorials/article273909135.html

3 www.miamiherald.com/opinion/editorials/article273909135.html

4 www.unpri.org/academic-blogs/how-us-anti-esg-laws-raise-borrowing-costs-for-public-finance/11330.article

5 https://scholars.unh.edu/ersc/210/

6  https://www.wildlife.state.nh.us/climate/sea-levels.html

Veris WP
Veris Wealth Partners celebrates Transgender Day of Visibility
March 31, 2023

Transgender Day of Visibility 2023

March 31st is Transgender Day of Visibility. Today, we celebrate the transgender and gender-expansive community, honor the contributions of transgender individuals to society, and work to raise awareness of the challenges and discrimination that trans and non-gender conforming people face every day.

Rachel Crandall Crocker, a transgender psychotherapist and activist based in Michigan, founded Transgender Day of Visibility in 2009 to address the lack of positive representation of trans people in American media and culture. The event has since grown into a globally recognized celebration of the courage and resilience of transgender individuals that also raises awareness of the challenges and discrimination trans people face.

The mission of Transgender Day of Visibility is especially critical now as a wave of laws targeting the transgender community are being introduced across the country. As of today, Trans Legislation Tracker is tracking 492 anti-trans bills from across the United States that are designed to “block trans people from receiving basic healthcare, education, legal recognition, and the right to publicly exist.”

Ways to Support the Transgender Community

There are a number of ways that allies and advocates can support the trans community:

  • Listening to the stories of trans people and educating ourselves about the unique experiences and challenges that transgender individuals face
  • Supporting organizations that are working to advocate for and protect transgender rights and promote education and awareness about transgender issues
  • Speaking out in support of transgender-inclusive policies in our schools and workplaces
  • Challenging harmful stereotypes and misinformation about transgender people and standing up against discrimination and hate crimes

Below is a list of organizations that provide support Transgender individuals and are working to help build a more inclusive and welcoming world:

Transgender Law Center

Trans Lifeline

National Center for Transgender Equality (NCTE)

Transgender Legal Defense & Education Fund

LGBT Foundation

Veris WP
Title How the US Debt Ceiling Debate & Potential Default Might Impact Your Investment Portfolio
March 13, 2023

How the US Debt Ceiling Debate & Potential Default Might Impact Your Investment Portfolio

By Michael Lent, CIO, Partner, and Co-founder of Veris Wealth Partners

The US hit the debt ceiling on January 19th of 2023. As of today, Congress has not yet voted to raise the debt limit, which it must do before it can borrow the additional funds necessary to pay for its approved budgeted spending (not unapproved future spending) on everything from salaries for military personnel to crucial social programs like Social Security and Medicare.¹ 

The US Department of the Treasury has already started taking “extraordinary measures” to keep the United States from defaulting on its obligations at least until June of this year.²  As the threat of default looms, a partisan debate is happening in Congress – with Republicans demanding spending cuts before agreeing to vote to raise the debt limit again and Democrats saying they will not negotiate the debt ceiling.³  

To help you better understand this situation – and how your portfolio might be impacted – here is a look at the current debt ceiling debate in the US in context of what happened when we last faced a near-default in 2011.

What is the Debt Ceiling?

When the government spends more money than it takes in, it must borrow money to meet its financial obligations. Ever since the passage of the Second Liberty Bond Act in 1917, US law has required that Congress first vote to increase the debt ceiling before the government can issue any more debt to cover spending it has already agreed to.⁴ 

A long-time source of controversy, partisan debt-ceiling debates about government spending and debt have sometimes led to instances of political brinkmanship. But these standoffs have always ended in a vote to raise the debt ceiling. According to the US Treasury, Congress has raised the debt ceiling 78 times since 1960 – under Presidential administrations led by both Republicans (49 times) and Democrats (29 times).⁵

The State of the National Debt and the Balance of Power

The national debt, representing the entire amount of debt accumulated by the Federal Government, currently stands at approximately $31.45 trillion.⁶ 

Our nation’s debt has increased under both Democratic and Republican presidential administrations and during periods of time when Democrats and Republicans were in control of the House of Representatives and/or Senate.⁷  

Today, just as in 2011, both the Presidency and Senate are controlled by Democrats and the House of Representatives controlled by Republicans. However, the Republicans have a much narrower margin this year. This situation surrounding the debt ceiling today is again likely to come down to the wire. 

What Happened When the US Came Close to Default in 2011 

The US previously came dangerously close to default during the Obama Administration, when Congressional Republicans refused to raise the debt ceiling without spending cuts. According to the Government Accountability Office (GAO), the US reached its debt limit on May 16, 2011 and the US Treasury began taking extraordinary measures projected to extend the Treasury’s borrowing authority until July 8th of 2011.⁸ 

One result of the near default in 2011 was that, for the first time in the history of the United States, Standard & Poor’s downgraded the nation’s credit rating to AA+.⁹ Rating agency Moody’s also lowered its outlook on US debt to negative while maintaining its AAA rating.¹⁰ 

Global financial stability was threatened during this time. Markets were volatile. The S&P 500 started to fall in July of 2011 and by that August, it had fallen by over 16%.¹¹  

Two days before the expected default of 2011, a compromise was reached to raise the debt ceiling and reduce government spending. Default on the debt was avoided, but many economists believe that the cuts in spending had a negative impact on economic recovery after the great recession.¹² The GAO also estimated that delays in raising the debt limit in 2011 increased Treasury’s borrowing costs by about $1.3 billion that fiscal year.¹³

Is Default Likely in 2023? What Might Happen if there is a Default?    

