Financial Advice About Why You Need a 401(k) Plan – DailyWorth.com

3 Reasons You Should Have a 401(k)

By Rob Thomas

Rob Thomas

DailyWorth Expert

Founder of Social(k). Sustainable retirement planning entrepreneur. Go Fossil Free.

socialk.com

When someone suggested I work in the stock market about 20 years ago, I laughed in their face. It was the mid ‘90s and I had just sold my caffeinated water company, Krank2o. My experience laid in entrepreneurship and small businesses, leading me to believe there was no place for me in the stock market. Well, I was wrong. There was a place for me and it was in the world of 401(k)s.

Now, you may think, what’s a creative guy like me doing in 401(k)s? But it was a good fit for me; I was going into smaller businesses like the ones I got my start in and teaching the employees about their options for their future. I was making positive changes in their lives. I liked helping people prepare for their retirement, and I was good at it. Stockbroking was fun but retirement investing felt like a more long-term way to help people.

My newfound passion led me to start Social(k), the first 401(k) platform to offer more than a few socially responsible funds. We offer about 500 screened, socially responsible options, and more than 5,000 traditional funds. I saw an opportunity to take the relatively sustainable personal investment that is a retirement plan and make it sustainable for the global community as well. Why not make that mass of slow money work for the world, as well as the investors?

As the president of Social(k) I spend a lot of time talking to employees and employers about why 401(k)s matter, and the number of people who believe they don’t need to prepare for the future is shocking. Part of my job is to help you see why you should, so that when the time comes, you can enjoy retirement with one less thing to worry about.

Here are three reasons why you should have a 401(k).

1.   You owe it to yourself.

You have to take personal responsibility for yourself. If you think you are going to live a long and healthy life, you owe it to yourself, your family and society to prepare for that. You may believe your expensive cars and valuable real estate will see you through, but those markets can crash, and you want to have savings elsewhere in case that happens. Why not put some of the money you’ve worked so hard to earn into a tax-sheltered place? Which brings me to my second reason…

2.   The government really wants you to.

The government wants you to put money away for retirement so badly that they will give you tax incentives. An example is the pre-tax incentive. This occurs when you put a certain amount of your earnings into your 401(k), and the government does not tax you for that part of your earnings. At that time, you only have to pay tax on the portion of your earnings that does not go into your 401(k). They will not tax the rest of the money until you are ready to take it out of your 401(k), and the theory is that when you take it out, you will be retired and earning less money, so you are at a lower tax bracket. Not a bad deal, is it? The Roth IRA post-tax option is even sweeter. Put the money in after taxes are paid and all earnings come out tax-free!

3.   It’s free money.

The best part about having a 401(k) is that it grows. When you’ve retired, the money you put into your 401(k) will almost certainly have increased in value. Yes, I’m saying you get free money. For example, you put in $50,000 and now the fund is worth $150,000. Need I say more?

My question for you now is, after reading this, do you still have qualms about investing in a 401(k)? And if so, why? Leave your answer in the comments below to be addressed in a future story.

Stay tuned for a five-part series on “fossil-free” investing brought to you by the fund managers helping you prepare for retirement.

Robert Thomas is a member of the DailyWorth Experts program. Read more about the program here.

via Financial Advice About Why You Need a 401(k) Plan – DailyWorth.com.

Why Is Goldman Sachs Advocating For Sustainability?

Why Is Goldman Sachs Advocating For Sustainability?

Even consulting firms and investment banking firms think that better corporate social responsibility equals more money.

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WRITTEN BY Ryan Honeyman author of The B Corp Handbook: How to Use Business as a Force for Good (Berrett-Koehler Publishers // October 13, 2014).

One of the most persuasive arguments for increasing a company’s social and environmental performance is that it will save money, enhance profitability, and generate more business value.

Curiously, it is not the Sierra Club, Greenpeace, or the Rainforest Alliance that is making this argument. It is traditional management consulting firms.

While writing my upcoming book The B Corp Handbook: How to Use Business as a Force for Good (Berrett-Koehler Publishers, October 13, 2014), I found that a veritable who’s who of thought leaders such as Accenture, Deloitte, Goldman Sachs, Harvard Business School, McKinsey & Company, and PricewaterhouseCoopers have released data-driven case studies, global surveys, and exhaustive reports offering compelling proof that using business as a force for good is also good for business.

