Socially Responsible Investing with Washington Square Capital Management’s Louis Berger

September 3, 2014

Play/Pause Download
JOHN SHEGERIAN: Welcome back to Green is Good, and we’re so excited today to have Louis Berger on with us. He’s the co-founder of Washington Square Capital Management. Welcome to Green is Good, Louis. LOUIS BERGER: Great. Thanks for having me, guys. JOHN SHEGERIAN: Happy to have you on, and we’re gonna be talking about an important subject, socially responsible investing, but before we get to that, I want to hear the story of Louis Berger — your journey leading up to founding Washington Square Capital Management. LOUIS BERGER: Sure, so actually, investing and financial advisory was a second career for me. I worked in the film industry for several years and then in 2006, I made the switch over to finance so investing had always been interesting to me. The environment and social causes were always interesting to me so I decided I wanted to merge those two ideas and so I started working at UBS, the Swiss bank, for a few years and then my business partner and I decided to start our own firm, Washington Square Capital, a little over five years ago. So, we run an independent financial advisory now where we work with clients and build socially responsible portfolios. JOHN SHEGERIAN: That is great, and for our listeners who want to follow along as we have our visit with Louis today and follow along with his company and see what he’s doing at Washington Square Management, you can go to So, Louis, let’s get right into it. Social-responsible investing, is this a hot topic the last five years? Is this something new or is this something that’s been around a long time? LOUIS BERGER: You know, it’s interesting because it’s often described as a passing fad when in reality, it’s been around for a very long time. It’s actually been around for as long as the United States has been around. We can trace it back to colonial times where the Quakers in the 1750s prohibited members from participating in the slave trade. You can look back to John Wesley, one of the founders of the Methodist church, and his use of money sermon where he preached helping people, helping the poor, avoiding businesses that hurt the poor, hurt other people, like casinos and distilleries, and then more recently we’ve seen SOI come into prominence in the 1960s during the Vietnam War. Investors wanted to divest from war profiteers. There was some widespread protest against Dow Chemical, the makers of napalm, and then in the ’80s, we saw the divestment movement from South Africa due to apartheid so it’s really been part of the fabric of the United States and then more recently, we’ve seen the green movement and investors are interested in what companies they’re invested in and actually making choices to invest in companies that reflect their world view. JOHN SHEGERIAN: So, this is something that goes back pretty much time immemorial, like you said, to the founding of our great country. It’s just not a green thing that just happened after Inconvenient Truth or some other landmark event here in the sustainability revolution. This really traces back to just our roots of the United States? LOUIS BERGER: Yeah, absolutely. It’s certainly become more popular in recent years. I think certainly Inconvenient Truth has raised the profile of environmentalism and there’s certainly more money being invested but it is something that’s been around for a very long time. JOHN SHEGERIAN: So, say today you and I met at a cocktail party. Can you share with our listeners what would be your major pitch, your major tenets for why our listeners should consider investing in a socially responsible way? LOUIS BERGER: What your listeners should know is that investing can be an extension of your worldview and your values and if you’re passionate about certain issues like the environment, it really should be an extension of your worldview and we view it as a natural progression of conscious consumerism so in recent years, many of us have started questioning where and how our products are made, where our food comes from, how our energy is sourced and we’ve adjusted our consumer habits as a result so investing has actually followed that same path so if you’re invested in a typical mutual fund and let’s say you care about the environment, you’re likely invested in companies that are diametrically opposed to your worldview so you may be invested in fracking companies, oil drilling, mining petrochemicals and investing in these types of companies is more than just an endorsement of their business practices. By owning their stocks and bonds, you’re actually helping to foster their growth and I doubt many listeners would want to help fracking companies expand their operations so it’s important to start thinking about, just like as a consumer where your dollars go, as an investor what companies your dollars are supporting. JOHN SHEGERIAN: So, how does one go about defining what investments are considered socially responsible? And, I mean it on both sides of the equation. I mean it on the Louis Berger side of the equation and in also your potential client base side of the equation. How do you find investments that are considered socially responsible? LOUIS BERGER: Sure, so it’s interesting because the term social responsibility is kind of nebulas, right? You know, it’s actually very subjective and can be very personal, so it’ll mean different things to different people and what one investor may consider socially responsible another may not so through our practice and interacting with our clients, we’ve come to realize that it’s important to have a customized portfolio for clients that follows their individual mandate so when we look at the space, we’re gonna look at investing in companies that our clients feel comfortable investing in and then my own preferences tend to sort of move towards environmentalism so I’m really interested in investing in companies that are part of the alternative energy movement, energy efficiency, companies that consider human rights, labor rights, water resources. There’s a lot of themes around environmentalism that you can express through an investment portfolio. JOHN