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Vote with Your Dollars: Busting ESG Myths & Greenwashing with the Founder of LightMoney
107 Plays2 years ago
Update: I recently launched my newsletter, The Sheconomist, and would love for you to subscribe: sheconomist.com - I share so many tools and resources that help young, high-achieving women with radical money and career self-advocacy.
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Did you know that you are probably financing gun manufacturers and deforestation?
In this eye-opening episode, we sit down with Dianna Burkholder, Chartered Socially Responsible Investment Counselor & Founder of lightmoney.com, a game-changing tool that offers unprecedented insight into a company's social impact across six crucial causes: women's empowerment, prison profiteering, dark money, climate change, people over profits, and racial justice.
Diana challenges traditional notions of investment and consumerism, emphasizing the significance of voting with our dollars. What if we could shift the world for the better simply by rethinking where we put our money? We delve into socially responsible investing and how the majority embracing this approach could catalyze incredible societal change.
As we navigate through the complexities of Environmental, Social, and Governance (ESG) criteria, Diana exposes the prevalent misconceptions around ESG scores. Far from assessing a company's positive impact on the environment, social causes, or governance, ESG scores instead measure the financial risk a company faces due to their behavior on these issues. This crucial misunderstanding has significant implications for investors and consumers alike.
Discover how Diana was inspired to create LightMoney.com after realizing that there were no adequate tools to effectively screen companies for socially responsible behavior. We explore the stark reality that many of us unknowingly invest in companies and industries that conflict with our moral values, often through our retirement accounts.
We also discuss the rising trend of shareholder activism that is encouraging corporate transparency and positive change. However, amidst the companies embracing conscious capitalism, Diana cautions us about the increased prevalence of greenwashing.
Don't miss Diana's invaluable advice on tangible actions you can take today to engage in socially responsible investing and understanding where your investments are truly going.
Listen in to learn, reflect, and become an informed consumer and investor, ready to align your financial decisions with your values for a better world.
Links to topics discussed:
- Journalist Susan Antilla who shed light on sexual harassment on Wall Street
- As You Sow Non-profit
- investyourvalues.org
Recommended
Transcript
Understanding ESG and Financial Risks
00:00:00
Speaker
ESG does not actually measure whether a company is doing good on environmental, social, or governance topics. It measures what risk those behaviors pose to them financially. I'm Tamina, and I'm extending a heartfelt invitation to you as we join forces in reclaiming economic power for women in a world that is often structured against us.
00:00:26
Speaker
We'll dive into the minds of accomplished female leaders, investors and entrepreneurs to equip you with the confidence and knowledge to build wealth for yourself and other women. So buckle up, get ready to learn and be inspired to take action.
Empowering Women Through Economic Power
00:00:42
Speaker
Welcome back, everyone. Today, we are covering a topic that is very dear to my heart, socially responsible investing. And I'm so thrilled to be welcoming Diana Burkholder, founder of LightMoney.com and chartered socially responsible investing counselor.
00:01:00
Speaker
The mission of Light Money is to be the go-to site for those who want to vote with their dollars, both as consumers and as investors. Light Money looks behind the curtain of environmental, social, and corporate governance practices, and provides transparent data on the corporations that make up the S&P 500. Welcome, Diane. I'm so excited to have you on the show. Thank you so much for having me. I'm very excited to be here and speak with you. Amazing. Let's dive right in.
Inspiration from Women Leaders
00:01:29
Speaker
Diana, this podcast is all about helping women build wealth for themselves and other women. And because increasing women's visibility is absolutely critical when it comes to wealth building, I always start out by asking my guests this question first. Diana, who is a woman that you admire and why? And can be anyone, like maybe a female founder, investor, business owner, politician, activist, content creator, scientist, doesn't matter.
00:02:00
Speaker
Oh, that's a great question. I would have a really hard time picking just one. So right off the bat, I would say Liz Warren for her work with the Consumer Financial Protection Bureau, which was the first federal watchdog agency for financial institutions. But I would also be remiss if I didn't mention Lucretia Mott. And I'm going way, way back here.