For example, Goldman Sachs reports that “more capital is now focused on sustainable business models, and the market is rewarding leaders and new entrants in a way that could scarcely have been predicted even 15 years ago.” The company found that there has been a dramatic increase in the number of investors seeking to incorporate sustainability and environmental, social, and governance factors into their portfolio construction.

In a report that echoes this sentiment, the International Finance Corporation discovered that the Dow Jones Sustainability Index performed an average of 36.1% better than the traditional Dow Jones Index over a period of five years.

Comparable results have been found by some of the top academic institutions in the world. A recent Harvard Business School study concluded that “high sustainability companies significantly outperform their counterparts over the long term, both in terms of stock market as well as accounting performance.”

In a global study of CEOs’ perspectives on sustainability, Accenture found that 93% of CEOs see sustainability as important to their company’s future success. The company reported that “demonstrating a visible and authentic commitment to sustainability is especially important…to regain and build trust from the public and other key stakeholders, such as consumers and governments–trust that was shaken by the recent global financial crisis.”

Although some claim that sustainability is a passing trend, Deloitte argues that “sustainability is a critical business issue that is quickly becoming a mandatory requirement.” Deloitte goes on to say that social and environmental responsibility will continue to be relevant because, unlike other business issues, sustainability is being shaped by constituencies such as shareholders, regulators, consumers and customers, nongovernment organizations, and other drivers outside of a company’s locus of control.

If you are still on the fence, PricewaterhouseCoopers found a “positive, statistically significant, linear association between sustainability and corporate financial performance,” and McKinsey, in no uncertain terms, says that “The choice for companies today is not if, but how, they should manage their sustainability activities.” McKinsey also reports that a fragmented, reactive approach to sustainability is no longer enough. “Companies can choose to see this agenda as a necessary evil–a matter of compliance or a risk to be managed while they get on with the business of business–or they can think of it as a novel way to open up new business opportunities while creating value for society.”

via Why Is Goldman Sachs Advocating For Sustainability? | Co.Exist | ideas + impact.

Historic: Rockefeller foundation to divest from fossil fuels.

MONDAY, SEP 22, 2014 02:46 PM EDT

When Standard Oil’s founding family divests, you know their argument is worth hearing out

smokeStack

JOANNA ROTHKOPF

John D. Rockefeller famously founded Standard Oil in 1870, a company that would become the largest oil refiner in the world as well as the basis for his family’s immense wealth. Now, the Rockefeller Brothers Fund, the family’s $860 million philanthropic organization, has announced it will completely divest from fossil fuels.

The New York Times’ John Schwartz reports on a growing trend:

In recent years, 180 institutions — including philanthropies, religious organizations, pension funds and local governments — as well as hundreds of wealthy individual investors have pledged to sell assets tied to fossil fuel companies from their portfolios and to invest in cleaner alternatives. In all, the groups have pledged to divest assets worth more than $50 billion from portfolios, and the individuals more than $1 billion, according to Arabella Advisors, a firm that consults with philanthropists and investors to use their resources to achieve social goals…

The people who are selling shares of energy stocks are well aware that their actions are unlikely to have an immediate impact on the companies, given their enormous market capitalizations and cash flow.

Even so, some say they are taking action to align their assets with their environmental principles. Others want to shame companies that they believe are recklessly contributing to a warming planet. Although it is unlikely that divestments will have any measurable financial impact in the immediate future, Stephen Heintz, president of the Rockefeller Brothers Fund, says the decision is about more than money: “The action we’re taking is symbolism, but it is important symbolism. We’re making a moral case, but also, increasingly an economic case.”

The decision comes on the eve of the U.N. Climate Summit in New York City.

via Historic: Rockefeller foundation to divest from fossil fuels – Salon.com.