SHEGERIAN: Okay, so now environmentalism is one form of sustainability and green, of course, and I love that and I think that is great so you would have today, if I’m a new potential client and you and I are having lunch today in Manhattan, you would have a list of potential investments that you’ve had success with or you’ve been tracking that you like but then how long does it take for you to get to know me so you get to know my likes and dislikes so then you can start matching up some things from your list and maybe some things that are off your list that you think that I would appreciate because of how different and idiosyncratic we all are? LOUIS BERGER: Yeah, no, absolutely. We look at each client individually so we run a pretty extensive questionnaire where we cover a lot of different themes and we get a sense of what a prospective client is really interested in, what types of companies or issues they want to include, what they want to avoid, and then using that criteria, we’ll build out a portfolio from there and yeah, we’ll certainly include certain types of companies that a client may specifically want to include or if they want to avoid certain types of companies for whatever reason. They may have a problem with a specific company’s business practices and our view is that our job is to make sure that the portfolio reflects the client’s wishes. JOHN SHEGERIAN: Is there a taboo list of things that you really are trying to shy your clients away from investing in or most of the people who come to you don’t want to invest in such as alcohol and tobacco, pornography, guns? Is there a big taboo list or is this just very personalized and has to do with your client base and also you and your partner? LOUIS BERGER: Yeah, it’s definitely the client base. There’s a lot of overlap in client portfolios, so yeah, there’s certainly themes that are pretty consistent that we see. I guess a taboo list of negative themes so fossil fuel companies, oil drillers, firearm manufacturers, companies that are involved with military or war, tobacco, big retail banks is actually a pretty big theme these days so clients will want to avoid investing in those larger banks. Nuclear power will come up. I’ve had clients come to me and say I want to avoid the big box retailers. We have clients that are vegan and want to avoid GMO or meat packers or companies that are using processed foods so again, it’s so subjective and totally fascinating because each client’s gonna have their kind of angle and worldview that we’ll incorporate. JOHN SHEGERIAN: So, there’s sort of a master taboo list but then it gets hand crafted based on, like you said, the client’s vegan or a client’s really anti-military or any of that kind of stuff. LOUIS BERGER: Sure, and most of those themes overlap. Most of those are consistent but some themes will be stronger than others. JOHN SHEGERIAN: That’s so fascinating. If you’ve just joined us, we’re excited to have Louis Berger on with us today. He’s the co-founder and Principal of Washington Square Capital Management. To learn more about socially responsible investing and all the great work that Louis and his partner is up to, you can go to, so let’s talk about that a little bit. What are the different types of socially responsible investment strategies that you’re excited about today? Is it solar? Is it Tesla? Is it Amy’s Foods? What are you looking at for your investors today and what are you showing them? LOUIS BERGER: Right, so there’s really four kind of broad approaches that investors will use when approaching the space and the first would be something called positive screening so you would look at the investment universe and you would say I want to invest in something that has a positive impact on the world so if you care about the environment, you’re gonna look at solar companies, wind companies. You’re gonna look at energy efficiency companies or just general companies that have a strong environmental track record. The second approach would be negative screening so you’d look at the investment universe and you would remove those companies or avoid those companies that you view as having a negative impact on the world so going back to that taboo list, and we’re talking about the environment, it’s generally going to be fossil fuel companies, mining, petrochemicals. Our third approach is something called Best in Class where you’re gonna look at an industry that may be negative screened so you’re gonna look at, let’s say, the utility space and you’re gonna find that company that’s leading the way, that’s at the vanguard, let’s say, in terms of their environmental practices so you may look at a utility that could have some exposure to fossil fuels but they diversify their portfolio in alternative energy so they’ll have wind power and solar power, biofuels, and this approach is probably best for a pragmatic investor that says okay, here’s a company that’s doing good things in the utility space. They’re moving forward. They’re aware of their environmental footprint, they’re aware of the resources that they use, and they’re actually seeking to limit those and then the fourth approach is something called Shareholder Advocacy, where you’re actually changing the way a company does their business from the inside so as a shareholder, you’re part owner of a business or company and you have the ability to put forward shareholder resolutions and this is something that larger institutional investors will do; a mutual fund, a pension, a nonprofit, a foundation. A lot of them have an environmental mandate and will often pull their resources together and put forward shareholder resolutions that will have a company look at their carbon footprint, look at their water use, question where they’re sourcing certain types of materials from and a lot of times, this change will be incremental but over time, it will help shape a company’s business practices and change the way they do business in the long run. JOHN SHEGERIAN: So, there’s four different types of investment strategies that are — LOUIS BERGER: Yeah, and then I guess to your initial question about what types of companies, again, I can’t really talk specifically to companies but generally speaking, we’re very