00:02:29
Speaker
Historically, Lucretia Mott was a woman during the pre-Civil War era that was a fierce abolitionist and feminist. And she's really the godmother of what we consider the socially responsible investing movement. And where that really stood out was her husband was a cloth merchant and she got him to stop
00:02:58
Speaker
selling and purchasing cloth that was made from cotton and switched to wool. She also spearheaded a campaign to get people to abandon sugar in candies made from sugar. She was the one who really popularized maple and maple candies in the US. She was just such a phenomenal influence on both the abolitionist movement and the feminist movement and suffrage.
00:03:28
Speaker
Both of those women I really admire and then someone more current, not that Liz Warren isn't current, she absolutely is. I also like to give a shout out to someone that I love the idea of really just elevating that not as many people may be familiar with.
Corporate Accountability and Social Responsibility
00:03:44
Speaker
Her name is Susan Antilla. She's an investigative journalist who wrote a book exposing Wall Street sexual harassment title, Tales from the Boom Boom Room.
00:03:56
Speaker
As a female in the financial industry, this is something that's pretty close to my heart. She uncovered the startling statistic that in three decades in the financial industry, only 17 arbitration cases have been found in favor of the victim, 17 cases in 30 years.
00:04:18
Speaker
Her work in activism helped draw attention from legislators who actually passed the ending forced arbitration of Sexual Assault and Sexual Harassment Act, and that was signed in March of 2022. So very, very big kudos for that.
00:04:35
Speaker
Wow, three incredible women. Amazing for all kinds of different reasons. I love the fact that you also talked about the creature, like talking about someone that goes way back. And I think it's a great example of highlighting a woman that.
00:04:53
Speaker
Definitely hasn't received the credit that she deserves. I mean, we know this about a lot of female scientists that didn't receive all the credit that they deserved. It was only the white men who got all the prizes and whatnot. So, and Susan's story is, is incredible. Mind blown by those statistics that you just shared with me and I'll make sure to link her profile and book in the show notes of this podcast off to a great start. Love it. Diana, I'm legitimately so, so excited to have this conversation with you today because.
00:05:20
Speaker
I am wholeheartedly convinced that if the majority of people followed a socially responsible investing approach, we would be living in a completely different and much better world. But I also believe it is important for us to take a step back and talk about what
00:05:40
Speaker
socially responsible investing and ESG investing is in the first place because I know not everyone might be familiar with those terms just yet. So when you and I talk about that, what do we mean? That is a great question. So I'll start with ESG because I think there's a lot of confusion over what ESG actually is.
00:06:03
Speaker
ESG is a term that is essentially a measurement of what financial risk ESG factors, which is environmental, social, or governance, pose to a company. ESG does not actually measure whether a company is doing good
00:06:22
Speaker
on environmental, social, or governance topics. It measures what risk those behaviors pose to them financially. So it's a really important distinction. A corporation that's headquartered in Southeast Florida is going to have a much higher level of risk from climate change than, say, one in Kentucky, even if all other factors were equivalent. So that Kentucky company would actually rate higher even if they were doing the exact same thing.
00:06:53
Speaker
So that's something that I think is frequently misunderstood. Socially responsible investing involves actively seeking companies that are doing good on very similar causes to ESG. A lot of the time, socially responsible investing actually is more focused on the UN's sustainable development goals, which are 17 causes that are sorted into a pyramid similar to Maslow's hierarchy of needs.
00:07:24
Speaker
Socially responsible investing is often tailored to the values of the investor themselves. And this can be done through both inclusion of certain criteria and exclusion of certain criteria. So that's kind of the clip notes version of ESG and SRI and what they mean.
00:07:41
Speaker
love that. And I 100% agree that distinction between easy investing and socially responsible investing is so, so important to make. I think even lots of journalists or media outlets get that wrong all the time and just to use it as also greenwashing, to be quite honest. And we're going to talk a little bit more about that later on. Yes.
00:08:03
Speaker
But Diana, now that we've established that foundation, we've clarified what those terms mean, we'd love to learn a little bit more about Light Money because founders usually start new companies or initiatives because they identify a need, a knowledge gap, or a specific pinpoint that they want to solve for. Why did you specifically create LightMoney.com? Yes. It was really a combination of all three of those.
