Good Cop, Bad Cop and Shareholder Engagement

Did you know that “good cop/bad cop” situations can be found in the social investing world? “Good cops” are those that listen, cultivate understanding, and develop relationships in order to resolve a situation. “Bad cops” work to resolve the same situation through confrontation and pressure. They aren’t bad in the conventional use of the word; they just aren’t necessarily nice. They draw harder lines. Good cops and bad cops can both get the job done. And when working toward the same goal, they make a powerful impact.

In social investing, both approaches are useful in pursing the goals of shareholder engagement. The good cop meets corporate officers at the table where policy decisions are made. The bad cop may instead call for divestment or separation from offending corporations. Both are educating, leading, and moving us toward an economy that is sustainable and just.

Recently I looked on the website of As You Sow, an activist non-profit that engages multiple corporations every year on a wide variety of social issues. Back in 2012, they created a list called the Filthy 15, targeting publicly traded companies that are responsible for huge amounts of carbon emission because of their reliance on burning coal. As You Sow was fulfilling its bad-cop role by calling out these 15 companies for high emissions so shareholders would know who they were. I happened to notice that one of the companies on the list was MidAmerican Energy, a midwestern utility company owned by Berkshire Hathaway. A few days later, I was looking at the portfolio investments of Praxis Impact Bond Fund, one of the fixed-income mutual funds held in Natural Investments model portfolios, and I noticed that they held a substantial position in a bond of MidAmerican. That piqued my interest. Why would one of the Filthy 15 be held in a Praxis mutual fund? So I looked into MidAmerican Energy. Much to my surprise, I found that it was one of the largest utility developers of wind energy in the U.S. In 2004, 70% of MidAmerican’s electricity was generated by coal and 0% by renewable sources. By 2015, wind energy led the way: MidAmerica’s energy mix was now 41% wind and 37% coal. They expect 85% of their power to be wind generated by about 2020, with a vision of 100% soon after. Now I could see why Praxis would invest in MidAmerican.

Next I called Praxis and talked to Mark Regier, director of corporate engagement and Vice-President of Stewardship Investing. In our discussion, Regier called MidAmerican Energy a wonderful example of what a transition to a low-carbon economy looks like.

I also discovered that Praxis holds, in a couple of other mutual funds, Duke Energy and Southern Company, also members of As You Sow’s Filthy 15. They hold positions in these companies because, in conjunction with many other shareholders, Praxis is engaging them in ongoing dialogue about climate risks and increased renewable energy development.

As You Sow takes the bad cop role, calling the companies out for carbon emissions. Praxis takes the good cop role, working with them to change internal policies and priorities.

Natural Investments has been a strong supporter of investors having fossil fuel free choices. One of the resources we use and recommend is a fossil-fuel free fund website sponsored and run by As You Sow. We also continue to hold Praxis funds in our portfolios. We see value in both roles. Both are contributing toward the same goal—moving our economy in the direction we need to go, sometimes with more relational responses and sometimes through confrontation.

Our industry as a whole seems to agree with us. In 2006 Mark Regier of Praxis received the SRI industry’s prestigious SRI Service Award for his work in shareholder engagement. The following year, members of the industry gave the same award to Conrad McKerron, senior vice president of As You Sow, for his complementary yet distinct work in the same realm—one a good cop, one a bad cop.

As You Sow focuses more on public engagement and education about the big picture of our evolving economy and its social and environmental impacts. Praxis focuses on the intermediate steps that specific companies are going to have to take to do better at being part of the solution. Financial activism includes both divestment and through thoughtful, engaged investment. As investors, you can choose to let your money speak for you as part of one of these approaches, or in support of both.

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Post-Election Resilience

After the election, I left the country. Many people had a similar instinct, but no, my doing so wasn’t out of disgust over the election results. It was planned long before, in response to an invitation to speak in Deauville, France at the annual global Womens Forum for the Economy and Society (also known as “Davos for women”). This was quite an affair: 1200 powerful political, business, media, and NGO women from around the world all focused on economic development and improving the status of women. The theme this year was “The Sharing Economy,” which as you know is an Evolutionary investment strategy in The Resilient Investor, so I fit right in despite being one of the only men in attendance.

The timing was good for my presence at the event—resilience is resonating well with people, not just because of global instability, but also because the current political situation, in particular Brexit and the American presidential election. There was even a “What America’s Choice Means for Women” panel at the event that featured Star Jones of The View and Leah Daughtry, the chair of the Democratic National Convention Committee, discussing the battles on the horizon.

So what does resilience mean in this political environment?

