Newday Impact Investing is a wealth advisory firm targeting millennials, not millionaires. Backed by senior managers from firms like BlackRock and Stone & Youngberg, the San Fransisco-based startup is hoping to change the face of financial investment by shifting capital flows to “do good” companies on a massive scale. But is it that simple?
“We started Newday to shift capital flows to good companies on a massive scale, empowering the next generation of investors,” says Doug Heske, CEO and co-founder. “We are the first to offer fully automated wealth management solutions for impact and socially responsible investing.”
Stocks, shares, and financial investment are topics that often conjure up images of wealthy older businessmen and a system that puts profit over people, peace, and the planet. But given the growing interest in purpose-driven companies, Newday is staking its future on a new breed of investors: 25- to 35-year-olds who want their money to reflect their values as much as their financial goals.
The business claims to be the first of its kind, offering fully automated wealth management services, using an app. However, it’s worthwhile to note that there are other companies such as Aspiration, ElleVest, Swell, and Robinhood that are also dabbling in this space.
The decision to target 25- to 35-year-olds might seem counterintuitive for a business in an industry whose usual demographic is ‘whoever has the most money’. A quick scan of power lists of the wealthiest in the world will reveal that by and large, the world’s wealth is not held by this age group. In recent years, however, we’ve seen them galvanize around people, businesses, and causes: consider the Bernie Sanders’ campaign to the success of crowdfunding.
Although there are not as many millionaires in their 20s and 30s, their combined purchasing power can have a significant impact. This is what Newday is hoping to tap into, by showing young people that investment can have a positive social impact. Newday just received B-Corp status itself, a certification that is resonating with Millennials, particularly.
Newday has launched with public companies, though it may not be the ideal solution, Heske admits: “You cannot get pure impact in the public space. But you can invest in leaders. We are looking to shift investor behavior first [there].”
That includes companies such as NRG Energy, an American integrated power company, that recently signed on to the UN Women’s Empowerment Principles. “[It] is a good example of a company in the Gender Equality portfolio as it became the first US power company to sig on,” he says.
Another includes Idexx Laboratories, which sits in the Animal Welfare portfolio; the company produces lab equipment and instruments for veterinaries and livestock, among other things.
But this, Heske assures, is just the beginning: “We are planning to launch Reg A private impact investing opportunities over the next couple of years.”
Essentially, the fund aspires to demystify the investment process for people that may never have done it. Currently, with just 1,000 users on the app, Heske claims that they’re planning to grow that user base to 5,000 by the end of the year.
“Users simply download the app, answer some questions, and receive an automated portfolio of impact investments tailored to their goals, values, and risk appetite,” Heske says.
Newday does all the research for potential investors, narrowing down a list of ESG companies to invest in. ESG refers to the environmental, social and governance factors that are used to measure the ethical impact of an investment in a particular company or business. Newday looks for companies that align on a number of themes like animal welfare, gender equality, and climate action.
To identify and select suitable ESG companies, the fund is turning to Chief Investment Officer Cara Barr’s previous experience in the field. As the former Director of Investment Strategy at BlackRock, Barr incubated BlackRock’s early ESG products, and the Newday team now uses a combination of in-house and third-party data to construct their portfolios. Numerous studies have shown that ESG companies are associated with higher profitability, lower risk, and outperformance over the medium to long-term.
Heske says they’re trying to give young people the chance to actually support the businesses they do like, instead of just boycotting the businesses they don’t like. Investments up to $100 are free, as well if you’re a college student, and then after that, it’s a flat 1 percent annually.
Although the team at Newday is small with just six full-time employees, Heske argues that they bring with them years of combined experience at traditional banks and hedge funds that will be beneficial as they look to transform the financial sector. His co-founders, Anthony Randazzo, an engineer previously at Sandbox serves as Chief Technology, and Alexander Meek, a former Deutsche Bank Associate is President of Newday.
However, some of the companies included in their portfolios raise a red flag: companies such as Merck & Co, a big pharma company that’s been accused of fraud on numerous accounts, and Proctor & Gamble, the personal care brand that’s historically used palm oil, been embroiled in labor rights abuse allegations, and continues to sell in markets that require animal testing.
So, while these companies may change their ways after consumer pressure, are they truly leaders in the space and the best use of Millennial investment dollars? Or should ethically-driven consumers look to simply support a new breed of brands in the private sector with their purchasing power?