By Jerome McKenzie

Last month’s announcement of Prince Harry and Meghan, the Duchess of Sussex’s, new role as “impact officers” at ethical fintech firm Ethic set off fireworks in financial markets heard around the world. We asked recently retired Certified Financial Planner designate, Jerome McKenzie*, a 30-year veteran in the finance industry to shed light on this news and what it can mean for you.

These young folks can enlighten their parents to the consequences to them and their grandchildren if changes aren’t initiated. This change in investment strategy is coming at an opportune time for those it will benefit the most, the descendants of baby boomers, (Gen X, Millennials, and Gen Z,) who will be receiving trillions of dollars in inherited wealth over the coming decades. They will take over control of the direction of those assets and the power associated with them.

ESG investing what is it?

ESG, Environment, Social and Governance, investing is not just a perception, but is the reality of a company’s behaviors, practices, community and societal interactions, employee relations, policies, standards, etc. These priorities are considered part of the ESG definition of acceptable standards and practices. Even though the term has been in use since 2005, ESG investing is evolving. The basic concepts and priorities are similar but are loosely defined. Because of this, we must be diligent in evaluating what is real and what is PR regarding disclosure and claims from companies trying to qualify for ESG investment dollars.

Europe, unlike the United States, has enacted laws to specify in more detail the required actions and disclosures required to qualify to claim compliance with ESG mandates. The SEC is currently working to create more measurable metrics with their own lists of requirements needed for companies to follow to comply with ESG related priorities that are found to be important for investors. Since the list of standards and disclosures and their perceptions can be different from company to company, I think disclosure parameters are needed in this area. One example of a list of ESG areas of concern:

E Environmental

– Waste and pollution

– Resource depletion

– Greenhouse gas emissions

– Deforestations

– Climate change

S Social

– Employee relations and diversity

– Working conditions

– Local communities

– Health and safety

– Conflict

G Governance

– Tax strategy

– Executive remuneration

– Donations and political lobbying

– Corruption and bribery

– Board diversity and structure

ESG investing is a change of mindset from years of building wealth and making money with companies that had little to no regard for the “collateral” and direct damage done to the environment and society or the way employees of their companies were treated, to investing in businesses that have strategies and policies that emphasize the importance of the planet’s survival and the well-being of its inhabitants (be they shareholders or not). As the next generation builds wealth, the hope is that ESG standards and practices become the norm.

*Jerome McKenzie earned his Associates’s degree from Penn Valley Community College in Business Administration and studied accounting at the University of Missouri. In 1979, he began his career in finance in the operations department of a stock brokerage firm. An eye witness to the 1987 crash changed the path of his career and in 1989 he began work at a CPA firm for 2 years.

The CPA firm did the accounting work for a Registered Investment Advisor (RIA) and after two years became employed by the RIA. I also became a Series 7 registered representative in 1989. In 1997 I obtained the Certified Financial Planner “CFP” designation. He worked for the RIA firm for 30 years where he assisted in the development of an asset management business where it grew from a few million dollars to over 1 billion dollars when he retired in  2018. He is currently a retired CFP designate.

---

Recognizing Powerful Black Voices in the Environmental Movement