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An Inspiring New Grand Strategy for America’s Future

In November, several of our Natural Investments team attended the Conference on Sustainable, Responsible, Impact Investing in Colorado. In the wake of the Trump’s victory, many of us felt initially devastated and depressed but we quickly found ourselves galvanized and inspired by each other and the recognition that our work as social and environmental activists will be all the more important in the coming years. One of the most inspiring presentations at the conference was a talk given by the authors of The New Grand Strategy—a powerful economic and investment plan for America’s future that identifies sustainability as the organizing logic for the nation. Remarkably, this vision came out of the Pentagon and is expected to be an important influence on America’s future under the Trump administration and beyond.

The story of the New Grand Strategy began in 2008, when Admiral Eric Olson, the Commander of U.S. Special Operations, was frustrated that the military was engaged in seemingly endless wars. The U.S. first crafted a so-called Grand Strategy during World War II, with fascism being identified as the primary global threat; it was adapted later in response to the Russia and the rise of communism. Olson recognized that the old Grand Strategy was no longer working to America’s advantage and wanting to get U.S. soldiers “out from under the sound of the guns”, he directed Colonel Mark “Puck” Mckleby and Navy Captain Wayne Porter to develop a proposal or “narrative” for a fresh guiding strategy for US global operations.

Through their lens as military officers it was clear that national security is no longer simply about threats from other countries and maintaining our primacy over these threatening forces via force and power. They realized that the world actually operates more as an ecology in an open system, and that the “big wicked problem” of our times is the widespread lack of sustainability within that system.

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Four ingredients for powerful change in your money life

The new year offers us a burst of energy for starting fresh and recommitting to the changes we’d like to see in our lives. In the Mindful Money Transformation work I do to help clients achieve their money goals, I’ve found that there are four important ingredients that work together to help create powerful change.

#1 – Our WHYs

We start by identifying the goal (the WHAT) but then quickly dive into the WHY. There’s little energy in the “what” until it’s accomplished—the energy to fire our actions is in the “why.” If the goal is to pay off credit card debt, the why might be “to feel free from the stress of the debt hanging over me.” If the goal is to contribute the maximum amount into their IRA for the year, the why might be “to know that I am sending love to and caring for my elder self by what I do this year.”

# 2 – The energy of 90 days

Many of our goals are long term and that’s OK, but it can be overwhelming and hard maintain momentum toward goals that are still out of reach. So looking at the year by seasons can be a powerful lens that really focuses your energy: using the energy of your WHY, look at the next three months (set a specific target date) and set yourself an achievable goal. Shifting to this seasonal focus can really help you keep the momentum.

Let’s look at an example.

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Location. Now more than ever.

Climate change is not a Chinese-created hoax to kill American manufacturing. It’s real, it’s happening now, and all of us need to adapt. Regardless of which climate scenario you think is likely, be it 1° or 2°C in the next 50 years, sea levels will rise, it will be hotter, there will be more droughts, more flooding, more wildfires, more stress, and after a list like that, likely much more drinking. I’m not suggesting you invest in Seagram’s to compensate, though buying a houseboat might make some sense. If you’re going to buy a house, and you know location is the most important purchase factor, what do you do when one of the key elements of location, climate, is changing rapidly? Can you anticipate and plan around climate change?

The real estate cliché about “location, location, location” usually refers to issues like being close to good schools, close enough to work, near family. Clearly these are still important but looming climate change is a disaster on a scale that will make them seem quaint. For many of us, real estate is the biggest piece of our net worth so getting it right is crucial.

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NI Advisors featured in Seattle Weekly

Seattle Weekly had a nice piece this week that begins by discussing recent protests against Wells Fargo’s bankrolling of the Dakota Access Pipeline, and expands into a broader exploration of the hurdles that some people encounter when they ask mainstream investment advisors to help them avoid putting their money to work in ways that are counter to their values:

That experience isn’t uncommon, say two of the advisors at Natural Investments, LLC, a “sustainable, responsible and impact” (SRI) investment firm with a branch in Seattle. “What people tell us when they find us,” says Ryan Jones-Casey, director of client services, is often something like, “’I’ve heard that I can do socially responsible investing, but I talked to my advisor at JP Morgan, and he said I’m going to lose money; he said it’s not worth my time.’”

The article’s author turned to two of the most recent additions to Natural Investments’ team for comments and additional perspective. Eric Smith and Ryan Jones-Casey joined forces with NI in 2016, and are fitting in great. We’re now up to fifteen offices nationwide, staffed by our collaborative team of independent investment advisors.

The Seattle Weekly article, So You Want to Divest from DAPL.  Will the Financial Industry Let You?, is well worth reading in full. Meanwhile, here are a couple more excerpts that include thoughts from Eric and Ryan:

Letting the past predict the future, brokers lean on old patterns and ideas about what makes money on Wall Street. Like, “I don’t want to learn something new; I’ve always done it this way,” says Smith. Not to mention that “a lot of people in the financial services industry tend to be relatively conservative,” he adds, so if some of the political aspects of SRI “[don’t] fit their philosophy, they don’t want their clients to do it.”