If we look at what happened in 2011 for insight about what might occur in 2023, as we get closer to the date when the Treasury Department can no longer avoid non-payment of bond interest, social security, etc. we can predict that we are likely to see greater stock and bond market volatility. While it is unlikely, default is possible given the position of a sector of the Republican Party. 

S&P Global Ratings put out a bulletin on the debt ceiling crisis in January of 2023 predicting that after engaging in “brinkmanship” that Congress will “address it on time” to” prevent severe consequences on financial markets and the global economy.” ¹⁴ Mark Zandi, the Chief Economist of Moody’s Analytics, published a slightly less optimistic analysis of the situation that same month, warning that rampant polarization and “heightened dysfunction in Congress” make the odds of default “uncomfortably high” and forecasting that – if default does occur – “interest rates will spike, and stock prices will crater with enormous costs to taxpayers and the economy.”¹⁵

Since it has never happened before, no one is certain of exactly what would happen in the event of a default, but I believe that would trigger US debt being further downgraded, borrowing costs going up and that major stock and bond market sell offs would be likely.

Michael Lent is a founding principal and the CIO of Veris Wealth Partners. He received his Certified Investment Management Analyst (CIMA®) designation in 2002. Michael has been delivering financial planning and investment consulting services to high-net-worth families, family offices, and foundations for over 30 years. Michael is a member of the Investments & Wealth Institute™ and previously served as Chair of the Board of Directors of US SIF. Learn More.  

Sources

1 https://www.usaspending.gov/

2 https://home.treasury.gov/system/files/136/Description-of-Extraordinary-Measures-Aug2021.pdf

3 https://www.washingtonpost.com/us-policy/2023/02/05/debt-limit-gop-proposals/

4 https://bgrdc.com/history-of-debt-limit-and-why-it-matters/

5https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/debt-limit

6 https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/

7 https://www.washingtonpost.com/politics/2023/02/07/debt-republicans-democrats-trump-biden/

8 https://www.gao.gov/assets/files.gao.gov/assets/gao-12-701.pdf

9 https://www.bbc.com/news/world-us-canada-14428930

10https://money.cnn.com/2011/08/05/news/economy/downgrade_rumors/index.htm

11 https://www.schwab.com/learn/story/us-hits-debt-ceiling-will-it-impact-investors

12 https://www.epi.org/blog/abolish-the-debt-ceiling-before-it-commits-austerity-again-the-gop-used-the-debt-ceiling-to-force-spending-cuts-in-2011-it-cant-be-allowed-again/

13 https://www.gao.gov/products/gao-12-701

14 https://www.spglobal.com/ratings/en/research/articles/230120-bulletin-credit-faq-u-s-sovereign-debt-hits-the-ceiling-again-12617455

15 https://www.moodysanalytics.com/-/media/article/2023/debt-limit-brinkmanship.pdf

This content is intended for informational purposes only, provides only a summary of topics discussed, does not constitute personalized investment advice or recommendations, and solely reflects the opinions of Veris Wealth Partners (“Veris”), which are subject to change without notice. The information contained in this document contains certain forward-looking statements, often characterized by words such as “believes,” “anticipates,” “plans,” “expects,” “projects,” and other similar words, that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements.

Certain information contained herein is derived from third party sources. While Veris believes such information to be accurate, we have not independently verified the accuracy or completeness of such information.

Veris WP
February 13, 2023

SECURE Act 2.0: What Does this New Law Mean For You?

By Tim Kingsbury, CERTIFIED FINANCIAL PLANNER™

Intended to persuade more Americans to begin saving for retirement, the Securing a Strong Retirement Act, otherwise known as SECURE Act 2.0, was passed into law as part of the omnibus spending package signed by President Biden on December 23rd of 2022.¹ This bipartisan legislation will change hundreds of rules related to 401(k), 403(b), traditional and Roth IRAs and other types of retirement accounts.

These rules were already complex, and SECURE Act 2.0 adds a number of new considerations that Americans must make when planning for the future.² How might this new law impact you or your family? Here are five provisions in SECURE 2.0 that you might want to be aware of: 

1. The Required Minimum Distribution (RMD) Age is Changing

Starting on 1/1/2023, the age that Americans must begin taking required minimum distributions (RMDs) from their retirement accounts went up from 72 to 73 years of age, according to Section 107 of the SECURE act.³ You may also want to be aware that SECURE 2.0 will raise the RMD age again in just a few years. In 2033 the RMD age will increase from 73 up to 75 years of age.⁴ 

When Americans reach the RMD age, the IRS begins requiring us to withdraw a specific minimum amount from our IRA, SIMPLE IRA, SEP IRA, and other types of retirement plan accounts every year.⁵ Now, if you are 73 years of age or older and do not withdraw the minimum, you are at risk of having to pay a tax penalty. The law is so new that, as of the time this was written, the IRS worksheet you can use to determine your RMD still links to 2022 data, but we believe they should update it soon. Consult your tax professional for the latest information. 

2. New Option to Rollover a 529 Plan to a Roth IRA in Some Circumstances

A 529 account is a savings plan that many families use to save for qualified educational expenses, including tuition for colleges and universities. Many parents, grandparents, and other family members often wonder what happens to the money if the student they are saving for decides not to go to college? SECURE 2.0 now offers a new option for certain 529 plan holders that find themselves in that situation. 

According to Section 126 of SECURE 2.0, beginning in 2024, if you have held that 529 plan for at least 15 years and meet the new law’s other requirements, you will have the option to rollover money saved in a 529 plan account into a Roth IRA set up in the name of the 529 plan beneficiary.