00:08:30
Speaker
Being in the financial industry, I was really surprised when I couldn't find tools to screen companies effectively for ESG or especially for socially responsible investing. Everything I came across was very vague. And at that point, I didn't even really understand the distinction between the two. So I was constantly seeing companies that had high ESG scores, even though I knew they had a terrible track record on certain components of the ESG.
00:08:59
Speaker
So I became increasingly more frustrated as I would try and find data on the topics that were important to me. And if it did exist, it really wasn't in a form that was easy to digest. When I thought about what it would be like trying to navigate this as a layman, I realized that there needed to be a tool available to see a snapshot of a company and what they're doing across multiple causes. A tool that's fully transparent,
00:09:26
Speaker
showing the underlying data and the sources. I wanted something that consumers, job seekers, and investors could use, and more importantly, understand. And that's how Light Money was born.
00:09:40
Speaker
I love that, and I want to talk a little bit more about that whole topic of increasing visibility, transparency, because I think that's a core challenge that we're facing in this context. What I have been observing is what's particularly frustrating
00:10:01
Speaker
is the fact that the vast majority of us retail investors are investing in industries and individual companies that we actually morally don't necessarily support. And we do that without even knowing it. Think oil companies, gun manufacturers, or companies with very little gender and or racial diversity. And this oftentimes happens every single day in the form of
00:10:27
Speaker
employer-sponsored retirement savings accounts, such as a 401k or IRA, for example, where investment options are oftentimes somewhat limited. Oftentimes it's the employers that provide a limited set of investment options. They're usually negotiated with the individual providers, right?
00:10:50
Speaker
Right. Index funds are another example. So that's, again, why I think increasing that transparency is so important. And that's why people like yourself are playing such an important part in increasing awareness, especially on the retail investor side. People like myself that are not necessarily working in the financial industry. Diana, I'm curious, what progress have you seen in corporate accountability in recent years?
Investor Influence on Corporate Behavior
00:11:16
Speaker
So yes, you are absolutely right about how we can accidentally be invested in things that are completely contrary to our values.
00:11:25
Speaker
Andy Bayharm, who's with Azure So, which I'll come back to them in a second, but he tells a phenomenal story of how he was speaking with a nonprofit who literally works at removing landmines from war-torn areas. But their retirement plan had exposure to the weapons companies that manufacture landmines. Like, can you imagine?
00:11:50
Speaker
That's crazy. Oh my goodness. Yeah. So, ASHUSO is a phenomenal nonprofit and I really did want to give just a brief shout out to them and further the answer to your question. They're a nonprofit that promotes corporate accountability through shareholder activism. So, do you remember McDonald's used to use massive styrofoam cups for their drinks? Yes, I do remember that. I was very little, I think, but I do remember.
00:12:17
Speaker
Yeah, and I know our landfills remember Azure SO was actually able to get them to change that, which obviously had a tremendous impact. So I will talk a little bit more because they offer a lot of tools to help us drive change.
00:12:33
Speaker
Yes, fire is catching. We are seeing increased transparency from corporations thanks to shareholder activism and regulatory action. The second largest oil corporation in the world got three climate activists elected to their board of directors after they continued to just pay lip service to shareholder resolutions on climate issues.
00:12:58
Speaker
Our country has previously had very little requirement of DEI or environmental disclosures. A tiny bit of history on that that I was kind of fascinated by. The Civil Rights Act passed in 1965. Most of us know that. The Title VII of the Act prohibited discrimination in employment and also formed the Equal Employment Opportunity Commission. So fantastic progress.
00:13:25
Speaker
Corporations were required to submit reports to the EEOC with their demographics broken down by job categories. But there was specific verbiage in that bill to prohibit the government from ever releasing the data to the public.
00:13:46
Speaker
So the odds have really been stacked against transparency from the beginning. It's built into the system. And it's just astounding to me how long that fight has been going on. But this year, 86 of the top 100 companies in the US released their EE01 figures publicly.
00:14:06
Speaker
In June of 2020, that figure was just 25 of the same companies. Wow, that's a lot of progress very, very quickly. Yeah, so that's been huge. Also, the SEC just issued regulations that require corporations to publicly report, and it astounds me that this wasn't a thing before.
