Shun the plastic bag. Eat less meat. Ride your bike instead of driving. Changing the default in our everyday choices is among the most common advice given to anyone looking to lessen their impact on the planet. And while each of these decisions does reduce our personal carbon footprint a little bit, many people are unknowingly undermining their own efforts to lead a more sustainable life through their investments.
“It’s all well and good to take your KeepCup to the coffee shop, but if you are still investing in companies that depend on fossil fuels there’s a massive misalignment between your values and how you’re going about securing your future in economic terms”, says Tom Culver. To help bridge this gap, the former wealth and investment manager took a leap of faith at the beginning of 2017 and left his stable career to launch the ethical investment start-up Goodments together with his wife Emily Taylor.
Democratising ethical investing
The idea behind Goodments is simple: make it as easy as possible for anyone to invest in recognisable brands that are aligned with their values. The Sydney-based FinTech company is achieving this through a combination of different strategies.
- Ditching the finance jargon
“The world of finance is full of unnecessary complexity and language that is completely meaningless to the majority of people”, explains Tom. “That’s why we decided to move away from talking purely about financial returns to emphasising the impact instead.”
When setting up their account, users are asked to answer a series of questions about what causes are important to them, what things they don’t want to support and are then asked to prioritise their choices. Based on these selections, the app presents users with a list of investment options that match their personal preferences.
Each listing includes an overview about the company, public sentiment information, it’s performance history and a Goodments score which assesses the company’s social, environmental and ethical impact based on independent sustainability data. “We have roughly 300 data points for each company listed on the app and award each company an overall ‘Goodness’ score out of 100”, says Tom.
- Lowering the cost of investing
Traditionally the barriers to start investing in shares are reasonably high, because you need a bit of cash in the bank to get started in the first place – not only to buy shares but also to fork out brokerage fees.
Goodments works on a subscription model with access to unlimited trading ($13.99/month) and subscribers can start investing as little as $2.99. This is possible because you buy shares in dollar amounts (also called fractional shares) rather than whole shares which can cost anything from 10 to hundreds of dollars depending on what company you’d like to invest in.
What’s more, within the free version of the app it’s possible to practice trading before signing up to the subscription and start to invest for real. “This feature is extremely popular – especially with people who are completely new to trading”, says Tom. “It allows them to test the water without having to take any actual risks.”
- Making investment more active
“We’d like people to think about Goodments, the way they think about Netflix or Spotify – something they can use during their commute”, says Tom about their ambitions. This is achieved through seamless transactions, regular market updates and by making it easy for users to keep on top of their investment-value alignment.
“Let’s say you care about sustainability and privacy. You have invested in Google because of their carbon-neutral operations, but then they are involved with a privacy breach”, Tom describes a hypothetical scenario. “The app will flag this issue for you and provide updates on how the problem is managed over time. Based on this data you can then decide if you want to continue to invest in the company or look for alternative options instead.”
Becoming an ethical entrepreneur
The trading feature within the app launched at the end of 2018 and the company is adding 1000 new users per month on average, but to get to this level of growth has been a long journey.
“The first time I really felt that I wanted to do something in this space was when I had a meeting with a client a few years back. This client had done very well by building social housing at the highest possible standard from a sustainability point of view and we had absolutely no investment options to offer to him that were aligned with his values”, remembers Tom.
As the idea for Goodments continued to evolve, Tom also started to see some shifts in the market as consumer awareness and demand for more sustainable investment options. “All of a sudden big investment firms jumped on the topic, but in most cases, these moves were driven by the potential financial opportunity provided by changing consumer behaviour”, says Tom. “I didn’t see much change in terms of how these businesses are run.”
So, with the help of a $50,000 investment from H2 Investors’ Accelerator Program, Tom set out to build the first version of the app. “The reactions from friends and family were split down the middle”, remembers Tom. “Younger people were really excited for me and saw this kind of ethical entrepreneurship as a viable career (sustainable investment is after all a market with 86% growth year on year since 2014). Older people thought I was mad to leave a stable career for something they couldn’t quite understand.”
Leveraging data insights to drive change
After a bit over a year of gathering and analysing data from its app users, Goodments is learning a lot about the issues that people care about. “Renewable energy and the environment are very high on peoples’ priority list and they absolutely want to avoid social issues such as predatory lending, gambling and tobacco”, says Tom.
What’s more, investors can use the app to track how their investment choices are contributing to better outcomes for society and the planet. To date investments made by Goodments’ subscribers have avoided 52k tonnes of C02 emissions, 88k gigawatts of non-renewable electricity, and recycled 60k tonnes of waste.
“We are now also starting to use our data insights to reach out directly to companies to let them know that people don’t want to invest in them because their business practices don’t match the values of younger generations. We are still a young start-up with relatively small user base, but as we grow as a business, I am sure our influence will grow as well.”
Interested in Goodments?
The free app (research and practice trading) can be downloaded on Apple and Android devices. Trading via the Goodments app is currently only available for Australian residents, but the company is planning to open up this functionality for the UK and US in 2019. For each investment made via the app, Goodments is making a donation to charity.
Other images supplied by Goodments.