Exxon Press Release by Carbon Tracker

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The Carbon Tracker Initiative (CTI), the UK think-tank that has put the risk of “stranded assets” at fossil fuel firms on the investment agenda, has warned ExxonMobil about the damage it might do to shareholder value by refusing to accept that the risk is real. CTI believes that due to tighter regulation of carbon emissions and improvements in fuel efficiency, demand for coal and oil in particular could decrease dramatically. Given such a “low carbon scenario,” firms like ExxonMobil face the possibility of leaving much of their fossil reserves untouched – hence the term stranded assets. However, last March ExxonMobil dismissed CTI’s view, saying there would be no low carbon scenario leaving its assets stranded: “This is because the costs and the damaging impact to accessible, reliable and affordable energy resulting from the policy changes such a scenario would produce are beyond those that societies, especially the world’s poorest and most vulnerable would be willing to bear,” ExxonMobil said in the response, entitled “Energy and Carbon – Managing the Risks.” CTI has hit back at the oil giant in a detailed analysis of its response: “We believe that Exxon uses limited and highly favourable assumptions and definitions to support its conclusions that a low carbon scenario is extremely unlikely. As a result, the company may be seriously underestimating the risk to shareholder value such a scenario poses, ” said the CTI. Such a “business as usual” attitude does not bode well for ExxonMobil as its share has already underperformed the equity market, the CTI says in the analysis. It provides a graphic showing that since 2009 the company’s share price has realised just 60% of the return generated by the benchmark S&P 500 index. The CTI also warns that the underperformance will continue unless ExxonMobil changes its attitude and recognises four facts.

First, it says that the company uses a very narrow definition of “stranded assets” taking them to mean proven reserves that are “unburnable,” says the CTI. It adds: “By contrast, we use a broader definition, understanding a stranded asset as indicating the potential for investments to become uneconomic due to changing market and regulatory forces, including lower oil prices.”

Second, ExxonMobil could be mistaken about its prediction that oil demand will rise. The CTI cited an estimate by the International Energy Agency (IEA) according to which oil demand peaks between 2020 and 2035 and declines thereafter.

Third, ExxonMobil ignores the fact that regulation of carbon emissions is tightening. “Contrary to Exxon’s belief that it is difficult to envision governments opting for a low-carbon path, the share of greenhouse gas emissions subject to national legislation or emission-reducing strategies rose to 67% in 2012 from 45% in 2007,” the CTI said.

The fourth, and final fact that Exxon has not fully grasped is that the prospects for renewable energy are good. “It was recently estimated by the International Renewable Energy Agency (IRENA) that doubling global investment in renewable energy could quadruple the share of global energy generated from the source to 36% in 2030 from 9% currently,” the CTI added.

Link to CTI report and to Exxon report

5 Ways To Ensure Your Money Doesn’t Contradict Your Social Values

Social(k) Move Your Money Ad

5 Ways To Ensure Your Money Doesn’t Contradict Your Social Values

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What has your money been up to lately? Spending time lining the pockets of CEOs whose business practices you find virulent, or maybe helping to pay for the marketing of products you consider dangerous or unsustainable? Or perhaps it’s on another continent, vacationing with a violent regime.  If pressed, could you say what in the world your money is supporting?

Anyone who pays into a retirement fund, invests in the stock market, or holds a bank account has a role, however slight, in shaping our financial system— though most people can say more about what’s wrong with that system than they can about their specific role in it. The real-world impacts of our own investing and banking decisions often seem so abstract that we can convince ourselves we’re not really connected to them at all, removing any urgent need to change our financial practices—or even to understand what we might be able to change, if we cared to.

It is possible to redirect your money’s social and environmental ties, even if a lack of understanding too often obscures that fact. In a recent New Yorker essay about learning the language of money, John Lanchester wrote that “when it comes to discussing money, incomprehension is a form of consent,” adding: “If we allow ourselves not to understand this language, we are signing off on the way the world works today.”

If you’re not  thrilled with the status quo and are wondering what you can do to line up your money’s values with your own, read on.

Smokestacks from a wartime production plant (Photo credit: Wikipedia)

1. Take a close look at what you’re invested in, and decide: Are you okay with this?

It’s not just you: Lots of people blindly funnel their money into investments they haven’t thought much about, whether through their company’s 401(k),  an investment advisor or via some other means. A number of campaigns have sprung up in recent years to fight that investor passivity: Unload Your 401k formed after the December 2012 shootings at Sandy Hook Elementary School to encourage those advocating for enhanced gun control laws to check into whether they have financial stakes in gun manufacturers. 350.org has been making a widespread push for people to get out of their financial holdings in fossil fuel producers as a way to amplify the conversation around climate change.  Investors Against Genocide  seeks to raise awareness about the companies whose funds have been tied to the ongoing violence in Sudan, and suggests ways investors can make their money “genocide-free.”

