By Lawrence C. Strauss

Peter Krull is a staunch advocate for sustainable investing, a philosophy he's espoused for more than two decades as a financial advisor. Based in Asheville, N.C., Krull, 55, is a partner and the director of sustainable investing at Earth Equity Advisors. As befitting the firm's name, Krull and his colleagues look for holdings in sectors such as infrastructure, biotechnology, semiconductor manufacturing, and electric vehicles. Through Sept. 30, the firm's Green Sage Sustainability Portfolio had returned just under 14.1%, net of the highest fee.

Over his career, Krull has watched the acronyms shift from socially responsible investing $(SRI)$ to environmental, social, and governance $(ESG)$, and more recently, as he puts it, to sustainable, resilient, and innovation (back to SRI). "It's about where we are in a changed climate world -- not one that's going to happen 10, 20 or 50 years from now," Krull says. He has just published a book titled "The Sustainable Investor: Responsible, Impactful and Values-Driven Strategies and Practices for Financial Professionals." Krull talked to Barron's Advisor about why younger clients are interested in sustainable investing, how next-gen advisors can break into the field, and why old school wealth managers are more resistant.

Take us back to the beginning of your career. How has it evolved?

Krull: I started with Merrill Lynch back in 1998, and I began this firm in 2004. We focused on what was known as socially responsible investing at the time. That has evolved over the years to sustainable and responsible investing. And we're really, especially having lived through Hurricane Helene last fall here in Asheville, North Carolina, changing that definition of socially responsible investing to be more about sustainable, resilient, and innovation investing. But it still is a lot of the same investing themes that I've focused on since I launched this firm more than 20 years ago.

What types of stocks were available for you to invest in back then?

We didn't have a whole lot of options. Most of it was just inclusion and exclusion of stocks through Calvert and some of the other basic mutual fund families. In 2012, I started an individual stock portfolio for clients. We started to have more opportunities, but it still wasn't great.

Today, though, the universe that I use for picking stocks has around 750 companies. That's continued to grow. Batteries are ultimately going to be a really important part of our economy, but back in 2012 you couldn't buy a single battery company. And now there are a number of them that actually are available in the stock market.

What other industries are you finding opportunities in?

When you look at the definition of sustainability, it does include things like biotechnology. I believe that a healthier society is going to be a more sustainable society. It also includes things like infrastructure, which I may not have included in the past. It's an evolution.

Could you share a few examples of stocks that you're holding?

We have semiconductors in our portfolio, because the more efficiently they can make our systems both from an electronics perspective and a manufacturing perspective, the better. Our holdings include Applied Materials (ticker: AMAT), which makes equipment used for chip manufacturing. It's done really well this year, returning about 45%.

CBRE Group $(CBRE)$ is another stock we hold. Their businesses include managing real estate, and they work with both the owners of the buildings and the tenants to make sure that buildings are going to be more efficient. Again, efficiency is a big part of it.

Another one of our holdings is Rivian Automotive (RIVN), which makes electric vehicles. When all is said and done, they're going to be one of the EV companies that comes out on the other side. They're getting ready to launch the R2 model in SUVs and eventually the R3. Those are going to be in a market that Tesla doesn't look like it's really trying to hit -- that lower-end market for EVs. Rivian has done a good job. I actually drive a Rivian pickup truck. Their CEO, R.J. Scaringe, is brilliant. I listened to a really good podcast with him not long ago. He understands the vehicles from the inside out -- and he understands the importance of connected and integrated systems in EVs for a company like a Tesla or Rivian, versus all of the legacy auto makers and what makes them so much better for the long run.

We also hold United Therapeutics $(UTHR)$, a biotech company. The company was started in the mid-1990s by Martine Rothblatt, whose daughter had what was at the time a very rare disease called pulmonary hypertension. The company has gone on to be a biotech powerhouse. It's known as a public-benefit corporation. Not only are they benefiting their patients, but they're also aiming to benefit their employees, suppliers, communities, and the environment.

Are most of your holdings U.S. companies?

Our portfolio truly is global. When you think about climate action, you think about Europe, not necessarily the U.S., especially right now. China continues to add massive amounts of clean energy. So this is a global trend. As I mentioned, there are a lot more companies to invest in now than I had 12 or 13 years ago when I was putting this portfolio together. Our first iteration had 40 stocks. Our current iteration has about 75 in the portfolio.

Is sustainable investing a good area for advisors to emphasize with younger clients?

Absolutely. Morgan Stanley does really good research on what the attitudes toward sustainable investing are, both in the States and globally. One of the firm's reports from earlier this year observed that sustainable investing remains strong, especially among younger investors. Interest is highest among Gen Z at 99% and Millennials at 97%, according to that note. A lot of it is aligned more toward themes like clean energy. But in general, they want to invest more responsibly. Here's what I tell both old school and next-gen advisors: As the next generation starts to inherit money, if you don't have a sustainable investment option in your repertoire -- and if you can't speak at least semi-intelligently about it -- that next-gen client is going to go elsewhere. I've found that the younger-generation advisors are all over it. They absolutely get it. Older advisors are, unsurprisingly, more resistant to it.

The Trump administration has pushed back hard on climate change and clean energy. How has that impacted you?

I don't think it has impacted us at all. In fact, very similar to going back to 2016 to 2020, during President Trump's first term, more people are actually coming to us because they recognize that the work that needs to be done to help us move into a clean energy economy -- and to move into a more equitable economy -- isn't necessarily going to be done through government action. It's going to be done through the private markets. So we continue to see good demand for what we do. We're not seeing any pushback from clients, because, of course, it's all we do. So our clients aren't going to say, "Well, I don't want to do sustainable investing anymore." They're with us because they want to do sustainable investing.

What's the focus of your new book besides offering how-to advice?

I'm trying to make it clear what sustainable investing is. We are faced with an existential crisis, and if we aren't actually working on transitioning our economy to a cleaner, more resource-efficient, more resilient, and more equitable one, then the next generations are going to have a really, really hard time. I've had a couple of conversations with Maria Lettini, who heads the U.S. Sustainable Investment Forum, a trade group. At our last conference, there were some people who wanted us to continue with what I would call pedestrian commentary, an approach I strongly disagree with. The people who are anti-ESG and anti-sustainable investing are really loud and they're putting a bunch of disinformation out there. So we need to be just as loud, and we need to actually correct the record. We need to be saying, "No, these guys are wrong."

Bill Gates, a longtime climate change advocate, recently wrote that "Climate change is a serious problem, but it will not be the end of civilization." What's your reaction?

I'll use Jamaica, which just got slammed by a major hurricane, as an example. You can do all of the good to help those people have a better life, but if a climate-fueled hurricane comes through, it's irrelevant. Our biggest challenge is existential. Our biggest challenge isn't only reducing our impact, reducing our CO2 and methane and our greenhouse gas emissions -- but it's also the resilience side in being prepared for such an event.

We obviously have to take care of people, but you can't prioritize that over people who are going to be impacted by climate change, especially in low-lying areas. When you think of Southeast Asia and sea level rise, you've got these countries with massive populations, and they have nowhere to go. We need to focus on the sustainability and resilience side. Health and standards of living are important, but they are going to be irrelevant if you don't have a place to live, because rising sea levels or Hurricane Melissa have completely destroyed where you live.

For advisors starting out and interested in sustainable investing, what makes sense as far as types of firms to join?

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