The beneficiary must have compensation income or earned income in excess of the contribution amount. Those Roth contributions must be within the annual contribution limit and a $35,000 lifetime cap is in place on what can be rolled into the Roth IRA.⁶

3. Qualified Charitable Distributions (QCDs) Will Now Be Indexed for Inflation

Transferring funds directly from your IRA’s custodian to a qualified 501(c)(3) organization (not a donor-advised fund or private foundation) is known as a Qualified Charitable Distribution (QCD). In certain circumstances, QCDs can be counted towards your annual required minimum distribution.⁷ 

Under Section 307 of the new law, individuals who are 70½ years of age or older can still use a QCD to donate up to $100,000 to qualified charities from their IRA. But SECURE 2.0 includes a provision that means the annual IRA QCD limit of $100,000 will be indexed for inflation, effective for tax years after 2023.⁸ 

4. Changes for High Earners Making Over 50 Catch Up Retirement Contributions 

Beginning in 2024, anyone earning wages of $145,000+ will be required to deposit all catch-up retirement contributions into a Roth 401k/403b or other retirement account, according to Section 603.⁹

5. Providing Retirement Benefits for Household Employees 

Households that employ nannies and other domestic workers are now allowed to provide retirement benefits to those employees under a Simplified Employee Pension (SEP IRA), according to Section 118.¹⁰

 

Tim KingsburyTim Kingsbury is a Wealth Manager and CERTIFIED FINANCIAL PLANNER™ professional in the New York office of Veris Wealth Partners. Tim’s focus is on helping clients meet their financial and impact goals. Learn more. 

Sources

¹ kiplinger.com/retirement/bipartisan-retirement-savings-package-in-massive-budget-bill

²finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf

³fidelity.com/learning-center/personal-finance/secure-act-2

⁴finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf

⁵irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds

⁶finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf

⁷fidelitycharitable.org/guidance/philanthropy/qualified-charitable-distribution.html#:~:text=A%20qualified%20charitable%20distribution%20(QCD,taking%20their%20required%20minimum%20distributions.

⁸finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf

⁹finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf

¹⁰finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf

DISCLAIMERS

The information contained herein is provided for informational purposes only, represents only a summary of topics discussed, and should not be construed as the provision of investment, tax, or legal advice. 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. There is no guarantee that the views and opinions expressed herein will come to pass.

Furthermore, the information contained herein contains certain forward-looking statements, often characterized by words such as “believes,” “anticipates,” “plans,” “expects,” “projects,” and other similar words, that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this document.

Additionally, this document contains information derived from third party sources.  Although we believe these third party sources to be reliable, Veris Wealth Partners makes no representations as to the accuracy or completeness of any information derived from such third-party sources and takes no responsibility therefore.

Veris Wealth Partners
September 14, 2022

A Look at a Few of the Potential Benefits & Limitations of The Inflation Reduction Act & Biden Student Loan Forgiveness Plan

by Tim Kingsbury, Wealth Manager at Veris Wealth Partners

August 2022 saw encouraging news coming from Washington with the passage of the Inflation Reduction Act (IRA)1 and the introduction of the Biden Student Loan Forgiveness plan.2 The potential effects of these initiatives are too extensive to unpack quickly, but this brief overview offers insights into a few of the most promising benefits and some of the limitations.

Inflation Reduction Act / IRA

The IRA is an extremely complex piece of legislation that includes new spending, taxes, and policies that touch on climate and our environment, energy, manufacturing, transportation, health care, and other important parts of our society and our economy.3

Here is a look at a few of the credits and rebates included in the legislation that are likely to have a major impact for Americans and for our environment.

The IRA’s EV Tax Credit

Tax credits are a dollar-for-dollar reduction in tax liability so they are more valuable than a tax deduction. The IRA includes a $7,500 New Electric Vehicle Tax Credit including two separate credits that take into account where the battery minerals were sourced and assembled.4 After the IRA was enacted on August 16, 2022 the tax credit was immediately effective for qualifying electric vehicles for which final assembly occurred in North America.5

We believe that one major potential positive impact of the IRA’s new credit is that it is likely to accelerate the onshoring of EV battery manufacturing in the United States so that we see significant growth over time. More information and changes to the eligibility requirements will be forthcoming in 2023.

Limitations

  • The IRA sets a Manufacturers Standard Retail Price (MSRP) cap of $55k for cars and $80k MSRP cap for new vans, trucks and SUVs. Vehicles priced over that amount do not qualify for the credit.
  • Before 2023, manufacturer sales caps of 200,000 vehicles are in effect that may negate the new tax credit, including vehicles from Tesla, GM and Toyota. Please refer to the Department of Energy’s list or use their VIN number decoder for availability as this is subject to change. Beyond 2023, manufacturer sales caps are lifted.
  • The law sets a Modified Adjusted Gross Income (MAGI) limit of $150k for individuals, $300k married filing jointly and $225k head of household.6
  • Note that the $4,000 Pre Owned Electric Vehicle Tax Credit, for model years at least two years earlier than year of purchase, are subject to MAGI limit of $75k individual, $150k married filing jointly and $112.5k head of household.

Prior to purchase, please consult your accountant or CPA to double check eligibility, as some provisions may change.

IRA High Efficiency Home Rebates

The IRA also offers incentives designed to help homeowners pay for more environmentally friendly and energy efficient home technologies, including a variety of rebates:7

  • $8,000 for heat pumps
  • $1,750 for heat pump water heaters
  • $840 for a heat pump clothes dryer or electric stove
  • $4,000 for electrical panel upgrades
  • $2,500 for electrical wiring improvements
  • $1,600 for insulation and sealing
  • And more…

Beginning sometime in 2023, various point of sale rebates should come online once additional guidelines are released.

