It’s not necessary to do extraordinary things to get extraordinary results.” – Warren Buffett

Since RTD’s founding in 1983, we have been inspired over the years by the generous passion of so many individuals and corporations who have been striving to make this a world a better place, not just for today but for generations to come.  Traditionally, making a positive impact primarily came in the form of donations and the volunteering of time.  According to Giving USA, Americans gave $449.64 billion to charity in 2019 which was up 5.1% compared to 2018.  This was an impressive jump over the 0.7% increase experienced the year prior.  Corporate giving increased to $21.9 billion representing an increase of 11.4% in 2019, which on a percentage basis was more than double the prior year’s increase.  While these numbers are impressive and certainly trending in a positive direction, there’s only so much that can be accomplished in the form of donations.  To put things in perspective, American’s collective net worth, which represents assets minus their liabilities, was $118 Trillion as of the end of 2019.  In other words, the total of all donations made represented less than 0.40% of American’s collective net worth.

Impact investing challenges the traditional viewpoint that environmental and social issues should be addressed only by philanthropic donations while at the same time, investable assets should remain focused on primarily achieving financial returns.  As investment options continue to expand and come to market, we have begun challenging this traditional viewpoint as well.  As such, the RTD Investment Policy Committee is passionate about pursuing opportunities to successfully incorporate impact investing into our portfolios wherever possible.

Challenges Of The Past

One of the biggest challenges historically has been the limited number of fund options available.  This reality, coupled with the fact that funds in this space had generally delivered subpar returns, made it difficult to embrace impact investing.  The very first sustainable mutual fund, the PAX World Fund, now called PAX Sustainable Allocation Fund, came to market in 1971.  Fast forward to 1994 and there were still only 26 funds were available.  It took twenty-three years to go from one to twenty-six available funds!  Twelve years later, in 2006, the number more than doubled and 60 funds were available to investors.  However, it wasn’t until this last decade that consumers began making purchasing decisions targeting companies who demonstrated they were good stewards of the environment, who attended to the well-being of all their stakeholders and who governed themselves in an ethical and transparent way.

As of January 2020, roughly 300 mutual funds and exchange-traded funds with an Environmental, Social and Governance focus were available, and we believe that number will grow exponentially over the next several years.  In addition, the passage of time has meant that performance track records are starting to become more and more meaningful.

Outlook For The Future

We believe we will be able to strategically incorporate purposeful investing into our portfolios over time.  As more and more fund options become available, it is our belief that we can shift the focus from mitigating performance drag to potentially enhancing the overall investing experience.  Most importantly, we believe the best performing companies of the future will be the companies who lead and embrace responsibility for the greater good.  They will be the businesses that balance purpose and profit; in essence, they will take into consideration the impact of their decisions on their clients, workers, suppliers, community and environment.  It is also our mission to do what we can to be a part of a community of leaders that drive and inspire business as a force of good.

Our first and foremost responsibility, as fiduciaries and stewards of your money, is to ensure our clients can meet their life’s goals without compromise.  However, we are committed to exploring all avenues that may help our clients align their money with their values and their life’s goals wherever possible.

It is also important to note that impact investing does not require radical changes.  We are certainly not going to fundamentally change our investment philosophy or discipline, which have worked well over the years.  What this does mean, however, is that we will be adding screening measures into our investment selection process that will further complement the already strict criteria that we have in place.  Existing criteria, such as reviewing and monitoring for consistency of performance versus fund peers and applicable benchmarks, efficient low operating expenses, and manager tenure, will all remain and continue to be important parts of our screening and monitoring process.  On top of this, we will be adding, whenever possible, additional criteria that focuses on responsible, well-managed companies that understand performance is no longer about profits alone.  We believe the best performing companies will also focus on purpose and making a positive difference to its various stakeholders.  This is the new standard that we will use to measure and monitor our investment selection process going forward.

This has been quite a journey and yet it is really just getting started. We are optimistic and certainly inspired by the collective energy and ambition that is taking place in this area.  For now, it’s important that we remain prudent and patient and that in time, as the momentum continues, we believe the ultimate impact can be extraordinary.  We will keep you posted as we continue to make progress in this area.

As always, we welcome the opportunity to continue the conversation and answer any questions you might have about our impact investing initiative.