Nicole Haddow: How to Quit Toxic Companies and Grow Your Wealth

Bryce: [00:00:31] Welcome to get started investing in this podcast, we cover all the basics that you need to start your investing journey. Are you joining us for the very first time? Is this the very start of your investing journey? Well, before you dive into this episode with us, our faith is designed to go from the very beginning, so we strongly recommend that you scroll up and start from episode one. However, if you are feeling brave and just want to dive in, then of course, don't let us stop you here at Get Started Investing feed, we unpack all the jargon and the confusing bits here your investing stories with the goal of making investing less intimidating. And of course, we want to have a good time along the way. My name is Bryce and as always, I'm joined by my equity buddy Ren. How are you going? Alec: [00:01:09] I'm very good, Bryce. Excited for this episode. We've got in a way we thought we were doing well last year, becoming published authors. Yes, we've got a two time published author joining us today, double the knowledge of the experience, but we're covering a topic that I think is close to a lot of listeners hearts, and it's definitely one of the biggest areas of interest in the Equity Mates community, and that is ethical investing. Bryce: [00:01:34] That's it. It's our absolute pleasure to welcome Nicole Haddow to the studio. Nicole, welcome. Nicole Haddow: [00:01:39] Thanks so much for having me, guys. Bryce: [00:01:42] So Nicole is the author of Smashed Avocado How I Cracked the Property Market and You Can, Too. And her most recent book, The Ethical Investor How to Quit Toxic Companies and Grow Your Wealth, and that is what we're going to be discussing today. Everything from why ethical investing through to some of the key practical ways that you can actually try to invest ethically. And we were fortunate enough to sit down with Nicole. What was it, Nicole? 12, 18 months ago and chat this through? Nicole Haddow: [00:02:14] Yeah, it was about 18 months ago. That's how long it's taken for me to get it out in the world. Bryce: [00:02:19] No, it's a great book and we'll we'll unpack it in a moment. But to kick off, we always like to start with a bit of a true or false game. Alec: [00:02:26] Ren we do. So, Nicole, we like to go back to the very start of people's investing journeys and start with true or false. Your very first investment has been your most successful. Nicole Haddow: [00:02:40] Well, it depends on how we're framing investments. My very first investment was an investment property and that did well and helped me to take my next step. If we're talking about shares and ETFs, I started with micro investing, started super small. But in the grand scheme of things, those investments did really well and still happen. Bryce: [00:02:59] True or false, you had a strategy in place before you got started. Nicole Haddow: [00:03:04] Mostly true. I came at this from the perspective of writing a book, and I interviewed a lot of people and had a good sense of what I needed to do to get started before I got started. Would I say that I had like a really, really structured strategy? No, but yes I did. I did talk to a lot of people, so I felt reasonably confident when I got started. [00:03:23][19.7] Alec: [00:03:24] So Nicole, true or false investing is as hard as you thought it would be. [00:03:28][3.8] Nicole Haddow: [00:03:28] I think it's false. I can't believe how many amazing digital products are out there now that make it unbelievably easy to to enter the market, especially when you don't have a lot. I had it in my hands before I started. I was going to need thousands of dollars to get started, and that wasn't the case. Bryce: [00:03:47] And to close out Nicole, true or false investing is like gambling Nicole Haddow: [00:03:51] a false unless unless you've been really, you know, unless you're just throwing money at things without thinking it through, I definitely would not be comparing investing to gambling. Alec: [00:04:03] Cynical, as Bryce said in the introduction, where you've just released your second book, The Ethical Investor How to Quit Toxic Companies and Grow Your Wealth. So we should start by saying congratulations. It's a big effort to get a book out, and it should be. You should be proud, and it's definitely an area of interest in the retail investor community in Australia. Ethical investing. Sustainable investing. So let's start with some definitions for people who may be new to the term. What is ethical investing Nicole Haddow: [00:04:35] or ethical investing is really just thinking about what aligns with your values and your and your morals and what you believe in. I mean, ideally in a perfect world, you probably not going to be investing in things that you don't agree with. So that's it in a nutshell. A lot of the commentary around ethical investing at the moment is is strictly sort of quite heavily focussed on fossil fuels, and it's definitely far more than just fossil fuels. Obviously, that's a huge that's a huge area of interest for people