It doesn’t take much to educate yourself on your own investment holdings. If you’re invested in a mutual fund—either through your company’s 401(k) or through another means—the best way to do this is by opening your fund’s annual or semi-annual report (most can be found online) and perusing the companies listed in the “Schedule of Investments” section. You can also sign up for an annual subscription on Morningstar.com to easily search for your fund and dig through its holdings.

 2. Put your money into a mutual fund that cares about social impact.

You’ll go a step further if you decide to move into a mutual fund that explicitly makes an effort to be socially responsible. This often means its managers are both making an effort to find investments tied to produce positive effects, as well as avoiding whatever is deemed as negative.

Begin by surveying your options: This chart from the Forum for Sustainable and Responsible Investment lists more than 150 socially responsible mutual funds, with corresponding performance information and details about what is screened out and what positive impacts managers are seeking.

What if you’re invested in your company’s 401(k), and you’re not seeing a socially responsible option listed among your menu options? You’ll have to follow up with your company’s investment committee and request that such an option be added. Jennifer Lazarus, a Durham, North Carolina-based   financial planner whose specialties include socially responsible financial strategies, says one of her clients actually joined her company’s investment committee to have a hand in this decision, and was eventually successful in getting one socially responsible mutual fund option into her company’s 401(k) mix. “This comes from the ground up,” Lazarus says. “It’s not going to come from retirement consultants.”

Green America, a Washington, D.C.-based nonprofit that advocates for sustainability values in the marketplace, offers this free guide for employees eager to add socially focused funds to their employers’ retirement plans.

And fear not, you don’t have to sacrifice returns when you opt for the socially responsible route.

via 5 Ways To Ensure Your Money Doesn't Contradict Your Social Values.

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Green Bonds Merge Investor Goals

Green Bonds Merge Investor Goals

AUGUST 1, 2014 • WILLIAM L. HAACKER

When it comes to investing in the environment, it’s getting easier to be green.

Green Bonds have been around for a while: Washington State sold more than $3 billion worth in 2008 to combat climate change, and Massachusetts sold more than $100 million to improve energy efficiency in state buildings, river revitalization and land acquisition in June 2013.

But the space has grown since then, according to a July report by the Climate Bonds Initiative:

- The total universe of bonds linked to climate-change solutions amounts to $502.6 billion compared to $346 billion a year ago.

- $35.8 billion of that total is composed of green bonds issued by corporations and development banks.

“Investors are concerned about climate change,” Sean Kidney, chief executive officer of the Climate Bonds Initiative, wrote in the report.

“The investment opportunities we find are safe and secure investment-grade bonds. This is a Dull Green Market—just how pension funds and insurance funds like it.”

Green Bonds have underwritten projects that include transportation; clean, renewable energy (solar and wind); energy-efficient buildings and industry; agriculture and forestry; waste and pollution controls; clean water; and “brownfields” redevelopment (the development of land with environmental issues). Toyota, Nissan and Chevrolet have used them to develop electric and hybrid vehicles.

The report indicated urgency for such projects, noting the International Energy Agency has said the world has five to 10 years to avoid reaching “climate tipping points” and “trillions in additional finance will be needed.”

via Green Bonds Merge Investor Goals.

A New Opportunity For Investing In Productive Farmland | Social(k) client making a difference

A New Opportunity For Investing In Productive Farmland

Creating value by improving the land

by Adam Taggart

Sunday, August 10, 2014, 1:13 PM

Tags:Craig Wichner, farmland, Farmland LP, Organic, real estate investment trust, REIT, soil

Over the past few years, we’ve tracked the success of Farmland LP, a fund created to increase the economic yield of farmland through sustainable farming practices.

Their approach is notable in a number of ways. It seeks to improves the quality of the underlying land. To avoid use of fossil inputs. To increase the yield per acre. To enable the production of vegetables, grains, and meats on acreage that before was monocrop. To employ more farmers per farm. To be more profitable than conventional farming. To improve the food resiliency of the local community. To reduce its dependency on liquid fuel transport by serving local markets. To generate annual returns for its shareholders, plus appreciation on their share of the underlying farmland.

The team believes there is an arbitrage in value that can be unlocked by reversing the damage modern farming has done to the land. After visiting their largest property this spring, I put together a detailed write up of how exactly they’re pursuing this, which can be read here.

Today’s big news is that, while the initial LP fund closed to new investors last year, the same management team has just launched a new fund, this time structured as a real estate investment trust (REIT).