00:14:27
Speaker
but to publicly report their carbon emissions along with other material ESG data. So there's definitely still a lot of work to be done, but it's incredibly exciting to see the progress being made.
00:14:42
Speaker
That's wonderful to hear Diana and the whole topic of shareholder voting. I think I could talk hours about that and I think I might actually have to have a separate episode on that topic because I know there's some incredible power and we as retail investors are oftentimes not even aware of it, not even.
00:15:01
Speaker
participating in shareholder voting to begin with. That's something that I'm advocating for. So yeah, it could definitely fill an entire conversation. I'm curious, Diana, obviously there's new regulation, which is great, but do you also think that maybe as a result of the pandemic, there is more corporations that feel maybe not only the pressure, but from a CSR, Corporate Social Responsibility perspective, they need to
00:15:31
Speaker
step it up a little bit even when it comes to attracting younger investors down the road. We all know Gen Z are very vocal about all of these issues, but also to protect their own employer brands and to attract the right type of talent. We'd just love to hear your thoughts on those most recent developments and if the pandemic has played any part in that. I do think it has to a certain extent.
00:15:58
Speaker
It's interesting because it seems like sometimes the more progress we make, there's some corporations that will just be dragged kicking and screaming into the century, basically. But I do think there are a lot of companies that are making changes for the better.
00:16:16
Speaker
There's a term that we use for its conscious capitalism, and there's definitely companies out there that kind of embrace that mentality that they are beholden not just to shareholders, but what we call stakeholders.
00:16:30
Speaker
the employees, the shareholders and the communities and the environment. So absolutely we're seeing a shift towards that. Of course, with that, we're also seeing a lot of greenwashing and a lot of lip service. And that is why transparency is so important. A hundred percent. And I want to talk about greenwashing in a moment, but let's follow that threat on
00:16:58
Speaker
individual's responsibility and potential future employees, current employees, potential future investors. I do think that there's so much potential there in promoting change, and I think it's so easy for individual folks to just say, hey,
00:17:15
Speaker
My investments my couple thousand dollars or let's say even couple ten thousands of dollars over the course of a lifetime like they're not gonna make a big difference right. But compounded across millions of investors we're talking about billions and trillions of dollars that are directly funding those corporations that are.
00:17:37
Speaker
Accelerating climate change, for example. So that's why I also hope that this conversation is going to be a bit of a, you know, wake up call for our listeners. Because you could say the same argument about voting. You know, my one vote is not going to make a difference, but if nobody is going to cast their vote, democracy is dead, right? Diana, if there are listeners out there who are now like, damn, I need to step it up. I need to become more active.
00:18:02
Speaker
If these listeners are ready to embrace socially irresponsible investing, what are some tangible actions that they can take today after listening to this episode? You are spot on with everything you just said. I'm going to back it up just a bit though and really
00:18:20
Speaker
make the case for why they should be ready. First, because I haven't quite done that yet.
Steps to Socially Responsible Investing
00:18:26
Speaker
So I'm going to tell everyone why they need to care about this and what difference they can make and then talk about how. So if anyone doubts the power of socially responsible investing, Google or look up whatever search engine, look up divestment and apartheid in South Africa.
00:18:47
Speaker
There are a couple of quotes from Desmond Tutu that are extremely relevant to this topic. And the first one is, in South Africa, we could not have achieved our freedom and just peace without the help of people around the world who, through the use of nonviolent means, such as boycotts and divestment, encourage their governments and other corporate actors to reverse their decades-long support for the apartheid regime.
00:19:16
Speaker
And a more recent quote from him was, people of conscience need to break their ties with corporations financing the injustice of climate change. So it's worked, it's always worked.
00:19:33
Speaker
the most powerful thing that we can do, you know, if we want to see change, the most powerful thing we can do is use our voices to try and influence corporations. Specifically, as to your question, and to your point, there really is a parallel between this topic and voting in elections. Oftentimes, we feel like our vote won't matter, right? So it's kind of the same concept. But then you see a race, and there's one that you realize, oof, maybe I shouldn't have sat this one.
