SocialFunds.com talked with Art Tabuenca, founder of Blue Marble Investments and EarthFolio, about the development of the first online investment platform specifically dedicated to sustainable investing.
by Robert Kropp, Socialfunds.com
Two of the most significant developments in the investment universe have converged in a single service.
Thanks to advances in information technology, computerized investment advisory services—known as robo-advisors—have skyrocketed in popularity in recent years. For the most part, these portals provide investment advice to individuals who cannot meet the minimum amount required by most in-person investment advisors, and their fees are usually much lower. A recent article at CNN  projected that robo-advisors will manage $2 trillion in assets by 2020.
What has not been as readily available, however, is robo advisory services for another significant growing trend, sustainable investing. A 2014 report by US SIF: The Forum for Sustainable and Responsible Investment estimated sustainable investment assets to be $6.57 trillion, a 76% increase since 2012 and 18% of total assets under management in the US.
The absence of such a service was addressed in October 2015, when EarthFolio (http://www.earthfolio.net), the first and thus far only automated investment service, launched. According to a press release, a minimum investment of $25,000 is required, and the management fee is .50%. “EarthFolio constructs each portfolio using mutual funds pre-selected on up to ten environmental, social, and corporate governance (ESG) screens,” the press release states. “The screens seek best-of-class companies in areas such as clean energy, equal employment, human rights, and animal welfare, while also minimizing companies profiting from sweatshops, tobacco, weapons, and gambling.”
The service’s portfolios are designed and managed by Blue Marble Investments, a sustainable investment advisory firm founded by Art Tabuenca in 2000. Before that, Tabuenca was Vice President of Bank of America Investment Services.
SocialFunds.com spoke recently with Tabuenca about the EarthFolio service.
“About three years ago, some firms emerged that were filling the void between do it yourself and getting advice,” Tabuenca said. Since then, he continued, “Online investment advice has become very popular. All the big firms are rolling out platforms now.”
Even though Tabuenca and Blue Marble (http://www.bluemarble.com) rolled out the first iteration of EarthFolio back in 2006 (“We were way ahead of the robo advisor revolution by quite a few years,” he observed, “Making socially responsible investment advice accessible.”), the technology at the time was unprepared to provide the more intuitive service that the newly launched platform provides. As Tabuenca said, “Investors seeking sustainable alternatives through advisors who are familiar with environmental, social, and corporate governance (ESG) factors have had a harder time of it, as relatively few advisors could claim such knowledge.”
“This opens up sustainable investing in a way that has never been done before,” he continued. “Basically, it brings the advisor to you rather than you having to go to the advisor.”
Tabuenca was emphatic in debunking the view, still held in some quarters, that sustainable or socially responsible investing (SRI) is still characterized by negative screening. (Even practitioners of impact investing, described by Eurosif in 2014  as “a peripheral strategy within SRI that has not yet realized its full potential,” have asserted that it differs from sustainable investing in that the latter is dominated by negative screening.) “SRI doesn’t end with screening, it actually begins with screening,” he said. “Most of the heavy lifting is in the advocacy, through proxy voting and shareholder advocacy.”
“Every portfolio we build invests exclusively in a broad spectrum of sustainable mutual funds that screen on up to ten environmental, social, and governance, criteria,” EarthFolio’s website states. Most, if not all, of the funds selected by the service will be familiar to regular readers of SocialFunds.com. All the funds “feature established track records, strong management, and no commissions or transaction fees,” the website states. The ten criteria include clean tech, fossil fuel free, and shareowner advocacy. The investment strategies emphasize a best-in-class approach.
“Passive investing is one of the defining characteristics of robo advising,” Tabuenca said. “The minimum investment is far lower, the fees are far lower.”
“As more and more sustainable indexes are developed, we will integrate them into the portfolios,” he continued. The sustainable fund indexes currently employed by the service are the Calvert Social Index and the Vanguard FTSE Social Index. The performance of sustainable indexes have historically been similar to that of the S&P 500, with the added advantage of increasingly important ESG criteria.
The geographical benefits of a sustainable robo-advisory service are considerable; as Tabuenca pointed out, investors seeking sustainable alternatives through advisors who are familiar with ESG factors have had a harder time of it, as relatively few advisors could claim such knowledge. As a result, most investors seeking advice on sustainable strategies have had to fend for themselves. The EarthFolio platform, Tabuenca said, “democratizes socially responsible investment advice in a way that’s never been done.”
The relatively low minimum required to maintain an EarthFolio account, Tabuenca pointed out, makes the service especially attractive to millennials and others who may lack the resources to maintain an account with an in-person investment advisor. In a blog post at EarthFolio , Kim Lisagor wrote, “Seven out of ten (of millennials recently surveyed) said they value the social and environmental impact of their investment choices.”
Furthermore, Tabuenca told SocialFunds.com, “EarthFolio’s technology allows for profiling a person’s risk tolerance just as a human advisor would do.”
Source: SRI World Group, Inc (www.socialfunds.com) Reprinted with Permission.