Investing for a Sustainable Future

Earth Equity Advisors

7. Affordable and Clean Energy 11. Sustainable Cities and Communities 13. Climate Action

Overview

For founder Pete Krull and Earth Equity Advisors, it all starts with a simple, but profound, question, "what do we want to own?" From there, this Asheville, North Carolina advisory builds and manages diversified investment portfolios for clients, offering only socially and environmentally responsible investments. That question, along with an unyielding commitment to a vision of a regenerative future and sustainable values, has made all the difference.

Author

Brian Liechti

Brian Liechti

School

Bard MBA in Sustainability

Bard MBA in Sustainability

Professor

Kristina Kohl

Kristina Kohl

Innovation

As an advisory committed solely to socially and environmentally responsible investments, Earth Equity Advisors is innovative in its structure, approach, and offerings. They share similarities with traditional advisors, using Modern Portfolio Theory, investing fundamentals, and the basics of long-term, proven investment methodologies when constructing and managing their funds and portfolios.

Krull notes they differ significantly from traditional advisors by incorporating "qualitative aspects to investments that a lot of traditional Wall Street does not look at: how a company does business, the company's environmental impact and stakeholder impact, and how employees are treated". While qualitative factors are becoming increasingly mainstream, Earth Equity Advisors has been leveraging them since Day One.

This means they not only look at companies from a fundamentals perspective, analyzing a company's financial statements and performance, its competition, and the market potential, but also from a beyond-fundamentals perspective to look for opportunities to invest for long-term positive impact. "We ask ourselves, what do we actually own and are we comfortable owning these companies?" Krull related.

One particularly innovative product Krull developed is the Green Sage Sustainability Portfolio, an all-equity portfolio "that is diversified, is positively-focused, has global perspective, and is not so aggressive that investors will get seasick with the ups and downs of the market. Putting all those things together has been an evolution over the almost eight years that I've run this fund," Krull noted. "The biggest innovation is starting from the perspective of what we do want to own."

Investing for a Sustainable Future

Source: https://www.earthequityadvisors.com

Inspiration

Krull rose to leadership in sustainable finance - he was selected to the 2018 Investopedia 100 list of the 100 most influential financial advisors in America - first through a career with a well-known financial firm before venturing out on his own in pursuit of aligning investments with sustainability values.

"I started with Merrill Lynch back in 1998 after a successful career in retail and retail management and Merrill back then had a great training program. I was with them for five years or so. I met my wife Melissa, who has PhDs in Microbiology and Molecular Genetics and we started having long conversations about environmental issues, social issues and how it related to the world and investments.

Also at the time, I had a chance to spend an afternoon with Bill McDonough, the world famous green architect and author of "Cradle to Cradle", at his office over in Charlottesville. We talked about sustainable finance and sustainable investing, though I don't think we used those terms at this point. Shortly thereafter, in June 2004, I decided to break away and start my own firm and I haven't looked back from it. That's how I decided to go into sustainable investing, mostly because it was the right thing to do. It wasn't because I saw it as a market opportunity, it was because I saw it as doing the right thing."

Krull's leadership is an extension of his personal values and vision, with finance as the connecting lifeblood and energy flow of the economy - which presents us with the choice, "what do we want to own?" Everything is connected, and we have a moral obligation to make an informed decision.

Overall impact

Earth Equity Advisors approach to investing is really a shift in paradigm from traditional investors. By beginning with the end in mind, their vision of a regenerative and sustainable future, Krull and his team then construct diversified, fundamentally sound portfolios and funds that align with their values. They currently have around $90 million in assets-under-management.

The results of this approach are significant. Running an analysis last fall of the firm's alignment with the Sustainable Development Goals (SDGs), Krull found that all the SDGs apply to their investments and they have a direct positive impact on 10 SDGs. "The top 3 are Climate Action, Sustainable Cities and Communities, and Affordable and Clean Energy. That's never been our primary goal, because I started doing this before there were SDGs, so we were probably doing them in parallel," he joked.