Certainly, “fear is a powerful barrier to change” in investing, says Jones-Casey. But he and Smith argue that a company that is resource efficient, watches its carbon footprint, and cares about human rights “is a more enlightened company,” and this kind of enlightenment “is actually the very thing that will lead to better financial performance over the long term. But that kind of thing is not at all the dominant paradigm in the financial services industry.”

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The Progressive Investor’s Action Guide for the Next Administration

Now that the 2016 presidential election is in the history books with a shocking outcome that few foresaw, the rough outlines of the next few years are starting to become a little clearer. We can reasonably expect a federal government with less interest in protecting voting rights, reproductive rights, and civil rights of historically disadvantaged and targeted communities such as immigrants, Muslims, LBGT people, disabled people, and people of color. We can also expect more interest in increasing fossil fuel production and distribution, stirring up international geopolitical conflicts over trade, territory, and resources, and lowering corporate taxes, among many other priorities. With our values and ideals—and for some, our lives—under what’s likely to feel like a constant siege, it’s natural to react emotionally with outrage or despair. And while it’s important to vent, we must not allow ourselves to be paralyzed into inaction or satisfied with mere talk! This is a moment that calls for us to activate our resources and engage our communities, not just to defend against potential losses, but to build on the gains of the last eight (and more) years. You, dear investor, are in the advantageous position of having resources that can be mobilized to help catalyze much-needed outcomes. With that in mind, here is your action guide for the next administration.

Step One: Lift up communities by investing in them. Lend your money to Community Development Financial Institutions (CDFIs) that specialize in redistributing access to wealth to vital projects in vulnerable communities. For example, investors nationwide can open a High Impact CD at Hope Credit Union, which serves formerly under-banked communities of color in the Mississippi Delta region. While the Standing Rock Sioux blockade of the Dakota Access Pipeline highlights the myriad of challenges that Native Americans face, First Nations Oweesta CDFI is actively redeploying investor capital to create jobs, grow businesses, and secure ancestral lands across Indian Country. The Calvert Foundation offers two initiatives that invest in specific constituencies targeted by the incoming president: Latinos (the Raíces Investment Initiative) and women (the Women Investing in Women Initiative: WIN-WIN). Self-Help Credit Union and Beneficial State Bank take federally insured deposits and reinvest them in affordable housing and small business loans in low-income neighborhoods that are otherwise unlikely to benefit from the new regime. Seek out CDFIs doing similar work in your city or region. And help build a thriving economy right where you live by buying local and investing in local small businesses and nonprofits that you know.

Step Two: Fight climate change by investing in the ongoing green revolution.

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Pollinators: an essential natural investment

Technically speaking, pollinators are “the biotic agents that move pollen from the anthers to the stigma to accomplish fertilization.” Very literally, the birds and the bees of the flowering plant world!

Of course, this is a bit of an oversimplification. While pollinators do include both birds and bees, this group also includes wasps, ants, flies, butterflies, moths, and some reptiles and mammals. Even gardeners can be pollinators, hand pollinating plants to prevent contamination and maintain pure genetic strains.

Some plants have co-evolved with the local pollinators, and the loss of native pollinators could lead to extinction of these unique plant species, as the pollinators and plants have evolved to be specialized for each other.

It is estimated that over three quarters of all farmed crops require animal pollination, so along with pollinator decline and the loss of specialized plants, we also face the crucial issue of farmed foods not being pollinated. The economic impacts of pollinator decline are already being felt in many areas. Where native pollinator species have become scarce, farmers have to replace them with managed bee populations, which involves added cost and work.

So, its clear that we are facing some problems with pollinator decline, but why is this happening? And, what can be done to restore pollinators to a healthy level?

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Are you a butterfly or a honeybee in your money life?

Before she started working with me Hope had spent many years trying to build her wealth like a butterfly. She was flitting from one money guru to the next. Reading their books, following them online, and changing course as she found the next lovely “blossom” (investment approach, idea, stock) that caught her eye. Trying to build wealth on our own can often lead to this butterfly approach, fueled by fear that we’re doing the wrong thing (especially when the market takes a deep dive), and ever seeking new ways to make the most of this money are investing.

Hope is a smart businesswoman. She wanted to be smart about building her wealth, too. We are now working together using a honeybee approach to building her wealth—and getting her to her ultimate goal, financial freedom.

Watch a butterfly. It flutters from blossom to blossom in what seems lovely but a bit random. The butterfly is primarily there to drink the liquid nectar; the pollination they do is by accident. While butterflies are eye-catching with their beauty—and important pollinators—their focus and their purpose are very different from the behavior of the honeybee.

Now watch a honeybee.

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