who want to get ethical, but it's so many things. It's gender diversity on boards, it's quality of supply chain. It's whether the people who work for the company are paid properly. There are lots of ways to define what's ethical Bryce: [00:05:19] and in your title of the book, you say how to quit toxic companies. So what? How would you define or in your mind what is a what is a toxic company Nicole Haddow: [00:05:28] where people are thinking about toxic companies they need to make? That decision for themselves, but in my mind, the toxic company is a company that sort of the environment or people or broader society, so companies that that are working against a better future, essentially. Alec: [00:05:44] So Nicole, there's plenty of things to write books about in the investing world. Your your first book was on property and it really followed your journey of of getting into the property market. Why did you decide that ethical investing was a topic that you wanted to cover and why was now the right time to do it? Nicole Haddow: [00:06:04] So when I finished smashed avocado when avocado was published, I had my investment property I was renting where I wanted to leave. Everything was pretty great. And then 2020 happened when I'm starting to think about this book. We were just coming out of the most horrific bushfires. A pandemic was starting and I thought, if I'm going to get into investing, I want to get into something that is, I guess, going to make a difference, hopefully. The other thing that happened around that time was because of the pandemic. My tenants actually moved out of my investment property and it was sitting there empty and I decided to sell. And I had this realisation that a property, just one property, isn't a holistic strategy. And I wanted to look into how I could diversify where my money was to build up protection over time. Bryce: [00:06:58] And so usually that would involve I then doing a bit of Googling and understanding a few investment strategies, but you embarked on writing a book to understand how you wanted to invest. What did you think about the ethics of investing before you started this sort of journey? [00:07:15][16.6] Nicole Haddow: [00:07:16] To be entirely honest with you, I didn't know a lot. And coming from a journalism background, my instinct is always just to start researching and start talking to people. And the more people I spoke to, the more I realised that this is a really complex area, but it was also something that people wanted to know a lot about. So when I started, I to be entirely honest, I knew I wanted to know about it and I didn't know a lot. So I've taken people on the journey as I've learnt, which hopefully makes it, you know, reasonably easy to understand. But I hadn't given it as much thought as I should have. And now at this end of the process, I am hugely passionate about it. I just think there is, you know, there are so many great companies out there to invest in. There are people doing great things. I learnt a lot about superannuation, which I'm sure we'll talk about shortly. I I just think everything you touch in terms of where your money is has the potential to make a difference. Alec: [00:08:12] So we'll get into the, I guess, the how in a little bit and you step through not just investing in shares, but investing in a wide range of things, including ethical property, which I'm interested to understand a little bit more. I'd be interested in what your sort of big headline takeaways were around ethical investing. Some of the big things you learnt that you maybe think more retail investors should know about. Nicole Haddow: [00:08:39] Oh, look, there are so many things. I think the biggest takeaway for me was thinking about my super, so I had, to be quite honest, been pretty indifferent towards my superannuation. You know, I'd had a lot of a lot of jobs. I wasn't probably giving it as much attention as I should have. When I started looking into this, I called my existing superannuation provider and I asked them to tell me where my money was invested and they couldn't or wouldn't do it. It took me weeks to get my top ten holdings. Eventually, when I had that information, I realised I was invested in a lot of mining companies and big banks, and it wasn't something that I believed in at all. And this is this is my nest egg. This is my retirement nest egg. How can these companies not be giving this information to their customers and expecting them to stay? That was probably the biggest one for me. Bryce: [00:09:33] And so when you finished the process of writing and had a sort of a more a better understanding of how you viewed ethical investing, is there anything that you sort of wish more people knew about investing ethically or in general that you sort of took away from the process? Nicole Haddow: [00:09:49] I think to begin with, the major one is that it didn't take as much in terms of funding as I thought it was going to. But also, I guess the other thing to consider from an ethical perspective is that it's really, really difficult to be perfectly, strictly ethical. And