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Thin(k) About Your 401(k) Plan: ESG Investing in Your 401(k) Account

It’s no surprise that with the change of presidential administrations that we would see regulations changing. Late in the Trump Administration there were two regulations that particularly affected ESG (environmental, social and governance) investing. Many were concerned about these policy shifts, but as you’ll see, it appears that these rule changes have been put on hold at least temporarily if not permanently.

In October of last year, the Department of Labor (DOL) issued a final rule for private-sector retirement plans regarding non-pecuniary factors like ESG ,which limited these factors, stating that, “retirement plan fiduciaries are focused on the financial interests of plan participants and beneficiaries, rather than on other, non-pecuniary goals or policy objectives.”

That was big news, and it didn’t stop there.  Another policy was to limit ESG considerations in fiduciary proxy votes.  Plan Sponsors serve as fiduciary to the plan and in the selection of investment options must, therefore, take into consideration how the funds they select vote proxies.  401k Specialist reported $7.9 trillion invested in all employer based defined contribution plans, of which $5.9 trillion were invested in 401k plans.*  That is a lot of money under the watch of the DOL covered under ERISA Law.

The big news didn’t last long. On President Biden’s first day in office, he issued an executive order directing federal agencies to review existing regulations issued or adopted during the Trump administration “that are or may be inconsistent with, or present obstacles to, the policies” the new president set forth “to promote and protect public health and the environment.”+

Not long after the order, the DOL seemed to back away from its final rule from just a few months back. Here’s what it had to say about non-pecuniary factor consideration and proxy voting by fiduciaries: “Until the publication of further guidance, the department will not enforce either final rule or otherwise pursue enforcement actions against any plan fiduciary based on a failure to comply with those final rules.”+

So much for final rules. The possibility of adding ESG investment options to ERISA governed retirement plans without potentially violating fiduciary responsibility is back on the table.  Stay tuned.


*401k Specialist, 401k Assets Totaled $5.6 Trillion in First Quarter 2020, by John Sullivan, Editor-in-Chief, June 17, 2020.

+ ThinkAdvisor, DOL Won’t Enforce New Rules on ESG in Retirement Plans, by Bernice Napach, March 10, 2021.

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Thoughts in Charts: ESG for a Reasonable Fee

You might have heard that sustainable investing costs more. But as this week’s “Thoughts in Charts” shows, claiming sustainable investing costs more is becoming more and more of an outdated assertion, and that’s good news.

Prior to 2016 (the grey portion of the chart) very few ESG funds fell into the least expensive of their Morningstar category, represented by the far left 1st decile. Since 2016 a significant number of funds have been added to the lower decile fees. Times have changed, and we are increasingly able to find funds that charge competitive management fees while still offering an ESG-focused strategy.

Source: Lynch, Katherine. “Newer, Low-Cost ESG Offerings Help Push U.S. Sustainable Fund Fees Down”. 1 June 2020. Morningstar. https://direct.morningstar.com/research/doc/986949/Newer-Low-Cost-ESG-Offerings-Help-Push-U-S-Sustainable-Fund-Fees-Down

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Money and Meaning: Measuring ESG

While “Sustainable” is a broad term, we are beginning to see established standards and metrics that help us quantify our value sets within companies and funds.

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Money and Meaning: Defining ESG


Sustainable investing is rapidly growing.  But what does that really mean?  Suzanne Mestayer breaks it down and explains what can be a confusing subject.


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Money and Meaning: Invest with Purpose

Investing isn’t philanthropy, but you can make your investments matter more than simply a monetary return. Sustainable, ESG (environmental, social and governance), and Impact are three such methods, and as Suzanne points out, the available selections are continuing to grow. Stay well and Stay Tuned.

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Money and Meaning: Investing with a Purpose

For more and more people, investing isn’t just about making money; it’s doing it with a purpose. In this first of a series, we discuss the broader subject and then drill down in subsequent videos. Join us!

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So You’re Interested in Sustainable Investing? Consider This…

As discussed in my last blog post, sustainable investing may be one of the most important investment trends of the next decade. It offers investors positive social impact alongside financial returns, and it is catching the eye of individual and institutional investors alike. Globally, more than $1 out of every $4 under professional management is invested sustainably1, as investors—especially women and Millennials—increasingly strive to align their investments with their values. Opportunities for investing sustainably now exist across all asset classes, from private to public, from real estate to fixed income to hedge funds.

However, as with anything new—from a self-driving car to a new job offer to a smartphone software update—we must consider both the benefits and the shortcomings of sustainable investing` before we go all-in. We must proceed with a healthy dose of caution as the market irons out the kinks.

The sustainable investing “movement” is still under development, with much work still to be done to clarify and standardize what it is, how it works, and what success looks like. Even the language used in this space is inconsistent, causing confusion around the various sustainable investment strategies and their nuances. Consider the following terms, often (erroneously) used interchangeably:

  • Socially Responsible Investing (SRI) uses a negative screen for companies believed to offer socially undesirable products or services, like tobacco.
  • Impact Investing focuses on using financial investment to address societal and/or environmental challenges, though many believe this occurs primarily through private markets.
  • ESG Investing evaluates a company’s environmental, social, and governance practices as part of an integrated investment selection process.
  • Thematic Investing (like ThirtyNorth’s Women Impact Strategy) is a more targeted method of addressing specific issues (in our case, a gender lens) in the investment selection process to address gender gaps and disparities. It is often a subcategory of Impact or ESG investing.

