Hi and welcome to the Impact on FinTech TV.
I'm your host Jeff Gitterman, and we're down on the floor of the iconic New York Stock Exchange this morning.
I'm joined by Peter Krall.
He is a partner and director of sustainable investing at Earth Equity Advisors, a prime capital financial company.
He's also the 2024 investment news ESG responsible investing adviser of the year, and I also count him as a friend.
Pete, welcome to the show.
Thank you, Jeff.
It's to be here on the floor of the New York Stock Exchange.
Not as exciting as it was during trading places days when pink slips were flying and everything, but I think for guys like us it's still really nostalgic to be here.
Absolutely.
And you know just to look around and there's so much history here, it's, you know, as somebody who grew up in this business and having been here during those days when there was loudness and there was all the excitement, it's good to be back.
Glad to have you back.
Yes, sure.
So I always like to start our interviews off by finding out what drove people initially to take their intelligence and their values into the world of sustainable investing because I think most of us started off in the business on the traditional side, but somewhere along the way you took a turn.
Um, tell us a little bit about that.
Absolutely.
So I started out with Merrill Lynch back in 1998 and you worked there for several years, got my feet wet, understood the business a little bit more, and I met my wife Melissa Booth, who is a dual PhD microbiologist and molecular geneticist, obviously much smarter than I am, and we started having conversations about sustainability and climate and conservation and things like that.
And about the same time I also met Bill McDonough, the gentleman who was the green tech, yeah, he wrote Cradle to cradle, etc.
And so I spent an afternoon with him and I really put those two things together, the time with Melissa and the long conversations, the time with Bill, and said, you know what, I think that there's an opportunity in what at the time was socially responsible investing and in let's see what year was it 2004, jumped off the cliff and started Krull and Company, which was the predecessor to Earth Equity.
So talk to me a little bit about when meeting with clients, how the communication goes, how the dialogue goes.
A lot of advisors that I talked to say they're afraid to have the conversation with the client.
They're afraid to bring it up.
How do you find the comfort and the ease in which to dive into these conversations with your clients?
Well, the reality is that people come very specifically to us for sustainable investing because that's all we do and it's all we've been doing for 21 years now.
And so the conversation is usually really natural.
It's, you know, we understand.
And that that climate is our biggest challenge.
It is an existential challenge.
And if we are not putting our money where our mouth is, if we are not trying to find the solutions, then we're not doing everything we can do.
And so the clients are coming to us because they want those solutions, so.
I just want to talk about the existential crisis that the industry has been facing.
Um, lots of challenges, lots of challenges coming from state attorney generals, lots of pressure on ESG, lots of fund companies that you and I have worked with in the past, pulling their names and their labels and changing their websites and their marketing.
Have you noticed a shift in the clients or is this much more just a reaction on the product side?
It's a reaction on the product side.
The clients and the prospective clients are still there.
We've got to.
Remember that there's a lot of political pressure being put on some of the big fund firms.
There's a lot of political pressure being put on them because people don't understand, and that's where it's important for both you and I to be translators.
It's important for you and I to both be storytellers about what is important about sustainable investing, why we need to continue pushing forward, because the reality is is that folks who are anti-ESG or anti-woke investing, whatever they want to call it.
Um, don't have the full story, but they have a powerful voice and so we need to have just as powerful a voice saying, hey guys, ESG really is about reducing risk.
ESG really is about, you know, doing an added level of due diligence.
Sustainable investing is really a ground up effort to look for solutions for a, you know, for this not for not climate change, but for the changed climate that.
Actually are living in right now and one of the things, so I live in Asheville, North Carolina.
I was going to ask you about that.
Yeah, absolutely, and you know we had a hurricane hit 500 miles inland last September and you know the reason that hurricane hit is, you know, because climate change intensified it, because the Gulf was warmer than it than it ever has been.
And so one of the things that I learned and realized going through that.
So we need to evolve SRI from socially responsible investing, and what I learned going through Hurricane Helene in Asheville is that we had a failure of infrastructure.
We had a failure of our utility infrastructure.
We had a failure of our communication infrastructure, and we had a failure of our transportation infrastructure.
So we are not ready in this changed climate world for what's coming next.
I spent time out in.
Palisades two weeks ago and just checked it out to see, you know, compare here's what happened in Nashville.
Here's what happened in California.
All of these climate intensified storms and events that are happening and so we really need to transition from again from socially responsible investing to sustainable.
We need to reduce our impact.
We need to make it so that way our children and grandchildren can thrive just the way you and I have been able to.
But the R needs to transition to resilient.
We need to be more resilient in the face of a changed climate.
And finally, the eye is about innovation because innovation is what can make us more sustainable.
It can help us reduce our impact.
It can help us come up with ways to be more resilient, you know, be it for sea level rise or more constant fires and things like that, or dealing with a hurricane 500 miles inland.
Yeah, it's interesting because I go back 2 years.
We've both been doing this for a long time now, and 2 years ago, if you talked about resilience or adaptation from the left and from the green movement, you were almost ostracized because it was considered a give up on.
