[This article originally appeared in our March issue of ETF Report.]
Socially responsible investing (SRI) goes by many names: impact investing; environmental, social, governance (ESG) investing; sustainable investing; and so on.
Whatever you call it, the idea of investing with your conscience is having its moment. Over the past year, investors have flocked to ETFs and mutual funds that allow them to support their pet causes, from minimizing the carbon footprint to greater human rights worldwide—even gender diversity in the boardroom.
It doesn’t hurt that research shows SRI often performs better than conventional index strategies. For example, over a three-year period, the MSCI EAFE ESG Index beat the vanilla EAFE Index by more than 120 basis points, according to a recent note from FactSet.
Sustainable investing just makes sense, says Greg Lessard, founder of Aspen Leaf Partners, a fee-only advisory firm in Golden, Colorado. Aspen Leaf is unique in that the firm invests only in ESG and socially responsible investments, or investments that align with those philosophies (such as infrastructure or certain government bonds).
Recently we sat down with Lessard to talk about his firm’s approach, as well as the evolution of SRI ETFs, and what he sees for the future.
Tell us a little bit about your background.
Originally, I went to forestry school. My actual academic background is environmental studies.
That’s everybody’s reaction! I was not supposed to become a financial advisor.
I graduated from Syracuse Forestry School in 2000. Then I got a job with the state, and I hated it. So I packed up my car, moved from New York to Colorado, and tried to find my way.
In 2003, I started selling life insurance—which, when you’re 23 years old, is really hard. Finally, though, I landed at Ameriprise in 2007. That’s where I cut my teeth.
So how did you end up forming Aspen Leaf Partners?
In 2008, I started talking to clients about the concept of socially responsible investing. Back then, we didn’t have any of the products we have today. It was all the expensive, negatively screened stuff. But I offered it anyway to clients who I thought might be interested. And some were.
By 2012, I got to the point where I said to myself, “I don’t like working for a brokerage firm. I don’t like selling things.” So I started a fee-only planning practice and advisory, where I could focus on these types of SRI investments that I wanted to focus on. That’s how Aspen Leaf came to be.
Who are your main clients?
Demographically, they’re younger baby boomers. They’re maybe thinking about retiring a few years out, and wondering, “Can I even do this?”
I don’t work with the elite, I don’t work with the super wealthy. I work with the kind of people who live in my neighborhood.
How do you use ETFs for your clients?
We use ETFs for 45-50% of each portfolio model. I don’t build elaborate portfolios with 25 or 30 holdings. Most of our portfolios are 10-12 holdings, about four or five of which are ETFs.
There are a lot of large-cap SRI strategies, but it’s hard to find things on the international stage, emerging markets and so on. Certainly bonds are challenging.
For clients who want more exposure to water or Catholic values or alternative energy, I’ll trim the large-cap ETF positions to make room for whatever theme is important to the client—something they believe in that will also offer value in terms of feel-good factor and future return potential. A good example is an alternative energy ETF we use, the VanEck Vectors Global Alternative Energy ETF (GEX).