00:20:03
Speaker
A few years ago, the Virginia State Legislature literally was decided by a single vote, adjudicated by a single judge that basically came down to a coin toss, the balance of power in the Virginia State Legislature. So don't set this out.
00:20:23
Speaker
either elections or socially responsible investing. We have a tendency to really expect perfection. And when we don't get that, we throw our hands up in frustration. But perfection is the enemy of good. I've heard from a lot of passionate, very like-minded people to myself that they just want to disengage and not participate in investing entirely.
00:20:49
Speaker
The thing about that is, together, we are a force for good, a force for change. Collectively, we have power. Singularly, though, if we set this out, we accomplish nothing but shortchanging our own goals. I couldn't agree more. You were so eloquent, and thank you for providing that example around divesting and apartheid because I think
00:21:17
Speaker
That is a very, very tangible example. So what can people do? Aside from, okay, I'm going to make that decision today. I'm going to engage in socially responsible investing. What can they do?
00:21:30
Speaker
Should it go to lightmoney.com to look up what these companies that make up the Fortune 500 do? Tell me a couple of different things that people can do after listening to this episode today. Yeah. Really, there's two big things that I would recommend. The first thing is know what you own. This is really how we address greenwashing.
00:21:52
Speaker
Light money can be used to see how individual corporations score across six causes, empowering women, prison profiteering, dark money, climate change, people over profits, and racial justice.
00:22:07
Speaker
For funds, as you sow offers a tremendous resource at fossilfreefunds.org, where you can search for mutual funds and or ETFs and see how they score across fossil fuels, deforestation, gender equality, civilian firearms,
00:22:27
Speaker
prison industrial complex, military weapons, and tobacco. So we definitely have a lot of overlap, but there's a few differences there. If you don't like what you're seeing, make change because you do have the power to do so. If you have limited options like you were speaking to earlier, you can actually go to investyourvalues.org and they have a great guide to really taking action on your employment,
00:22:57
Speaker
sponsored retirement plan. So go to investorvalues.org, scroll down to the Action Center and select employees. And they basically give you step-by-step guides on how to collectively come together and get other employees on your side, because that's always more effective as we know. And go to your employer and ask for them to incorporate SRI options.
00:23:23
Speaker
I love that. I think giving people a script of this is step one, step two, step three, go now to your HR or benefits team and address this head on. I think that's really powerful. And I do believe, at least I know that's the case with my employer sponsored retirement account. There are certain ways where you can switch from the default options to
00:23:44
Speaker
like a self-serve tool. Fidelity has that option, for example. They usually don't recommend that to people who are maybe not as familiar with investing, but there are those options out there as well. Can you elaborate a little bit on that, Diana? So I do have to tread a little bit carefully because I'm a physician in the financial industries. They are an option. It's not very common to have that in a plan and it kind of comes down to
00:24:13
Speaker
the fiduciary responsibility of the plan sponsors. So they are assuming a certain amount of risk with that and it costs more, which of course, that's always going to be a deterrent for a lot of companies also. So it's not always an option, but if it is, that's where, you know, going back to those resources that I was mentioning and really knowing what you own becomes even more important.
00:24:36
Speaker
Gotcha. Thank you for clarifying that. And obviously, if anyone is investing, and I hope so, I hope people are investing outside of their retirement savings accounts as well. There you obviously have a lot more control about where you're going to put your money because these days, the options are limitless. And that's exactly why we need more transparency and help from people like you, Diana, to guide us through this maze of thousands and thousands of ETFs that are available at this point.
00:25:05
Speaker
Really, really incredible work. Can we talk a little bit more about this whole topic of greenwashing? We've briefly touched on it every now and then throughout this conversation. Yeah, absolutely.
Avoiding Greenwashing and Ensuring True ESG Values
00:25:18
Speaker
How can individual investors protect themselves from getting more greenwashing? Because I feel like a lot of companies these days like to use it for clickbait and to please people when in reality they might not necessarily be following those practices. We talked earlier about there's a lot of misconception around what ESG means in general. There is all of these ESG rankings out there, but you're mentioning earlier that those don't really
00:25:48
Speaker
tell us how these companies actually score across these different dimensions. So just curious what we can do to be more mindful. Yeah, definitely don't trust just because something has, you know, ESG in the name doesn't necessarily mean that it actually has that in its mission. If you're really passionate about climate change, then definitely screen
00:26:12
Speaker
whatever it is you're investing in through those tools that I mentioned because there is so much greenwashing and it's definitely an interesting thing that we've seen in this industry and the SEC has definitely become more aware of it and I think we're going to see changes.