Limitations

  • The law sets a collectable maximum of $14,000 in high efficiency home rebates.
  • To be eligible for these rebates, household income cannot exceed 150% of area median income as calculated by HUD. Fannie Mae provides an area median income lookup tool, but please consult your accountant or CPA to double check eligibility.

IRA Residential Clean Energy Credit

A tax credit for installing clean household energy such as solar (PV panels, batteries, setup costs etc.), wind, or geothermal has been raised from 26% to 30% from 2022 to 2032 – independent of the prior $14k High Efficiency Home Rebate cap.7

Student Loan Forgiveness Plan

The cost of college has soared over the last few decades, with the average price of tuition, fees, and room and board for an undergraduate degree jumping 169% between 1980 and 2020.8 Over the same period of time, government investment in financial support for students has declined.9 Massive amounts of student loan debt is the result. The Department of Education now estimated that the average American undergraduate student now graduates with nearly $25,000 in student loan debt. Those debts have a disproportionately high negative impact on middle class and lower income families, particularly on people of color, which many experts point to as a cause of the widening racial wealth gap in this country.10

To respond to this growing crisis, President Biden, Vice President Harris, and The Department of Education introduced a Student Loan Forgiveness Plan this August designed to provide relief to low and middle income federal student loan borrowers.11 This plan may yet be challenged at the Supreme Court, but currently it includes:

  • $10k of student loan forgiveness, plus an additional $10k if Pell Grants are held, if income was under $125k for individuals or $250k Married Filing Jointly/Head of Household for either years 2020 or 2021. Parents with PLUS loans are also eligible, subject to income limits.
  • The Federal student loan repayment freeze was extended until the end of 2022.
  • Monthly payments for income driven repayment plans were cut to 5% of a borrower’s discretionary income – down from 10% of discretionary income.
  • Monthly payments for graduate loans will be capped at 10% of discretionary income, down from 20%.
  • Balances will not increase as a result of accrued income as long as monthly payments are made on time.
  • Remaining balances will be totally forgiven after 20 years of payments or 10 years of payments if the balance is $12k or less.

Anyone who believes they are eligible should consult an accountant or tax professional for exact qualifications.

More Information Coming in 2023

We welcome these developments and we eagerly await additional information and guidelines. As 2023 approaches, these new policies will become more concrete and clear.

If you think you may benefit from the IRA or Student Loan Forgiveness plan, please consult your accountant/CPA, financial advisor, or wealth manager before taking any action.

Tim Kingsbury is a Wealth Manager and CERTIFIED FINANCIAL PLANNER™ professional. He is located in the New York office of Veris Wealth Partners and is focused on helping clients meet their financial and impact goals. Learn more.

Sources

1 https://www.congress.gov/117/bills/hr5376/BILLS-117hr5376enr.pdf

2 https://studentaid.gov/debt-relief-announcement/

3 https://www.nytimes.com/interactive/2022/08/13/upshot/whats-in-the-democrats-climate-health-bill.html

4 https://techcrunch.com/2022/09/02/a-complete-guide-to-the-new-ev-tax-credit/

5 https://home.treasury.gov/system/files/136/EV-Tax-Credit-FAQs.pdf

6 https://www.jdpower.com/cars/shopping-guides/how-the-new-ev-tax-credits-work#:~:text=The%20IRA%20also%20sets%20personal,and%20%24150%2C000%20for%20joint%20filers

7 https://electrek.co/2022/08/19/us-tax-credits-rebates-climate-law/

8 https://www.forbes.com/advisor/student-loans/college-tuition-inflation/

9 ​​https://www.theatlantic.com/politics/archive/2018/05/american-higher-education-hits-a-dangerous-milestone/559457/

10 https://www.brookings.edu/research/student-loans-the-racial-wealth-divide-and-why-we-need-full-student-debt-cancellation/

11 https://studentaid.gov/debt-relief-announcement/

The information above is provided for informational purposes only and reflects the views of the authors. 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.

Veris WP
September 7, 2022

ESG Critics Are On The Wrong Side of History

by Stephanie Cohn Rupp, CEO of Veris Wealth Partners

“Don’t take the wrong side of an argument just because your opponent has taken the right side.”                                                                                                                                              — Baltasar Gracián

Environmental, Social, and Governance (ESG) investing is facing a new round of criticism from American conservative leaders. Senator Ted Cruz, to offer one example, has framed BlackRock’s ESG policies as “abusing the market.”1 More alarming to me, are the new state-level policy attacks on ESG led by elected officials from across the United States. To offer three recent examples: 

  • Governor Ron DeSantis and trustees of Florida’s State Board of Administration passed a resolution barring state pension funds managers from considering ESG criteria.2
  • Texas State Comptroller Glenn Hegar banned state and local entities from doing business with ten banks that the state accused of boycotting the oil and gas industry.3
  • The State of West Virginia and its State Treasurer now refuse to do business with financial institutions that divest from fossil fuels.4

As I see it, these actions demonstrate a lack of concern for the financial performance of the pension-holders they supposedly wish to protect – as well as a lack of regard for the views of a vast majority of the American people. A recent Pew study showed that 69% of American adults want the US to focus on developing the infrastructure for wind, solar, and other alternative energy sources instead of expanding the production of oil, coal, and natural gas.5

I have spent the last twenty years of my career in global Impact and ESG investing, serving clients from across the political spectrum. From my perspective, these condemnations and policies designed to defend the fossil fuel industry show a deep misunderstanding of ESG investing and lack of knowledge about important megatrends that are shifting the views of Republicans and Democrats alike and shaping a future that will look very different from today.

