I’m a novice impact investor, and neither my team nor I can offer professional financial advice. You need to do your own research and evaluate any investments before throwing your money at them, etc., etc.
Whether you call it impact investing, sustainable investment, or green investing, the basic focus is to build a financial portfolio that is values-driven and financially successful. Like a growing number of investors, I choose to invest my money with companies that are doing good for the world and exclude those that are doing bad things for people and planet.
But there is a lot of nuance in impact investing, as I covered in my interview with ETHO Capital. For example, what do most companies use to measure environmental, social, governance (ESG) criteria? Across funds and impact investment companies, I was often surprised to see many of the ‘green’ or ESG-screened funds included companies that seem to have very little to offer to the sustainability conversation. The Financial Times covered the growth of more sustainable funds a few months ago, and the author noted that this increasing interest means that a lot of firms are rushing to include sustainable offerings in thier portfolio, but leaving investors confused as to what’s really green about their portfolio.
One of the platforms that purports to offer an easier impact investing opportunity is COIN. It promotes itself as a ‘conscious investing platform’ that helps you find investments based on specific ‘impact areas.’ Each Impact Area includes companies that have been ‘selected for their ability to make a difference.’ I was drawn to the simplicity of the service, as well as the user-friendly and clean interface. ‘YAY!’ I originally thought – this is exactly the type of investment opportunity I have been seeking.
I invested a small amount ($100) through its platform so that I could learn more about how it works as an investor. My chosen Impact Areas include Climate Action (obvs), Gender Equity, and Clean Water. On the surface, these seem like really good options, but the deeper I dug into the platform, the less excited I became.
TL;DR: I was really disappointed with the offerings overall, and with COIN’s version of impact investing. The following article is my narrative interspersed with an interview with Megan Schleck, Cofounder and CEO of COIN, from an email interview in August 2019.
What is COIN Investing?
Let me start by saying that I really WANT to like this company, and I really WANT to see more opportunities to make impact investing easier and more accessible. So I reached out to the team at COIN to learn more about their company and what what companies, exactly, are found in their specific Impact Areas, and how they have built their investment platform.
COIN is new to the market – it just launched to US investors in March 2019, and has seen good growth thus far. Megan explained: “We have experienced an average weekly growth rate of 19% in our first 5 months. The average age of our customer is 36. We are seeing customers with all levels of experience, from beginner to experienced investors. Currently, our most popular impact area combination is Climate Action, Clean Water, and Reduce Waste.”
“When we started COIN, there were no products or platforms available that allowed investors of all account sizes to get advice on how to directly invest in stocks aligned to their unique values. We wanted COIN to provide the level of quality and customization
About the partnership with John Hancock she said, “John Hancock has been a big supporter of COIN and values-based investing, and has supported us in building the technology that will allow us to scale our product personalization
Wait, Where Are My Holdings?
As I mentioned above, I chose Climate Action, Gender Equity, and Clean Water as my Impact Areas. While arguably ALL the Impact Areas are important, these three are most important to me for investment purposes. However, when I looked on the site to find out where exactly my money is invested, I was surprised to not find it.
I reached out to customer service via email, and the representative explained that the individual holding information in each Impact Area is not included on the site – the list of holdings has to be specifically requested from the client. I think this should be much more transparent, so this was a big red flag for me.
I received the list of holdings (for all the Impact Areas) and I was pretty disappointed with what I saw across the Impact Areas. The Climate Impact area includes only two actual energy companies (NextEra and ConEdison) and one Public Utility (Edison, parent company of Southern California Edison) – these companies are making some strides for climate action, sure. But as old-school energy companies, they are still generating energy (and money) of the use of fossil fuels.
The other companies in my Climate Action are primarily transportation and data (Apple, IBM, Microsoft, CSX, and more). This is, from an impact point of view, a disappointing list to behold.
I asked the team why my Clean Energy impact area did not include any solar companies, wind companies, EV companies, or other renewable entities – you know, companies that are DIRECTLY involved in our clean energy economy?
Their reply: “COIN currently advises on stock-only portfolios, focused on a US large cap investable universe. Most pure-play clean-tech companies (e.g. solar) are not currently found in the large-cap US universe. From an impact perspective, we believe that large cap companies with robust and verifiable data have a significant part to play in achieving the goals of each of our Impact Areas. A commitment to 100% clean and renewable energy from a company like Apple has a larger scale impact than a similar commitment from a smaller company. [As] we grow, we expect to expand our offering to additional asset classes.”