so for me, I sort of got to a point where I thought, look, I'd rather move the needle a little bit and not try at all. So I would absolutely say, you know, don't put too much pressure on yourself to be finding these. So the perfect investments, especially if you're starting out with, say, ETFs, because that's that's a bundle of investments. And, you know, not every single company in that holding is necessarily going to meet strict ethical standards, but it's. Slightly better to get started. Bryce: [00:10:32] Yeah, we've certainly come to understand through speaking with our community and on our own investing journeys as well that it's it is a quite a grey area when it comes to ethical investing at the moment, and there's some awesome products available for those that do want to. But yeah, you're right. Ethical investing means different things to different people and finding that pure form ethical investment is often sometimes a little difficult. Alec: [00:10:56] I would go a step further and say, there's no perfectly ethical company. Yeah, there's always something that they could be doing better. And it's it's a spectrum and you've got to decide what's important to you. You know, we feature in the book on a couple of pages and that's what we talk about. And Nicole starts through some examples there of companies that you would think are ethical. But you know, there's always questions. So I think it's a it's a good reminder that we should always be thinking ethically but not letting perfection be the enemy of the good because it's tough to find perfection. [00:11:29][32.5] Nicole Haddow: [00:11:29] I think the reality is as well. I think that the businesses, they're there to make money while there are lots of businesses out there that want to be doing the right thing or do something well, they are also financially incentivised to to to make that cash. Bryce: [00:11:44] Senegal will take a quick break to hear from our sponsors, but when we come back, we're going to talk about some of the practical steps that you talk about to invest ethically. Alec: [00:11:56] So, Nicole, before the outbreak, we spoke about the what is ethical investing and some of the challenges, I guess, in figuring out what ethical investing means to you as an individual investor. But the majority of your book, you actually get quite practical and you can really you really step through some of the different ways that people can become more ethical in their investing. And I think the thing I like about your book is that it's not investing in the narrow sense that Bryce and I often talk about here on the podcast, which is investing in the stock market. But you cover everything from, you know, micro investing to superannuation to even what bank you bank with. So before we even get onto investing, let's start with how you bank. What did you learn here and what should we be taking away and implementing in our own lives? Nicole Haddow: [00:12:50] Well, historically, we've really only had sort of the big four banks and because there wasn't a lot of choice. People just sort of, you know, I don't know about you guys, but I just ended up with the bank that my parents banked with. Alec: [00:13:04] Yeah, I was a Dolomites kid and I've never left Commonwealth Bank since Nicole Haddow: [00:13:07] it was a disaster. So my parents were ANZ customers and my bank account was set up and I still have that bank account today. Certainly looking at other alternatives to my banking. Banking can be really complex, especially if you've got a home loan, you can't necessarily just move. That's a whole other conversation. But the great thing is, there are some amazing players coming up in this space of ethical banking. Now there there are banks that are staunchly opposed to things like climate change. There are what's known as neo banks are digital banks that are far more focussed on the quality of the customer experience. Whereas some of the bigger legacy banks are still investing quite heavily in things like fossil fuels or ventures that people might not necessarily agree with. So, you know, for example, if you're staunchly opposed to climate change or have a view on the fact that you know, we're not doing enough about that and you're banking with a bank that's still investing heavily in those ventures, that potential is not aligned with your values. Alec: [00:14:09] So for people that may not be super in tune with all the new entrants in the space and may really only be familiar with the big four banks, what are some names that they may be interested in doing some more research on and deciding if they want to move banks? Nicole Haddow: [00:14:26] So one that's really interesting is Bank Australia. Very, very outspoken in terms of climate change, doesn't invest in climate or in fossil fuel projects, does invest in renewables. So lots to be excited about on that front. Then there are neo banks like OP. The interesting thing with banks like AAP is that they're really appealing to that sort of millennial Gen Z audience, and they're ethical from the perspective of they want to help their