These anti-ESG positions are, in my view, dangerously on the wrong side of history.

ESG Critics’ Biggest Mistake: Ignoring Stranded Assets

I believe the greatest mistake of policymakers enacting bans on ESG investing is that they are ignoring the risk of “stranded assets.” 

Lloyd’s defines stranded assets as those that “have suffered from unanticipated or premature write-downs, devaluation or conversion to liabilities” typically because of environmental changes caused by climate change.6  

By continuing to invest in fossil fuels, the pension systems of West Virginia, Texas, and Florida – and the pensioners who depend on them – will continue to be exposed to oil and gas and the risk of stranded assets.

Though fossil fuels continue to dominate the global energy system today, we are about to experience a sharp decline in their use because of new government regulations, sharp changes in consumer behavior, and the potential for legal action against emitters. Researchers have forecasted that 60% of oil and fossil methane gas, and 90% of coal will remain in the ground for the planet to not exceed a 1.5 °C carbon budget.7 These “assets” will remain stranded.

Stranded asset risk is not fully reflected today in the value of companies that extract fossil fuels. If this risk was priced in, as I think it will be in the future, this would result in a sudden drop in value that would affect investors and shareholders.

Whether you believe in climate change or not — as an investor, it is a dangerous bet to continue to invest in an industry which has a high probability of becoming obsolete. Returns to pensioners will most probably suffer as a result.

Error #2: Ignoring that Energy Companies are Making Net-Zero Commitments and Transition Plans

Several energy companies have now made Net-Zero commitments. Exxon-Mobil pledged net-zero carbon emissions from operations by 2050.8 Shell’s target is to become a net-zero emissions energy business by 2050.9 Why would policymakers force their states’ pensioners into investments in soon outdated energy, even while the energy companies are making these commitments and embarking on the energy transition?

In contrast, the states of Texas and Florida have yet to make a Net Zero commitment.

Error #3: Misreading *Republican* Opinion

The Republican politicians that are taking action against ESG are apparently not paying attention to the shifting views of their own voters. A Pew research study found that 88% of Republicans are supportive of specific policies to reduce climate change, such as planting a trillion trees to absorb carbon emissions, while 73% of Republicans are supportive of providing a tax credit to businesses to develop carbon capture and storage.10 My own experience supports polling data indicating that a vast majority of right and left-wing asset owners want to combat climate change.

Anti-ESG politicians should take note that voters from the opposing parties are not as far apart on this issue as it might seem. Another Pew study indicates that 77% of all Americans (including Democrats, Republicans and Independents) wish to prioritize renewables over fossil fuels.11

If we look at Pew’s findings broken down by political affiliation and gender, 66% of Republican women wish to move away from fossil fuels and 60% of Republican men agree.12 This data suggests that Republican women are more concerned about climate issues than Republican men. It is notable then that McKinsey projects that more than two-thirds of wealth in the US will be held by women by 2030.13 I believe this massive wealth transfer to women will cause a tidal wave of ESG investing — especially in climate solutions. Conservatives may now attack ESG investing as “woke,”14 but the data suggests that wealthy Republican women will increasingly invest in the clean energy transition.

A Majority of Americans Want Climate Solutions – More of our Leaders Need to Get on the Right Side of History 

Partisan voters and investors obviously still have polarized views on many issues, but all evidence suggests that they are now largely in agreement on climate change.

I believe that these myopic bans on ESG investing in Texas, Florida and West Virginia pose real world risks, not only to the pensioners of these state systems, but to all humanity – by supporting policies that exacerbate global warming and its catastrophic consequences.

I call on every American voter and every investor who agrees with me to send a message to the leaders who are on the wrong side of history – both with your votes and with your dollars.

Stephanie Cohn Rupp is the CEO of Veris Wealth Partners. She has worked globally in Impact and ESG investing since 2001 and is a Board Director of US SIF. Read Stephanie’s full bio.

The above article was originally published on the Medium.com website on August 31, 2022.

References

1 https://www.cnbc.com/2022/05/24/sen-ted-cruz-blasts-larry-fink-over-woke-shareholder-votes-on-climate.html

2 https://www.nytimes.com/2022/08/24/business/dealbook/desantis-florida-esg-investing.html

3 https://www.texastribune.org/2022/08/24/texas-boycott-companies-fossil-fuels/

4 https://www.nytimes.com/2022/07/28/business/west-virginia-fossil-fuel-banks.html

5 https://www.pewresearch.org/science/2022/03/01/americans-largely-favor-u-s-taking-steps-to-become-carbon-neutral-by-2050/

6 https://www.lloyds.com/strandedassets

7 https://pubmed.ncbi.nlm.nih.gov/34497394/

8 https://corporate.exxonmobil.com/News/Newsroom/News-releases/2022/0118_ExxonMobil-announces-ambition-for-net-zero-greenhouse-gas-emissions-by-2050

9 https://www.shell.com/powering-progress/achieving-net-zero-emissions.html

10 https://www.pewresearch.org/fact-tank/2021/07/23/on-climate-change-republicans-are-open-to-some-policy-approaches-even-as-they-assign-the-issue-low-priority/

11 https://www.pewresearch.org/science/2019/11/25/u-s-public-views-on-climate-and-energy/ps_11-25-19_climate-energy-00-014/

12 https://www.pewresearch.org/science/2019/11/25/u-s-public-views-on-climate-and-energy/ps_11-25-19_climate-energy-00-014/

13 https://www.pnc.com/insights/wealth-management/business-continuity-and-succession-planning/preparing-for-the-great-wealth-transfer-to-women.html

14 https://www.bloomberg.com/news/articles/2022-09-01/woke-inc-author-s-firm-targets-blackrock-esg-investing

The information above is provided for informational purposes only and reflects the views of the authors. 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.