Next, consider the lack of standardization around performance evaluation. For starters, it’s not clear what “success” looks like in sustainable investing. Traditionally, higher financial returns have defined higher performance. When it comes to sustainable investing, however, the equation isn’t quite as simple. For some investors, positive social impact may be the end game, even if it means lower financial reward. Others believe a social impact screen is in fact the best path to greater financial outcomes. And other investors live everywhere along the spectrum.

Making matters even more challenging, there are no established and broadly accepted performance metrics, standards, or rating systems in this space. The companies being evaluated for ESG typically self-report these behaviors, introducing ample opportunity for bias. Asset managers and financial advisors offering sustainable investment products often must rely on a limited track record and hypothetical back-testing to demonstrate results. It appears that some companies are even rebranding existing funds as sustainable investment products, regardless of how marginal the ESG or social impact may be.2 These issues make it hard for investors to assess how a particular investment option aligns (or doesn’t) with their goals and nearly impossible for them to make apples-to-apples comparisons across companies, funds, and products. It is no surprise, then, that 70% of institutional asset owners surveyed by Morgan Stanley said that the lack of quality ESG data is one of their biggest challenges when investing sustainably.3

Finally, though numerous sustainable investment products are already on the market or under development—including offerings from virtually every major fund company—many financial advisors have not yet turned their attention to these offerings and may be uninterested in learning about them and/or ill-prepared to discuss them.

So, before diving in…


  • Think carefully about who you choose as a partner to guide you through this new terrain,
  • Be sure you and your financial advisor are speaking the same language and are aligned on how you will measure the success of your sustainable investment strategy, and
  • Before accepting the promise of something new at face value, push yourself to dig beyond the hype and review a fund or product for both quality and methodology.


Suzanne T. Mestayer


1 Global Sustainable Investment Alliance 2016 Report

2 It is Difficult to be an Ethical Investor, Wall Street Journal, September 4, 2018

3 Understanding ESG Ratings: A Brief Primer from Celent, ThinkAdvisor, August 6, 2018


Bringing Together Money and Meaning: More Than a Tagline

At ThirtyNorth Investments, we steadfastly believe that investment decisions begin and end with an understanding of what money means to you (so much so that we made it our company tagline: Bringing Together Money and Meaning). After all, people don’t seek to accumulate wealth just for the sake of it; they do so with a goal in mind—a vision of how money will help make their lives, their children’s lives, their community, or their world better tomorrow than today.

What we didn’t anticipate when we chose this tagline was that it would foreshadow what is being considered the most important investment trend of the next decade.

Impact Investing—also known as Sustainable Investing or Environment, Social, Governance (“ESG”)—offers investors positive social impact alongside positive financial returns. Not to be confused with philanthropy, Impact Investing is predicated on the belief that companies that act responsibly with regard to ESG perform better financially.

This burgeoning investment strategy was the focus of Barron’s first Impact Investing Summit earlier this summer, where one thing was made clear: Impact Investing is here to stay.

Seeing the opportunity to amplify their financial gains while also encouraging socially responsible corporate behavior, it’s no wonder more and more investors are adopting investment strategies that incorporate an ESG lens:

  • 70% of institutional investors say they are integrating sustainable investing into their investment process1
  • The majority of millennials, Gen X and women believe that a company’s track record in environmental, social and governance is an important consideration for investing. In fact, 37% of all high net worth investors are reviewing their portfolios for impact investments2
  • 90% of women surveyed globally said making a positive impact on society is important when considering investment decisions, and 77% indicated that they want to invest in companies with diversity in leadership3

However, while it’s just now hitting the investment mainstream, Impact Investing is not entirely new. In fact, ThirtyNorth Investments created our own Impact Investing offering, the Women Impact Strategy, more than two years ago. A carefully crafted portfolio of 50 companies with gender diversity among their corporate leadership teams, we created the Women Impact Strategy after reviewing data4 that demonstrated what we already intuitively knew: companies with more women at the top deliver excess returns.

We are proud to be counted among the individuals and organizations acting early and with conviction in the Impact Investing space, including hedge fund manager Paul Tudor Jones (whose JUST ETF, which ranks companies based on their social impact, launched this summer) and Blackrock CEO Larry Fink, who wrote to his investors earlier this year, “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

I continue to be amazed by the breadth of companies offering new ESG funds every day. As Impact Investment options continue to grow, so too do the possibilities for making more money, and for making that money more meaningful. It is a wonderful sign of things to come.

1Sustainable Signals: Asset Owners Embrace Sustainability, Morgan Stanley Institute for Sustainable Investing  June 18, 2018

22018 Insights on Wealth and Worth, U.S Trust, 2018

3 Harnessing the Power of the Purse: Female Investors and Global Opportunities for Growth, Center for Talent Innovation, 2014

4 The CS Gender 3000: The Reward for Change, Credit Suisse Institute, September 2016

All investment strategies have the potential for profit or loss.  There are no assurances that an investor’s portfolio will match or outperform any particular benchmark.