Net zero and on the mitigation side and the energy transition side, I have been talking about it for a long time that the energy transition isn't going to come fast enough.
We need to become more adaptive.
We need to build resiliency into the system from an investment standpoint, are you starting to see more opportunities to do that?
And how are your clients responding to that?
We've, we've, so when I put a portfolio together, especially on the fun side, we'll have a core, but we'll also have thematics that really complement that core, and you know the thematics that we use are energy transition, water, real estate, biotechnology, and infrastructure.
We've added that infrastructure component to it.
So is there anything that I would consider like a Really pure sustainable fund that's out there.
I don't think we've quite got to that point, but the opportunities are absolutely there.
The opportunities are there because, because they need to be because we're at that point in time right now where, no, we are not going to reduce our emissions to the point where we don't have to be resilient and adaptive, and that's the reality of it, and it's been like that for quite some time.
The political will is simply not there to make that transition.
Yeah, so that brings us always to the investment side of it because if you can look at any investment theme, I can't tell you where we're going to be on.
AI, I can't tell you where we're going to be on gold.
I can't tell you where we're going to be on interest rates in 20 years, but I can emphatically with certainty say that in 20 years we're going to have more of a volatile climate than we have today.
So the investment case for investing in resilience and mitigation.
And adaptation is baked in in a confidence level for investors that you really can't find in any other sector of the marketplace.
No, I couldn't agree more.
And that's what I've been talking to people about.
You asked about clients earlier, you know, what do our clients think about it.
Um, I get, I get head shakes, yes, when I start to tell the story about again about us in Asheville in the hurricane and about the need for more resilience and and the reality is we need to be planning not for the hurricane or the fire that hit last year, but for the intensity of the one that's going to hit next year and the year after because it's only going to ramp up as you know, as the oceans warm and as you know we pump more CO2 into the atmosphere.
You just published a book or it's about to come out.
Congratulations on that.
I know it's an arduous process and it's like You know, having a baby for sure, so it must feel great to have it done and completed, but tell the audience a little bit about what you published.
Yeah, so it's called the Sustainable Investor, and it was written with the idea of educating both financial advisers and the public about what sustainable investing is, what ESG is, you know, what goes into it a little bit on the history of it, you know, going back to religious folks not wanting to own gambling or sin stocks, things like that.
And really coming forward to today, in fact, I delayed my my turning the book in because I was writing it as Hurricane Helene hit, and I wanted to integrate my experience.
I wanted to integrate that resilience piece into the book and so it's coming out 3 months later than it was supposed to.
Nonetheless, I think it's a more complete book because of that.
And so it goes into how we manage our fund portfolios.
It goes into how we manage our individual stock portfolio for financial advisors.
Talks about how you run a sustainable practice, you know, the different organizations that you want to belong to, the fact that you probably don't want to drive a Hummer to a to a client meeting, and it's about living the lifestyle and actually embodying what we're espousing in public.
Well, hold the book up for that one right there.
There it is right by Peter Karl.
Yeah, the website is sustainableinvestorbook.com.
Awesome.
Anything you want to wrap up, what do you think is the future?
It's Climate Wee happening in New York City as we film this.
What day is the book coming out?
The the book comes out on November 3rd.
November 3rd, OK.
Take me 5 years into the future.
Where do you think our space is?
I think we continue to expand because the reality is the demand is not, is not going away.
Morgan Stanley publishes some really good research on demand for sustainable investing.
And their last report that came out earlier this year basically said that 99% of Gen Z, 97% of millennials, and 86% of Gen X are either somewhat or very interested in sustainable investing.
And so if you're a financial advisor, this is a generational issue that if you don't have a portfolio that is going to satisfy these Generations, those clients are going to go elsewhere and you can't just do a sort of less bad ESG portfolio.
You have to have the solutions-based portfolio for those next generation clients.
And so that's where I see it.
I see that the great wealth transfer going into the hands of these next generations and those next generations really pushing the agenda for sustainable investing.
Last question, a little bit off topic, yes.
Betterment, all of these programs that are coming out where AI-driven financial advice.
Do you think this younger generation will still want to work with advisors like us or people at least, maybe advisors younger than us?
Yes, maybe.
But do you think we're we're dinosaurs, or do you think we're going to stay trendy?
I think that you can never, you can't replace the human connection, especially when it comes to people's money.
I know you can do some of it with a robo advisor or AI or something like that, but at the end of the day, people want to feel reassured that they're going to be able to retire, that they're going to be able to send their kids to college.
All the things.
That are the, if you want to call them the touchy feely side of things that AI never is going to have.
Love it.
So we're sustainable and we just have to fight for a more sustainable world now.
Absolutely we need to be just as strong in our message as the people who are anti-ESGR.
Awesome.
Thank you so much for being on the show today.
It was a pleasure.
That's it for the impact on Fintech TV.
I'm your host Jeff Gitterman.
Until next time.
