The big story of 2018 has been investor pressure on corporates to take action on climate change and sustainability. The pressure is starting to have a real impact, but it’s not all about the big players. Avenues are starting to open up to make it easier for personal investors, a “new generation of more ethically-minded Aussies”, to drive change through their investment decisions.
One startup trying to mobilise the next generation of responsible investors is Goodments.
Co-founded by chief executive officer Tom Culver and wife Emily Taylor, the team of six launched an app in November (a research product has been available for a while) that matches shares to people based on their values.
As part of the initial set up, users are asked to select the issues they care about, such as renewable energy or diversity in the workplace. This is followed by categories they’d like to exclude, such as fossil fuels and palm oil. Users are then matched to a selection of more than 2000 shares and funds available.
As well as information about how the company is performing financially, each company is given a “Goodments score” – a rating out of 100 based on its sustainability performance.
Culver says the data underpinning the sustainability scores comes from a couple of places: “What they say they are doing, and what they are actually doing”.
“Those who are doing the best are doing what they are saying, the middle scorers say they are doing good things but aren’t acting on them, and those scoring the worst are neither saying nor doing anything sustainable.”
A Goodments score of over 70 is considered a strong sustainable performer, he says.
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The app allows users to trade with individual companies
Culver says that the company is unique in that it can match people to individual companies. There are similar services already available but he says they only match users with funds and portfolios, such as clean technology funds.
Funds aren’t always an attractive option for people. Culver says that this is because “people don’t like being told what to do.”
“That’s the problem with funds. They are run by anonymous people, and in Australia, this is often old white men in sitting behind desk making decisions based on what they think.”
The company has however recently added exchange traded funds (ETFs) to the mix, so users are now matched to both individual shares and funds.
“We’ve listened to our community and have curated a selection of funds that reflect what they’ve told us – we’re excited to be launching with renewables and cleantech funds, an LGBTQIA fund and a no banks fund,” Culver says.
Trading with individual companies also has one major drawback – it can be expensive. A single stock for a well-known company such as Apple or Tesla can be worth hundreds. Then there’s also the brokerage fee to pay, with broker services commonly asking around $20 per trade.
The new app taps into technology that is currently only available in the US stock market that allows people to buy fractions of shares, making it much more affordable for investors, particularly those new to the game.
Culver says the only downside of trading fractional shares is that you don’t get voting rights – they still pay dividends and can be bought and sold the same as normal shares.
The app also does away with a cost per trade model and is subscriber based instead. Subscribers have the choice between an annual or monthly subscription and can join for as little as $12 a month.
“Given our monthly subscription cost is lower than the average brokerage in Australia, you’d be mad to keep paying $19.95 a trade, especially when our experience is simpler and gives you a more complete picture of the company you’re buying into,” Culver says.
Who is the subscriber base?
The app is targeted at a younger and new investor market who want to see their money make a difference.
“We are witnessing a ground-up movement on sustainability right now. People are sick of the regressive environmental policies from our so-called leaders and are taking matters into their own hands,” the startup co-founder Emily Taylor says.
“We hope to play a small part by helping people invest in the good,” she says.
At this early stage, Culver says the app is already attracting a lot of attention, with thousands signing up to the trial version.
He says this is partly because more people are starting to recognise that sustainable investing doesn’t necessarily come with a financial penalty. In fact, it is often the opposite.
What motivated Culver to set up the app?
One reason Tom Culver and Emily Taylor set up the app was because they have a passion for sustainable investing and believe in its potential to make a real impact.
“We want to create a community of investors to influence companies, for example, if 90 per cent of investors are backing a renewable provider, then we want to be able to show other companies that.
“We want also want to be able to show when companies aren’t so sustainable and say: ‘look what you are missing out on.’ We want to become a change agent.”
The startup also donates funds to three charities: the Sea Shepherd, Girl Effect, Charity: Water.