WSJ profile of Boardwalk Capital : 'Sustainable' Investment Firm Has Its Work Cut Out
by Thomas Coyle
Boardwalk Capital Management's focus on "sustainable and responsible" investing is the future, owner Scott Sadler believes. Now it's a matter of convincing clients, one at a time.
The Atlanta-based investment adviser often encounters prospects who are skeptical of its nontraditional approach. "It's a conservative area in some respects," Mr. Sadler explains."People here are charitable, they're generous, but they don't necessarily make the connection between that and the idea you can get the same sort of return from sustainable and responsible investing as you can get from traditional strategies--and at the same time do good."
After three years, Boardwalk has $10 million under direct management and it says it advises on another $50 million. That these aren't exactly bell-ringing totals illustrates the challenge sustainable-investing firms face when targeting individual investors--that is, regular people. While what is known as green and socially responsible investing is often described as a hot trend, the firms that have built large practices in this niche usually serve big-money institutions such as pension plans, endowments and corporations.
John Fullerton, founder and president of the Capital Institute, a think-tank for sustainable investing in Greenwich, Conn., says the investing approach of Boardwalk reminds him of Generation Investment Management, co-founded by Al Gore in 2004. That firm manages $7 billion, much of it from institutions.
Boardwalk is "for people who want or need to be in public stocks, but in ways that do less harm as a first step to doing good," says Fullerton, a former managing director of J.P. Morgan Chase & Co.
But Mr. Sadler, a former Goldman Sachs Group Inc. wealth manager who also ran a pioneering emerging-markets fund for Wachovia from 1994 until 2002, understands that people have their doubts. Though his wife Mary, the two-person firm's chief operating officer, encouraged him to consider the niche in 2009, soon after he had started Boardwalk and wanted to move it in a new direction, he was a skeptic at first.
"I did some research and found that if you picked the best companies" according to published environmental, social and corporate-governance rankings "and stay diversified" on the model of indexes such the S&P 500 and the All-County World, the result can be a well-balanced investment portfolio, he says. "It satisfies the activist in Mary and the analyst in me," he adds.
Mr. Sadler thinks investors are slowly warming to the idea. When it is explained to them, they like the concept of putting their money to work in companies that use the world's natural resources responsibly, treat employees fairly and guard against corruption--not just for the moral value of such things, but because they see them as companies likely to prosper over time.
Some misconceptions are hard to shake, however.
"People are always asking, 'Do you invest in solar panels?'," says Mr. Sadler. "I tell them, 'No, we invest in companies that invest in solar panels'."
So on the environmental side, Boardwalk looks for companies within major indexes that back environmentally friendly technologies, on the premise that such support refines these technologies for wider use and stands to lower the company's energy costs over time. Google Inc.'s recent $200 million investment in a Texas wind-power farm could be seen as an example.
Similarly, Boardwalk looks for companies deemed "best" places to work on the theory -- backed by research, says Mr. Sadler -- that companies that make a point of being good to their employees fare better over time than indifferent employers. When it comes to governance, it seems that companies with higher percentages of female board members are more transparent than those with fewer women directors.
Even bonds can have a responsible bent, says Mr. Sadler. A Boardwalk client's municipal-bond allotment can support things such as clean water and green-space set-asides while excluding forms of development the client opposes.
For Mr. Fullerton, Boardwalk's early-inning attempts to turn regular investors -- with college educations to pay for and retirements to fund -- into sustainable investors may help the firm add assets over time. "It's always smart to be on the right side of a trend," he says.
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