Veris WP
June 27, 2022

The End of Roe

“With sorrow — for this Court, but more, for the many millions of American women who have today lost a fundamental constitutional protection — we dissent.1“

– Supreme Court Justices Stephen Breyer, Sonia Sotomayor, and Elena Kagan

Veris Wealth Partners condemns the Supreme Court’s disgraceful decision overturning Roe v. Wade.

We share the sorrow expressed by Justices Breyer, Sotomayor, and Kagan in their dissenting opinion in the case of Dobbs v. Jackson Women’s Health Organization and we find it appalling that women in the United States no longer have a federally guaranteed constitutional right to abortion access.

The Immediate and Future Impact of this Decision

At least 26 states are expected to ban abortion in the coming days.2 No one is exactly certain of what may come next, but the dissenting Justices wrote, “Whatever the exact scope of the coming laws, one result of today’s decision is certain: the curtailment of women’s rights, and of their status as free and equal citizens.”

In their response to the decision, the ACLU wrote that “Forcing women and other people to carry a pregnancy against their will has life-altering consequences, including enduring serious health risks from continued pregnancy and childbirth, making it harder to escape poverty, derailing their education, career and life plans, and making it more difficult to leave an abusive partner. This decision could also lead to pregnancy losses being subject to suspicion, investigation, and arrest, and patients and doctors being thrown in jail.”3

The response issued by the Association of American Medical Colleges (AAMC) sounded the alarm that almost half of US OB-GYN residency programs are located in the 26 states where abortion is expected to be outlawed. They make the point that it will now be challenging, if not impossible, for a great number of American medical school students to get vital training not only in abortion care, but also in treating women who are suffering miscarriages and other related OB-GYN issues.4

Another impact of this decision is that other rights are likely at risk. In his concurring opinion to the Dobbs decision, Justice Clarence Thomas wrote that the Supreme Court “should reconsider all of this Court’s substantive due process precedents, including Griswold, Lawrence, and Obergefell”.5 These are the decisions that guaranteed access to contraception, struck down sodomy laws and legalized same-sex marriage.

Action Steps

The next elections will be crucial to determining what comes next. Many say that this decision to overturn Roe was the result of 50 years of activism, voting, and political maneuvering from the anti-choice movement. We believe we all must rise to this moment and do what we can to fight for women’s rights, for human rights, in the United States.

Please vote.

Please support organizations that are still providing reproductive health care and those that are fighting for reproductive rights for women in the United States including:

Veris Wealth Partners reaffirms our commitment to continue to support the reproductive rights of women and girls in the United States.

Sincerely,

Veris Wealth Partners

References

1 https://www.politico.com/news/2022/06/24/read-supreme-court-dissent-opinion-on-roe-v-wade-pdf-00042264

2 https://www.guttmacher.org/infographic/2021/if-us-supreme-court-overturns-or-guts-roe-v-wade-26-states-are-certain-or-likely

3 https://www.aclu.org/press-releases/aclu-comment-supreme-courts-decision-overturn-roe-v-wade

4 https://www.aamc.org/news-insights/how-repeal-roe-v-wade-will-affect-training-abortion-and-reproductive-health

5https://www.politico.com/news/2022/06/24/thomas-constitutional-rights-00042256

The information above is provided for informational purposes only and reflects the views of the authors. 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.

Veris WP
June 2, 2022

Veris Wealth Partners Supports Women’s Reproductive Rights

“Restrictive abortion regulation can cause distress and stigma, and risk constituting a violation of human rights of women and girls, including the right to privacy and the right to non-discrimination and equality, while also imposing financial burdens on women and girls.” 1 -The World Health Organization

Since 1973, American women have had a federally guaranteed constitutional right to abortion access. A leaked first draft of Justice Samuel Alito’s majority opinion has given us early warning that the Supreme Court is preparing to take that right away by overturning Roe v. Wade.2

Veris Wealth Partners affirms our support for women’s rights – including women’s right to have control over their bodies. We are unapologetically pro-choice. We believe that access to abortion is a basic right to medical care. We also condemn any effort to demonize abortion, as women often make this choice with anguish.

The Potential Consequences of the End of Roe

Striking down Roe v. Wade means the states will decide this issue. After Roe falls, over half of all states are expected to outlaw abortion3 and in some cases deem doctors, medical teams, and patients as criminals.4 The state of Texas, for example, has already passed a “trigger-ban” ordering that anyone arrested for performing or inducing an abortion be charged with a first-degree felony5 – punishable by life in prison and up to a $10,000 fine.