customers do well. So, for example, app is a really interesting one. They started purely just with bank accounts. They didn't have home loans at the time that I've spoken to them. I think that might be in the works now, but they're their priority isn't just taking their customers money, their priority is making sure that their customer is on a journey. And when it does come time to borrow money, they are well-placed and educated to do that. So again, it's not just a climate change thing, it's about looking after the people that are that are trusting you with it with their money. Bryce: [00:15:27] Cynical. Let's move on to perhaps our biggest investment. For some people, they certainly don't consider it as that, but that is superannuation. There are plenty of new entrants in market offering a a service or a superannuation for sustainability focussed superannuation accounts. So what can we do in this space given that it's such a large portion and can really move the needle? The first thing Nicole Haddow: [00:15:52] I would say is to see if you know where your money is invested. The thing that I found was that I didn't know, and when I went to find out where my money was invested, they were withholding that information. The logic kind of was, this is sort of our secret recipe. We don't want that information out in the world that's just not flying anymore because there are ethical funds out there that will list every single holding in their portfolio transparently on their website in a couple of clicks. So when I couldn't get that information out of my existing provider, I was like, I'm moving. But the other great thing was I'm now far more engaged in my superannuation because I'm interested in the company that my fund invests in. And, you know, I think again, that's that's really exciting that you can be doing something that is compulsory for your financial future, but also making a difference in terms of where that money's going. Alec: [00:16:47] So Nicole, moving from the biggest investment we made to one of the smallest micro investing. What should we know here and how? And we invest micro invest ethically, Nicole Haddow: [00:16:59] micro investing is, you know, just as it sounds. I started with, you know, a couple of dollars here or there. I started with an app where I was rounding up my spending, so I went and bought a $4 50 coffee. That extra 50 cents, up to $5 was then invested in one of my micro investing apps. I guess the challenges with those micro investing apps is quite limited in terms of what you can invest in. The ones that I have used. Did have ethical options. But again, one was a combination of two exchange traded funds and one was a managed fund. You don't have a great deal of control over what's in that, so you get the diversity and you get the education of how it's performing when you're starting out. But it's a lot more challenging if you are looking specifically for a certain kind of ethical investment. So I spoke to one woman in the book who mostly invests in individual shares because she's really passionate about vegan and animal welfare products, and they at this point there really isn't an ETF that supports that. So again, you need to you need to be looking at whether that's macro investing app is going to meet your ethical standards or whether it's a good stock to help you learn. Bryce: [00:18:13] So then moving to shares, what are some of the things we should know about investing directly in companies? And also what are some of the best resources that you've found that really help us figure out which companies can meet your ethical standards? Nicole Haddow: [00:18:29] So in terms of shares, again, the challenge is, to be honest, I have only invested so far in one individual company, and that was a bit of a punch just to just to have a go and see whether whether I liked it. The challenge with individual companies is there's a lot of time involved. So reading company reports, understanding the financial situation again, depending on what your ethical individual share is, it might be in an emerging market. So my individual share investment is in hemp, which might sound like a bit of a strange thing to be investing in. But hemp is being used for a lot of environmental purposes, and that in itself is a challenge. I want to invest in it because I've learnt enough about it to think that there's potential in the hemp space, but because it's emerging, there's some risks associated with that. Alec: [00:19:21] Nicole, one thing that I was very excited to get to when I was flicking through your book was ethical property because it's not a term I've heard before, and you're a lot further on the property investment journey than Bryce and I are. So for people that are also new to this idea of ethical property investing. First of all, what is it? And then secondly, what did you learn throughout the book? Nicole Haddow: [00:19:48] It's more about the thinking about the ethical components of property. So there's a couple of things to me. I'm really passionate about people being able to enter the property market. So ethically, do