This is notable for several reasons. It’s a larger fund, which should enjoy greater economies of scale than the original one. And, the new REIT structure will eventually enable the fund to become publicly-traded (likely in 5 years or so, depending on key milestones). Once this happens, much smaller investors will be able to purchase shares — finally making the dream of participating in productive farmland an option for all.

Those who would like to learn more about Farmland’s operations and/or new REIT can send a request for more information here. Note that their REIT is available to accredited investors only and that Peak Prosperity has an existing business relationship with Farmland (full details will be provided when opening an account with the Fund or at any time upon request.)

Click the play button below to listen to Chris’ interview with Craig Wichner (24m:50s):

via A New Opportunity For Investing In Productive Farmland | Peak Prosperity.

The Forum for Sustainable and Responsible Investment

SRI Basics

What is sustainable and responsible investing?

Sustainable and responsible investing (SRI) is an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact.

 

SRI Assets in the United States: According to the US SIF Foundation’s 2012 Report on Sustainable and Responsible Investing Trends in the United States, as of year-end 2011, more than one out of every nine dollars under professional management in the United States—$3.74 trillion or more—was invested according to SRI strategies. The next Trends report on SRI assets will be published in the fourth quarter of 2014.

  

Motivations: There are several motivations for sustainable and responsible investing, including personal values and goals, institutional mission, and the demands of clients, constituents or plan participants. Sustainable investors aim for strong financial performance, but also believe that these investments should be used to contribute to advancements in social, environmental and governance practices. They may actively seek out investments—such as community development loan funds or clean tech portfolios—that are likely to provide important societal or environmental benefits. Some investors embrace SRI strategies to manage risk and fulfill fiduciary duties; they review ESG criteria to assess the quality of management and the likely resilience of their portfolio companies in dealing with future challenges. Some are seeking financial outperformance over the long term; a growing body of academic research shows a strong link between ESG and financial performance.

 

Terminology: Just as there is no single approach to SRI, there is no single term to describe it. Depending on their emphasis, investors use such labels as: “community investing,” “ethical investing,” “green investing,” “impact investing,” “mission-related investing,” “responsible investing,” “socially responsible investing,” “sustainable investing” and “values-based investing,” among others.

 

What strategies do sustainable and responsible investors use?

Traditionally, responsible investors have focused on one or both of two strategies. The first is ESG incorporation, the consideration of environmental, community, other societal and corporate governance (ESG) criteria in investment analysis and portfolio construction across a range of asset classes. An important segment, community investing, seeks explicitly to finance projects or institutions that will serve poor and underserved communities in the United States and overseas. The second strategy, for those with shares in publicly traded companies, is filing shareholder resolutions and practicing other forms of shareholder engagement. Sustainable investing strategies work together to encourage responsible business practices and to allocate capital for social and environmental benefit across the economy.

 

How large is the sustainable and responsible investing marketplace?

 

The US SIF Foundation’s Report on Sustainable and Responsible Investing Trends in the United States identified $3.74 trillion in total assets under management at the end of 2011 using one or more sustainable and responsible investing strategies.

 

Sustainable and Responsible Investing

in the United States in 2012: $3.74 trillion

 

 

From 2010 to 2012, sustainable and responsible investing enjoyed a growth rate of more than 22 percent, increasing from $3.07 trillion in 2010. More than one out of every nine dollars under professional management in the United States today—11% of the $33.3 trillion in total assets under management tracked by Thomson Reuters Nelson—is involved in sustainable and responsible investing.

Full article via The Forum for Sustainable and Responsible Investment.

Investing in companies that invest in women

paxwrldThe only mutual fund of its kind

focused on women’s leadership

Research shows that when women hold positions of leadership, their companies deliver better performance across a variety of metrics including return on equity, return on sales and return on invested capital. In addition, they also deliver higher returns for their shareholders.

With this compelling research in mind, Pax World Management and Ellevate Asset Management, whose principal is Sallie Krawcheck, launched the Pax Ellevate Global Women’s Index Fund (PXWIX). It is the first and only mutual fund in the United States that focuses on investing in the highest-rated companies in the world in advancing women’s leadership.

If you share my belief that investing in companies that invest in women is a compelling investment strategy, I encourage you to find out more about the Fund.

Thank you,

Tom Gainey

via Investing in companies that invest in women – rthomas@socialk.com – Socialk Inc. Mail.