00:26:29
Speaker
in the near future where that gets a lot harder for companies and funds and money managers to do. When you use light money, we show that background data. We show the sourcing data. There's no smoke and mirrors to it. You can click through to the original source. The only one that's no longer active and we're going to be changing out this metric
00:26:52
Speaker
soon, but forced arbitration, which is fantastic. The data source that we used for that was a nonprofit that was pushing for the legislation that would get rid of forced arbitration, and so they are no longer around. We've kept that ad up there for a while because I think it's still really important to see which companies are basically
00:27:15
Speaker
being forced by legislators to not use those tactics in sexual harassment cases, but that one will get switched out for something that's a little bit more specific for women in the workplace.
00:27:30
Speaker
I love that we're getting all the behind the scenes intel here and I honestly appreciate you so much for putting in the groundwork here because I know especially these days there's so much information coming at us all the time through social media through streaming services so I feel like
00:27:51
Speaker
People have probably gotten a little bit lazy when it comes to these things and they look at newspaper headlines and just take it for bare value without doing their due diligence on their end. So I think that's really, really important to point out. Diana, we're coming up on time. I can't believe it. This has been such a great conversation. Not only do I like to start out with.
00:28:12
Speaker
same question, but I also like to close with the same question for each of my guests. If I gave you $1 million today to invest in a company or a cause that would benefit women, where would you invest?
00:28:24
Speaker
That's a great question. So I do have to give a quick disclaimer. I am not making an investment recommendation or answering questions as an investment advisor and lightmoney.com is not an investment advisor. Perfect. Important to preface this 100% and make all of those legal disclaimers.
00:28:43
Speaker
Absolutely. If someone were to give me personally a million dollars to invest in a cause that would benefit women, I would use those funds to fund microloan programs for women. To be clear, this would not be an investment that would be made with the expectation of a return in the traditional sense, but an investment made for impact. We call that impact investing. That's a really fun topic for another day.
00:29:13
Speaker
I love it, Diana, and yes, couldn't agree more. I should have a completely separate conversation about impact investing. I just want to say thank you so much for taking the time today to talk to me about such an important topic. I've certainly learned a lot and, you know, I've done my research ahead of time and been
00:29:33
Speaker
reading up on these topics for a while now. So I'm sure to a lot of members in our audience, a lot of this will be incredibly eye-opening. So thank you so much for all the work that you do and the space. And yeah, is there anything else that you would like our audience to know before we close off for today?
00:29:53
Speaker
Oh goodness. Well, first of all, thank you so much for having me. Really appreciate you giving me the opportunity to talk about something that's, you know, so very valuable to me. If anyone does have any questions, you can always submit questions through thelightmoney.com or I'm pretty much on all the, all the social medias. Don't, don't sit this out. That's my one big ask is don't sit this out and don't
00:30:19
Speaker
Don't seek perfection and miss out on the good in doing and expecting absolute pure perfection because that's going to be really, really hard to find. I've tried. I've tried my best, but it's really hard to find.
00:30:33
Speaker
Beautiful words to close out with. Don't sit this one out. Don't seek for perfection. I think this is especially important for women to hear, especially the thing about perfection. So again, thank you so much, Diana. This was such a wonderful conversation and best of luck to you. Thank you.
00:30:52
Speaker
Hey there, not so fast. If you enjoyed this episode, please consider leaving a 5-star review on Apple Podcasts, Spotify, or wherever you've listened in from today. Reviews are a podcaster's most important currency. It helps me create visibility for the incredible women who join me on this show. And if you've made it this far, I'd like to believe that supporting women is one of your favorite pastimes.
00:31:17
Speaker
If you already left the review, first of all thank you, but why not share this episode with a friend or post it to your Instagram story? Thank you for helping me on my mission to make women rich by making women rich.