I believe that it's right to have an investment portfolio with 20 properties in it? No, I don't. That's my personal ethics. I would like to see everyone who needs a house have a house. So, you know, there are some ethical questions around the way that our property industry is structured generally. But then it's the sustainability component. So what is what is your house made of? Is it made of ethical materials? How much if you're building from scratch or what is the what is the climate impact of that? And then there's the running costs of the property itself. So in my case, I bought a house that I'm doing up. I'm trying to upcycle where I can. Sorry, there was old carpet in the property rather than getting rid of the carpet I had it turned into a hallway runner and rug. That's a really small example, but a lot of people are going to great lengths to make sure that they're not spending a lot on brand new things that are contributing to climate change from a supply chain and a construction perspective. Again, there are banks and organisations that support people doing this. So again, Bank Australia has a clean energy home loan, and they actually do a reduction on the interest rate. If your property's up to a certain standard in terms of solar power, battery power, that kind of thing. That's cool. Alec: [00:21:15] There you go. I didn't know that. I don't know a lot about home loans, though so cynical. Bryce: [00:21:24] We've come to towards the end of the interview, so it's a great time sort of wrap it all up. So aside from obviously picking up your book and giving it a raid and a reminder, it's called the ethical investor how to quit toxic companies and grow your wealth. What are some next steps that listeners should take if they really want to embark on that journey of ethical investing? Nicole Haddow: [00:21:48] There's so much you can do, I would say as a starting point, there's a really good website called Market Forces and that outlines. Is how the banks in particular are investing money in fossil fuels, so you might just want to have a look and say, you know what your bank is doing and and whether it's sort of worth moving over, there are ethical financial advisers out there. I I've spoken to quite a few in the book. The challenge with financial advice is it can be quite expensive, especially if you starting out. So it really is a case of doing your research. Google was certainly my friend. It's not something that I relied on entirely. There's a lot of information out there about about ethical investments, impact investing. I would say work out way where your passion area is. You know, another one of my interests is aged care. So if you go, I like aged care, what's happening in the aged care space? So working out what, what you like and what's interesting to you and what's going to keep you engaged and seeing what's out there? Alec: [00:22:47] So on that point, you mentioned a couple of resources the market forces. Obviously, Googling is always a great place to start for people who are interested in, you know, figuring out where their money's going, care about where their money's going, but feel a little bit overwhelmed by this whole challenge. What are some other great resources you came across when writing the book? Nicole Haddow: [00:23:12] You know there's a huge social media community out there. So again, people who are talking about this sort of stuff on Instagram aren't usually financial advisors, but if you're trading it as inspiration and you're getting a sense of what people are talking about, I'm really quite stunned by this movement of people looking to divest their money from things that they don't believe in and just generally have conversations about it. I mean, let's flip it over, you guys. I know that you have some interest in ethical. Where do you go? Bryce: [00:23:41] Where do I go? Well, I think when I first start looking is a lot of these fund managers who claim to be or who say that they have ethical funds or a lot of the a lot of the ETF providers who have ethical funds as well. I often like sort of looking under the hood for those providers and actually understanding how they what they classify as ethical investments and looking at the companies and having a bit of an understanding of how they might differ between the two. Because as we said, right at the top, how one fund or firm defines ethical could be completely different to the other. And then and then I sort of go from there. Nicole Haddow: [00:24:16] That's probably the other point worth making is there's not seems no regulation around sticking an ethical or sustainable label on a financial product. So people really need to be aware of that and go in with their eyes, their eyes wide open. I initially did look into it to an ETF that was labelled sustainable. It absolutely wasn't even close to meeting my standards. So, you know, that's the concept of greenwashing, where people are aware that people want to invest ethically, but they really need to, you know, not take that at face value. Alec: [00:24:48] Absolutely. As some of our listeners might