"If all portfolios were constructed this way, we would see a lot more companies changing their operations in a way so that they could realistically be included in a fund like [the Green Sage Sustainability Portfolio]. It would have a positive impact on capitalism across the board. Until you decide to not buy into a company because of their operations, it's going to have a limited impact"

Business benefit

Krull's personal sustainability values reflect throughout Earth Equity Advisors in profound ways. The firm has been a Certified B Corp for over five years, with special attention paid to supporting and developing employees. They offer generous benefits and ample training and certification opportunities, creating long-term value for Earth Equity Advisors and its employees, a very sustainable approach from a business and human capital management perspective. Promoting full spectrum flourishing for employees - and the broader community - helps a business that requires long-term thinking and relationship-building thrive. "Employee retention is huge and getting people who buy into the vision and values is a big part of it."

Earth Equity Advisors isn't your run-of-the-mill Certified B Corp - they've been recognized a "Best for the World B Corp" four years in a row. "We didn't earn that just by doing business as usual. We did that sticking by our values, and doing what's right for our clients, what's right for the earth, doing what's right for our employees," Krull emphasized.

Krull measures impact through the B Corp assessment scores, and conducts an annual employee assessment, which measures job satisfaction, safety, culture, and impact. Additionally, Earth Equity Advisors is a Living Wage Certified organization through Just Economics of Western North Carolina.

For Krull, the firm's location in Asheville, not an area especially rich in financial institutions, is ideal for quality of life and fits the values of Earth Equity Advisors. "It's a community that really cares about sustainability, from the Collider to Warren Wilson College to good groups like the Sierra Club here, there's a lot of folks who believe that what we're doing is the right thing."

But, most of the public is unaware of their options when it comes to sustainable investing, so continued education is critical in shifting finance toward long-term, positive impact. "It's amazing, I still find people everyday who either haven't heard of us or haven't heard of sustainable investing who say, 'oh my gosh I'd love to do that, I've never heard of that.' Even being in a progressive town like this, there are still a lot of people who are behind the times, so to speak."

Social and environmental benefit

In their investments, always beginning with the question of "what do we want own" in mind, Earth Equity Advisors uses their investments for positive long-term impact, particularly around Affordable and Clean Energy, Sustainable Cities and Communities, and Climate Action, by investing in Calvert Impact Notes, alternative energy, sustainable real estate, green building, natural & organic products, and other sustainable investments.

To support these ends, Earth Equity Advisors remains steadfast in their commitment to one industry they do not want to own: fossil fuels.

Fossil fuel divestment is the only way to go when it comes to fossil fuels, according to Krull. "A lot of companies are still trying to use engagement as a means to get fossil fuels companies to change to be better. Being less bad is still bad. That's the only thing you'll be able to do with fossil fuel companies: make them less bad. It's better to reallocate those assets to something where we're going to make a material positive difference."

Divestment from fossil fuels allows Krull to invest for positive impact, as opposed to shareholder advocacy in the 'less bad' approach. "Shareholder advocacy is so glacially incremental that we don't have time for that kind of incremental change. We need to be making changes yesterday, as we all know," he explained.

On the B Corp assessment, one of Earth Equity Advisors' best scores is in customers, which is directly related to how they invest. "We focus on communities. We are 1% for the Planet signatories, which means we donate 1% of our revenues to environmental nonprofits," Krull added.

Interview

Peter Krull, CSRIC, Founder, CEO and Director of Investments

Photo of interviewee

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Earth Equity Advisors

Earth Equity Advisors

Asheville, North Carolina, US

Business Website: https://www.earthequityadvisors.com/

Year Founded: 2004

Number of Employees: 2 to 10

Based in Asheville, North Carolina, Earth Equity Advisors, four-time Best for the World Certified B Corporation, manages diversified investment portfolios for clients across the country, offering only socially and environmentally responsible investments.