OK, fine, large cap only. But that still doesn’t explain the placement of some decidedly unsustainable companies in the Impact Areas. For example, each of my three Impact Areas included CitiGroup, which is another company that I do not want to support. Sure, just last month it hired a Chief Sustainability Officer, but I don’t want to support the bank that received the most government bailout money, and continues to invest billions of dollars in fossil fuels, including supporting a coal-company IPO as recently as 2017.
I was also incredibly disappointed to see Pepsi in my Clean Water Impact Area. As I have previously written, soda companies make money selling unhealthy products linked to the worst health issues of our time AND puts these products into single use plastic containers made from fossil fuels and continue to flood the ocean with plastic debris. And Break Free From Plastic just named Pepsi the #3 polluting brand in the world – no way do I want a single penny going to that company.
COIN defended its inclusion of Pepsi in the Clean Water holdings with a total greenwashed response: “Pepsi’s water use intensity is among the lowest in its peer group and well below the industry median. Their goals and targets related to SDG #6 – Clean Water – are robust. The company has also demonstrated progress with a 25% improvement in water use efficiency as of 2016 and a strong goal of another 25% by 2025. This is an example of how a large-cap company can make a notable positive impact on areas of sustainability which are of concern to our customers.”
Nope, nope, nope. I don’t care if the company’s water use is ‘improved’ — this company should be blacklisted from ANY type of sustainable investment offering. Related: I did learn from the team that investors can blacklist up to three companies total, so if you decide to invest with COIN, be clear on the holdings you want to remove; note that you cannot remove three per Impact Area, but three total. Of course, in the FT article referenced above, the author notes that greenwashing is in the eyes of beholder, and this to me seems like a clear example of it.
In the email interview, I asked about criteria selection, sustainability metrics, and if they have someone on staff to track these indicators. Below is a condensed answer from COIN:
They have hired a research
The proprietary methodology is different for each Impact Area, and focuses on three pillars:
- Goals, that measure intentionality and progress toward achieving the Sustainable Development Goals (SDGs) aligned with each Impact Area;
- Business Opportunity, which measures positive and negative revenue toward the Impact Area from products and services; and
- Corporate Conduct, which looks at a company’s performance on universal corporate metrics and those specific to each Impact Area.
These metrics sound awesome, but is it enough?
As I learned in my interview with Amberjae Freeman of ETHO Capital, most ESG screenings are simply not robust enough to build a truly sustainable portfolio. These funds might screen for some Sustainable Development Goal (SDG) criteria, tobacco, and weapons, but there isn’t anything in the COIN screening (that I could find) that specifically encourages real avoidance of fossil fuels. Even the UN Global Compact that COIN uses as a benchmark doesn’t specifically exclude fossil fuel companies. In fact, the UN language is incredibly non-committal when it comes to removing fossil fuels from the growth economy:
Principle 7: Businesses should support a precautionary approach to environmental challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; and
Principle 9: encourage the development and diffusion of environmentally friendly technologies.
Where is the Impact in this Investing?
With 25 holdings per Impact Area, I didn’t do a deep dive into every single company. But looking at each Impact Area, even from a distance, the lists are just boring. These Impact Areas include older, established companies that might be making some strides for sustainability, but really, this seems like business-as-usual (or investment-as-usual, really), and I don’t see anything truly innovative nor truly impactful about COIN’s version of investing except for their cool mobile and desktop platform.
Overall, it seems to me that the companies included in the holdings at COIN are still focused on the same old-school capitalism that at its (cold, black) heart is meant for pure economic growth and not real impact. The business of economic growth at any cost is what got us into this climate mess and doesn’t value human nor natural capital.
To me, the COIN platform seems like a millennial-friendly version of standard investing protocol. The type of investing I want to do – and the type of investing I think can change the world for the better – is radically different than the large cap companies featured in these Impact Funds. I want to see a plethora of investment opportunities (beyond ETHO and individual stocks) that are truly focused on smart investing BETTER for us all, and sadly, I think I will have to continue to wait.
As I wrote in the beginning, I’m a novice investor, and neither my team nor I can offer professional financial advice. You need to do your own research and evaluate any investments before throwing your money at them, etc., etc.