interested in the alternative energy space. We think LED lighting is really interesting. Metal recycling is a space we look at. Disruptive Internet technologies are interesting. So, organic foods is a space that’s growing pretty rapidly so there’s several different companies that we’ll keep an eye on and then put those into client portfolios when we see good opportunities to buy them. JOHN SHEGERIAN: Louis, at Green is Good, we love to give our listeners advice that they can use so is there any things that they shouldn’t be doing? Is there any types of investments or strategies our listeners should be avoiding? LOUIS BERGER: Right. Well, I think it’s really important if you’re gonna invest in a socially responsible mutual fund, which is often the most common approach that we see out there, you should take a close look at their investments and make sure their screening criteria matches your values and make sure that the underlying investments are also companies that you’re comfortable investing in. Another thing is you really have to consider the fundamentals of investing. You can’t just ignore them because you’re doing socially responsible investing. You have to look at risk tolerance, at time horizon. We’ve come across prospective clients in our practice where they’ll say, ‘Yeah, I’m socially responsibly invested. I have all of my money in a solar stock,’ and that may be something that’s socially responsible but it’s fiscally reckless so we want to make sure that your listeners know that diversification is important, that risk tolerance, that time horizon should all be considered in addition to the screening criteria we’re talking about. JOHN SHEGERIAN: Louis, is it your experience that socially responsible investing is changing the way that companies actually do business? LOUIS BERGER: Yeah, absolutely. I’d say it’s similar to the movement in conscious consumerism that we’ve been seeing so any time a person becomes aware of where their money is going and starts questioning it, it forces a company to change the way they do business so SRI is forcing companies to rethink their business practices because they want to start appealing to SRI investors and shareholder advocacy, which I mentioned earlier, has been a great tool. It’s changing, kind of moving the needle and forcing corporations to start changing their business practices and there’s absolutely still a long way to go and the challenges we’re facing aren’t going away anytime soon but we’ve definitely been seeing a lot of progress and I think as SRI continues to grow, we’ll continue to see pressure put on companies to address a lot of the issues that consumers are concerned with. JOHN SHEGERIAN: Louis, Washington Square Capital, what do you do different than other socially responsible investing financial firms are offering right now today? LOUIS BERGER: Sure, so I mentioned mutual funds earlier and a lot of those types of approaches will use kind of a set strategy, what we view as a one size fits all strategy, and mutual funds can absolutely be a good way to invest socially responsibly and it’s often appropriate for smaller investors or investors that are new to investing and want to outsource the management of their portfolio to a manager that’s going to follow their values and their mandate but what we have encountered and what we’ve found is that managing a portfolio with individual stocks and bonds will actually more closely mirror what an investor is looking for so rather than going with a mutual fund where you don’t really have any choice — you can’t call up the manager and say, ‘Hey, I’d really love to invest in a solar company,’ you’re kind of at the mercy of the investment decisions they make — if you work with an advisor like us and we build out a customized portfolio, you have a lot more control over where your money goes; what type of companies, what industries, what asset classes and what we’ve found is our clients tend to be a lot happier with that because they know exactly they have full control over where their money is going and they have full control over what companies they’re invested in. JOHN SHEGERIAN: You know, we’re down to the last minute or so, Louis. What do you think of the future for socially responsible investing and is it gonna really become more of the mainstream and will your firm continue to benefit from that and grow in the years ahead? LOUIS BERGER: Yeah. You know, I think it’s absolutely on that path. We’ve seen significant growth in recent years so if you look back to 1995, there were only about 55 investment funds with an SRI mandate and as of 2012, that number has grown to 720. JOHN SHEGERIAN: Whoa. LOUIS BERGER: It’s grown quite substantially and actually, as of 2012, SRI investments represented about one out of every eight investment dollars in the U.S. and that number has probably grown since 2012. Another thing we’ve been seeing is a generational shift. We’ve seen millennials become very interested in applying SRI to their portfolios so oftentimes, we’ve seen younger investors, millennials, inherit money from a grandparent or parent. They’ll inherit their grandparent or parent’s advisor and often times, that advisor will not be interested or be able to invest socially responsibly. They may not be equipped. They may not follow the funds that they need to so a lot of these investors are being underserved and they’re looking elsewhere for guidance and what we see is a shift from the boomer generation. As they age, they’re gonna be leaving money to the younger generation and that generation’s gonna investment in socially responsible investments so yeah, we think it’s gonna grow and be more mainstream in the future. JOHN SHEGERIAN: Thank you, Louis, and for our listeners out there that want to learn more about what Louis is doing or contact Louis, go to Thank you, Louis, for socially responsibly investing in companies that can help make the world a better place. You are truly living proof that green is good.

Subscribe For The Latest Impact Updates

Subscribe to get the latest Impact episodes delivered right to your inbox each week!
Invalid email address
We promise not to spam you or share your information. You can unsubscribe at any time.