We believe that this decision will negatively impact millions of women in the United States – including those who are likely to resort to dangerous, and often deadly, non-medical methods of abortions. According to the World Health Organization, “unsafe abortion is a leading – but preventable – cause of maternal deaths and morbidities” globally.6

Our leading health institutions do not support the decision to overturn Roe v. Wade. Dr. Gerald Harmon, president of the American Medical Association, responded to Alito’s leaked draft by saying, “With deliberations underway, we strongly urge the Court to reject the premise of the draft opinion and affirm precedent that allows patients to receive the critical reproductive health care that they need. Allowing the lawmakers of Mississippi or any other state to substitute their own views for a physician’s expert medical judgment puts patients at risk and is antithetical to public health and sound medical practice.”7

The Outsized Impact of this Decision on Marginalized Women & Girls

Because of long-standing inequities in our country, women and girls from marginalized backgrounds are expected to experience the worst impacts of the Supreme Court’s decision.8 Lack of access to adequate healthcare and contraception means that women of color are more likely to experience unintended pregnancy than white women.9 Evidence of racial disparities in women’s access to health care can already be seen in maternal mortality data. Research compiled by the CDC in 2020 showed that the maternal death rate for Black women was 2.9 times greater than the rate for non-Hispanic white women.10 The worst negative economic impacts of this decision are also expected to disproportionately fall on BIPOC women.11

Additional Support is Needed for Women and Families in the United States

Many women choose abortions because they cannot afford to raise a child.12 In addition to full reproductive rights, we believe that women and their families also need access to:
● Affordable healthcare
● Family planning and contraceptives (including education and training)
● Policies that support mothers and families
● Paid family leave
● Affordable childcare
● Workplaces that support parents through scheduling, pay, benefits…etc.
● Tax policy that provides financial benefit to family caregivers

Actions We Are Taking

Veris made a corporate donation to Planned Parenthood Federation of America in May 2022, which was matched by Partners within the firm.

Through our investment managers, Veris clients have taken meaningful actions related to reproductive rights:

● As You Sow filed four resolutions related to sexual and reproductive health in 2022.13 30 Veris clients have endorsed two separate reproductive rights resolutions “Report on risks of policies restricting reproductive rights and strategies to minimize or mitigate risks”.

 – 23 Veris clients endorsed this resolution for TJX Companies
– 7 of our clients endorsed this same resolution for Kroger.

● Another Veris investment manager has filed shareholder resolutions and engaged with portfolio companies on reproductive health & rights and political donations to organizations that are anti-abortion.14

● Another manager provided Veris with proxy voting guidelines for abortion/right to life issues.15

As we know the cost of keeping a child is sometimes prohibitive to women in a precarious financial situation, we have also taken action to support paid family leave. In support of mothers, in 2021 we worked with the Paid Leave for the United States (PL+US) campaign to advocate for a national paid family leave bill in the Build Back Better package. We signed on to the initiative and Alison Pyott met with US Senator Jeanne Shaheen’s office to voice our support. We also provided statements of support including why as a small business this was important to us and our recent paid family leave policy change at Veris. We will continue to support the PL+US network efforts.

What You Can Do

Vote.

Call your congressional representatives and urge them to act to protect women’s access to reproductive choice and health care.

Support organizations that are working to help women get the health care information and services they need while helping to protect reproductive rights for women in the United States:

● Planned Parenthood
● NARAL Pro-Choice America
● Center for Reproductive Rights
● The National Abortion Federation (NAF)

We hope that you will join us in protecting the reproductive rights of women and girls in the United States.

Sincerely,
Veris Wealth Partners

References

1 www.who.int/news-room/fact-sheets/detail/abortion

2www.politico.com/news/2022/05/02/read-justice-alito-initial-abortion-opinion-overturn-roe-v-wade-pdf-00029504

3www.nytimes.com/interactive/2022/us/abortion-bans-restrictons-roe-v-wade.html

4www.politico.com/news/2022/05/06/potential-abortion-bans-and-penalties-by-state-00030572

5https://statutes.capitol.texas.gov/Docs/HS/pdf/HS.170A.pdf

6 www.who.int/news-room/fact-sheets/detail/abortion

7 www.ama-assn.org/press-center/press-releases/ama-statement-draft-supreme-court-opinion

8www.pbs.org/newshour/nation/black-and-hispanic-people-have-the-most-to-lose-if-roe-is-overturned

9https://contraceptionmedicine.biomedcentral.com/articles/10.1186/s40834-020-00118-5

10https://www.cdc.gov/nchs/data/hestat/maternal-mortality/2020/maternal-mortality-rates-2020.htm

11www.newyorker.com/business/currency/the-devastating-economic-impacts-of-an-abortion-ban

12www.guttmacher.org/journals/psrh/2005/reasons-us-women-have-abortions-quantitative-and-qualitative-perspectives

13www.asyousow.org/resolutions-tracker

14www.trilliuminvest.com/documents/latest-shareholder-advocacy-reports 

15 www.domini.com/uploads/files/Proxy-Voting-Procedures-and-Guidelines-Effective-2021-0201-for-web.pdf

The information above is provided for informational purposes only and reflects the views of the authors. 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.

Veris WP
May 5, 2022

6 Trends Shaping the Future of Impact and ESG Investing

By Roraj Pradhananga

The Impact and ESG investing space is growing and changing rapidly. These are a few of the emerging trends that we are paying close attention to at Veris Wealth Partners. 

1. The Mainstreaming of Impact and ESG Investing

Environmental, Social and Governance (ESG) and impact funds/investments have performed very well, and interest in impact investing is growing at a tremendous rate. Globally speaking, ESG assets are expected to grow to $41 trillion by 2022 and $50 trillion by 2025. The United States has now surpassed Europe in ESG growth. ESG assets in the US are on track to grow to $20 trillion in 2022.1 According to the Global Impact Investing Network (GIIN) survey, impact investing assets under management (AUM) increased from $502 billion2 in 2019 to $715 billion in 2020.3 The IFC estimates the impact investing market to be even larger at $2.3 trillion including $1.3 trillion that are managed by publicly owned Development Financial Institutions (DFIs) and national/regional development banks. Of the $2.3 trillion in AUM, $636 billion represented core AUM managed by privately owned asset managers and DFIs where intent, contribution and impact measurement are identified. This is an increase from $505 billion in 2019.4

It is really exciting to see our sector headed towards the mainstream, but we aren’t there yet. My inner skeptic sees interests in ESG and impact investing that are driven solely by increasing consumer demand and not by intentionality, which is important for cohesiveness and long-termism – qualities that define our industry. A recent survey by HSBC found that of 528 institutions with $12.6 trillion in AUM indicated that 33% of respondents said attracting capital or inflows is the strongest reason for integrating ESG followed by 26% stating competition or peer pressure, not because of their convictions or commitment to environmental and social sustainability.5 I believe not all of these assets represent authentic ESG or impact focused investments or full ESG integration. Not all of these are hundred percent ESG integrated and some are exclusionary only.

