From the June 2010 issue of Investment Advisor • Subscribe!

Leadership Case Study: Jeremy Paul and Bud Sturmak

Five years ago, a few of Jeremy Paul's more forward-thinking clients came to him expressing a desire for more socially responsible investment (SRI) choices within their existing 401(k) plans. Jeremy is the president of RLP Capital, a wealth management firm based in New York that specializes in providing fiduciary services for individual and corporate clients. Paul consulted with Bud Sturmak, his colleague and managing director at RLP Capital, and decided to approach the 401(k) providers with which they worked. Jeremy and Bud soon concluded that the "green" investment choices offered by the providers were extremely limited.

As the two men were learning more about the SRI space, they uncovered several interesting observations from the ground level. In meeting with plan participants, many expressed the desire for more information about the plan investment choices in order to more easily identify those investments that aligned with their values. Later, Jeremy and Bud uncovered that one of their plans had holdings that were closely tied to genocide in Sudan, a fact that was not widely known in the public domain.

Launched in April 2010, their Green 401k solution (thegreen401k.com) promotes the use of socially responsible investments in mainstream 401(k) plans. As the culmination of an extensive fact-gathering effort, the Green 401k now screens about 450 mutual funds for environmental, social, and governance (ESG) criteria. The RLP Capital socially responsible rating system now screens for 36 factors, including: human rights; ESG disclosure and reporting; use of clean/renewable energy; and shareholder advocacy. The goal of their research is to provide plan sponsors and plan participants with an additional layer of transparency so that they have a better understanding of what they are investing in.

Whether considering a traditional or a socially responsible investment for inclusion in a 401(k) plan, RLP uses the same due diligence process. This ensures that plan sponsors are fulfilling their fiduciary responsibilities. An interesting outgrowth of their due diligence and internal research has been an uncovering of a number of studies that demonstrate the strong investment performance of SRI funds in recent years.

What's most interesting regarding the leadership that Sturmak and Paul have undertaken with the Green 401k is that it all began in response to an unmet need by their clients. "We recognized that there was a desire to offer socially responsible investment choices, but that there was a fundamental transparency problem," recalls Jeremy. "Plan sponsors and plan participants wanted to know what they were investing in--whether it was a desire to avoid investing in funds with holdings tied to genocide in Sudan, or a desire to invest in funds that screen for particular social or environmental criteria, this information was not available to them."

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