know, I'm pretty opinionated and so I have a pretty I have a pretty good idea of some of the ethical things that I care about and some of the things that are not as important to me. And so the first step for me is always looking at the company themselves, and there's so much information these days on a company website, the annual report investor presentations. More and more companies are now doing sustainability reports, which is great to see. And there's always the risk of greenwashing. You know, a company that's never going to come out and say, we're terrible on climate. And if you care about climate, you shouldn't invest in us. So like you do have to take it with a grain of salt. But there's a lot of great information there, and it's a really great starting point. So for me, it's like having a pretty clear idea on what I think is important and then looking at the companies themselves and really going from there. I mean, we're in a very privileged position that we get to speak to a lot of ethical fund managers as well, and you start to really see where different people diverge in their thinking. And then when there's like really clear ideas on a big a big divergence that we say is in some fund fund managers willing to work with companies and are willing to accept. If a company has a bad starting point but is working to get better, then they can be considered ethical because they're trying to do the work and trying to be better. And then other fund managers just have blanket rules around, you know, you're either good or your bad, and we don't care if you're getting better. Once you're better, then we'll consider you and there's no right or wrong approach. But again, that's a that's a big one that we say, you know, I guess people need to make their own decision about where they fall on that decision. Nicole Haddow: [00:26:36] I think I think the more the more you learn about, the more you realise there is that kind of screening where some sometimes it's just like a blanket, OK, it's it's a negative screen. We're not we're not investing in this if it has x y z, but then there are those that are going over and beyond, and they have that expectation that it does a list of things that get it into that. Ethical space, so there's sort of, you know, the bottom of the barrel. Yeah, OK, it's not an evil company, so therefore it gets in and then it's the ones that are really trying to do their best and across a number of areas. Bryce: [00:27:08] Cynical final question before we wrap it, you know, is there any advice that you would give yourself knowing what you know now? Back before you started writing this? Or is there any advice that you'd really like to pass on to close out to the Get Started Investing feed community? Nicole Haddow: [00:27:24] Oh, look, the first thing the piece of advice I would have given to myself would have been to call my super fund about 10 years ago. I just really I'm quite frustrated with myself that I hadn't been paying close enough attention and I would encourage your listeners to call their super provider. I'm assuming that even if some of your listeners aren't advanced in terms of their investing, that they would have a super fund, and that's a really good starting point to work out. You know, whether you are happy with the ethical performance of that fund and and where your retirement money is invested. And again, as I've just discussed, understand the concept of greenwashing because there isn't that regulation in terms of putting those labels on products, you really need to do your research. But importantly, you need to work out whether it's whether it's ethically aligned for you. I might be investing in things that you guys say on that doesn't really make the cut. For me, that's OK. Like, ethics are personal. So you just need to work out where your ethics lie and what you can invest in that is aligned with that ethical or not.  Bryce: [00:28:25] We think that everyone should pay closer attention to their superannuation because it's such an important part of your financial life. So, yeah, I definitely agree with that advice there. Now, before we go, just a reminder to our community that if you have taken a lot of value from this conversation or from the Get Started Investing podcast, we would really appreciate it if you could just pass it on to someone else who you think needs to learn more about ethical investing, or perhaps needs to know more about investing in general and would like to start their investing journey and want the community to talk about it. So that would be greatly appreciated. But Nicole, a massive thank you and also congratulations on launching the book. Will include a link to the book in our show notes. It's called The Ethical Investor How to Quit Toxic Companies and Grow Your Wealth. And yeah, look, it's a topic. As Ren said at the start of the show that it's incredibly important to us and to get started and Equity Mates community. So we thank you for sharing your time this afternoon. Nicole Haddow: [00:29:28] Thanks so much, guys. Love your work. Really appreciate your time. Thanks.