Veris is an impact focused wealth management firm, and we take extra steps to determine authenticity. We believe the fund managers we invest our client assets with do care. For them it is not just about growth in assets under management. We believe there is a difference between what our clients are invested in and the overall market. 

2. Greenwashing and Impact Washing

We believe more firms are claiming to do impact investing without the intentionality and/or additionality. People have valid concerns about greenwashing and impact washing, but I believe we also need to worry about losing the concept of authenticity, accountability and why we truly believe in impact investing. Nowadays, it feels as if everyone is claiming to have an impact – how do we differentiate and truly validate those claims?

I believe our industry must push for verification of impact, measurement and management – which is a huge challenge due to lack of data. Despite the challenges, many of us are clamoring for more standardization and definitions. I believe mandatory disclosures, reporting and regulatory changes like the EU’s Sustainable Finance Disclosures Regulation (SFDR)6  and similar regulatory changes that are being considered by the SEC would help.

On the public equities and fixed income side of the investing – I’m paying close attention to challenges around data. We are asking, how can we best utilize the ESG data that we have and how can they be forward looking instead of backward looking? How do we truly integrate ESG factors in the investment process and measure and manage impact?

On the private investment funds, how do we truly define and assess whether the investments have concretely contributed to additional social and environment impacts? However, all these questions shouldn’t take away the focus and spotlight from the great work many impact investors are doing and the need to do more.

3. Innovation and Intersectionality

While the push for standardization is much needed, I also believe the field must continue innovating on better ESG, sustainable and impact investing solutions. I believe we need targeted solutions that focus on overlooked impact themes and especially those where capital flow is very minimal today.

I also believe we need more focus on intersectionality, especially with complex challenges that are often intertwined – climate change, health and wellness, mental health, wealth building, employee ownership, etc. I see lots of discussion around environmental/climate justice but our industry doesn’t have targeted investable solutions yet.

4. Active Ownership and Policy

Even with increasing numbers of people – especially younger generations – supporting action on climate, racial inequities, impact and ESG investing, there appears to be a huge partisan divide in this country, with one party seemingly holding back policy changes.

I believe we need sound government policies and a friendly policy environment to scale impact and ensure the progress we make will not be lost if future administrations change the rules.

I believe we need to amplify the voices of the communities that are directly impacted and engage with portfolio companies on various ESG topics and challenges and help guide them to be agents of impact and change.

5. Commitments and Authenticity

Many organizations have made public commitments around net zero7 and equity, diversity and inclusion in the last couple of years.8 What is missing is the details as to how these organizations plan to get there.9 This is further supported by our conversations with our approved managers as they analyze policies and data of the companies they invest in.

I believe we need a heavy lift on these issues now – we don’t have until 2050 or later to get to net zero based on our current trajectory. We also need to ensure that EDI is not an exercise in box checking. 

6. The Changing Role of Impact Investors

I believe our industry is facing some existential questions, including:

  • What does it really mean to be an impact investor?
  • Are we perpetuating extractive practices through what we currently call impact investments and various financial instruments we use?
  • What is the role of impact investors in providing catalytic and patient capital? Do we wait for government and quasi government entities to de-risk projects before we move in or do we become the de-riskers?

As we think about these important questions and have conversations about the answers, I believe our industry must continue doing the important work we are doing. We need to create innovative financial instruments to provide capital to emerging solutions to ensure individuals, communities and solutions who need access to capital the most have access to it.

Roraj Pradhananga is a Partner and the Senior Research Analyst at Veris Wealth Partners. He leads our Investment Research team, is a voting member of the Investment Committee and Chair of the Equity, Diversity & Inclusion (EDI) Committee.

References

1 https://www.bloomberg.com/company/press/esg-may-surpass-41-trillion-assets-in-2022-but-not-without-challenges-finds-bloomberg-intelligence/

2 https://thegiin.org/assets/GIIN_2019%20Annual%20Impact%20Investor%20Survey_webfile.pdf

3 https://thegiin.org/assets/GIIN%20Annual%20Impact%20Investor%20Survey%202020.pdf

4https://www.ifc.org/wps/wcm/connect/365d09e3-e8d6-4da4-badb-741933e76f3b/2021-Investing+for+Impact_FIN2.pdf?MOD=AJPERES&CVID=nL5SF6G

5 https://www.gbm.hsbc.com/en-gb/feed/sustainability/esg-sentiment-survey

6https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/sustainability-related-disclosure-financial-services-sector_en

7 https://www.un.org/en/climatechange/net-zero-coalition

8 https://www2.deloitte.com/us/en/insights/topics/talent/building-employee-trust-dei-programs.html, https://www.cultureamp.com/blog/dei-2022-trends, https://www.cultureamp.com/resources/report/2022-workplace-dei-report, https://www.cnbc.com/2020/06/11/companies-are-making-bold-promises-about-greater-diversity-theres-a-long-way-to-go.html

9 https://zerotracker.net/#companies-table

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