July 24, 2018   By Suzanne Mestayer


Are We There Yet?

As we celebrate the Women Impact Strategy’s second anniversary in April, it’s a bit thrilling to reflect on all that has happened in this relatively short period of time.

We began with the seed of an idea in 2015:

If it is true that gender diversity in corporate leadership roles (directors and executives) produces better results, is there a related  investment strategy that may be both financially rewarding and socially impactful?

Our own research, in addition to that of several others[1], concluded that the investment thesis was more than wishful thinking.  The research found better stock performance over long periods of time (ten years) for public companies with higher numbers of women at the top.   But looking in the rear view mirror has its limitations, and bringing an investment strategy to life in real time is …  something else entirely.

So how is it going? Exciting on all fronts, for sure.

  • Our experience continues to support the thesis.
  • Our strategy is now available as an separately managed account on the TD Ameritrade platform
  • Articles are published daily on the benefits of diversity, and the movement of investment dollars into socially impactful investments[2] continues to grow significantly
  • We are pleased to be among a very short list of independent firms across the country that have launched a gender lens investment strategy using liquid public stocks.
  • We presented at conferences and had our research published on the Impact of Women in Corporate Leadership
  • We are encouraged by the increasing numbers of women joining public boards, and the institutional investors who announced they are voting proxies[3] with an eye on the diversity of the board member candidates.
  • Perhaps most importantly, the benefits of gender diversity across areas such as decision making, innovation, and talent retention, are becoming widely recognized as providing a strategic advantage to companies.

Like a passenger in the back seat on a long car trip, we ask the question “Are we there yet?”.  No indeed! We see progress, but we are clearly not at a defined destination.  There is no magic number which allows anyone to check a box “Done”.

For the companies in which we invest, it’s about creating and sustaining a corporate culture which values the benefits of diversity.   And that, like investing, is best done with a long term view.

Suzanne Mestayer



[1] Credit Suisse Research Institute, “The CS Gender 3000: The Reward for Change”. September 2016, https://glg.it/assets/docs/csri-gender-3000.pdf

Hunt, V., Yee, L., Prince, S., and Dixon-Fyle, S., McKinsey & Company, “Delivering through diversity”. January 2018, https://www.mckinsey.com/business-functions/organization/our-insights/delivering-through-diversity

[2] “total US-domiciled assets unders management using SRI strategies grew to $8.72 trillion at the start of 2016”, US SIF Foudantion Biennial Reprt on: US Sustainable, Responsible and Impact Investing Trends, 2016.

[3] Vittorio, A., “New York State Pension Fund to Protest All-Male Boards”, March 21, 2018, https://www.bna.com/new-york-state-n57982090156/.

Fink, L., “Annual Letter to CEOs: A Sense of Purpose”, https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter


Power and Responsibility Are Best Connected

“ With great power comes great responsibility”

This famous quote often comes to my mind in connection with investments.  In order to attribute it appropriately, I did a bit of research and discovered that it comes from… Spider-Man.  Imagine.  Nonetheless, it’s a great quote and apropos to the message of this piece.

Whether through retirement plans, individual accounts, or endowments, most investors have mutual funds and/or ETF holdings.  By using these vehicles, the fund companies (eg Vanguard, Templeton, etc) are inserted as Institutional Investors.  They vote on behalf of their investors on corporate issues, such as election of board members, compensation issues, and various other items in the annual or special elections.  Because they are stewards representing millions of investors and trillions of assets, they can be a powerful force in these corporate decisions.  Investors expect they will use this power responsibly.

It is for this reason that we were pleased to see the Investor Stewardship Group (ISG) formed early this year.  The ISG includes 38 of the largest US based Institutional Investors that in aggregate invest over $20 trillion in the US equity markets.  ISG recently established a framework for basic standards of 1) investment stewardship and 2) corporate governance.  While not legally binding, those who adopt the standards will build the confidence of their investors and enhance their engagement with the corporations in which they invest.

The stewardship standards include recognition of their accountability to investors, as well as the need for increased transparency of their voting records and governance oversight practices. They include disclosures regarding conflicts of interest, and standards for more productive engagement with corporations.  They also acknowledge the importance of their oversight of proxy advisory firms.

Recently, Vanguard issued an open letter to directors of public companies worldwide.  This letter refers to their Investment Stewardship program, and lists four governance practices which they evaluate. It specifically references gender diversity on boards as a way improve performance.  It is an illustration of productive communication on behalf of the “more than 20 million investors” they represent.

The standards for corporate governance also focus on accountability and transparency, and go further into board leadership and responsibilities.    While different, these standards dovetail nicely with the “Commonsense Principles of Corporate Governance” which were issued in 2016 by a number of well-recognized public company leaders.

The adoption of self-imposed standards serves as a positive signal for investors and builds public trust.  And yes, it connects power and responsibility.