New York Federal District Court Judge Jed Rakoff triggered lots of headlines with his recent rejection of a settlement between the Securities and Exchange Commission (SEC) and Citigroup, in which the company admitted no wrongdoing and agreed to pay a fine the judge called “pocket change.” Matt Taibbi exulted at “one of the more severe judicial ass-whippings you’ll ever see,” detailing the sorry state of the SEC’s enforcement actions, in particular the repeated agreements by companies to “never do that again,” while all too often ending up back before the SEC on similar violations. Much of the day-after coverage had a similar focus on the wrist-slapping nature of most SEC settlement.
But as the dust settled, many commentators noted that the weak penalties doled out by the SEC may be attributed to its meager operating budget (which necessitates quick settlements over long, expensive trials), as well as to the challenges of proving malfeasance on the part of companies engaged in a business in which everyone recognizes that risks are part of the game. Both of these reflections suggest that if the SEC pushed harder, it may have to trade a few high-profile trials for dozens of small-potatoes settlements.
The clear solution is to give the SEC the resources it needs to dig deeper and push harder, including following through on legal charges when necessary and appropriate; the SEC’s slim staff and budget leave it relatively toothless in the face of a continuing supply of potential violations needing investigation and prosecution.
The Sisters’ shareholder activism is just what Jeffrey Sachs says is needed as citizens work to build on the Occupy movement:
The young people in Zuccotti Park and more than 1,000 cities have started America on a path to renewal. The movement, still in its first days, will have to expand in several strategic ways. Activists are needed among shareholders, consumers and students to hold corporations and politicians to account. Shareholders, for example, should pressure companies to get out of politics. Consumers should take their money and purchasing power away from companies that confuse business and political power. The whole range of other actions — shareholder and consumer activism, policy formulation, and running of candidates — will not happen in the park.
This week, the Investor Network on Climate Risk joined similar groups from around the world in releasing a comprehensive call for energy policies at the national and international level that will encourage increased investment in renewable energy solutions. The Global Investors Statement on Climate Change includes proposals and criteria for designing useful and forward-looking regulations and incentives that will support “investment-grade” climate change policy.
The 4-page Statement, signed by 285 investment advisors institutional investors representing more than $20 trillion in assets, and a detailed 44-page report have been sent by the sponsoring investor networks to the G20 and other governments in anticipation of the UN conference on climate change in Durban. The investor networks will use the statement and report as a central resource in their ongoing engagements with national governments.
The Statement says, in part:
Climate change presents major long-term risks to the global economy and to the assets in which we invest. At the same time, well designed and effectively implemented long-term climate change and clean energy policy (“investment-grade policies”) will not only present significant opportunities for investors in areas such as cleaner and renewable energy, energy efficiency and decarbonisation, but will also yield substantial economic benefits including creating new jobs and businesses, stimulating technological innovation, and providing a robust foundation for economic recovery and sustainable long-term economic growth…..With data from the IEA indicating that global energy-related emissions of carbon dioxide (CO2) in 2010 were the highest on record, it is clear that the need for action is urgent. However, current levels of investment in low-carbon technologies fall far short of what is needed. Private investment will only flow at the scale and pace necessary if it is supported by clear, credible and long-term policy frameworks that incentivise investments in low-carbon technologies rather than continuing to favour carbon-intensive energy sources.
Natural Investments, LLC, is pleased to be one of the signatories, on your behalf. For more, see the links above, or investorsonclimatechange.com.
A growing movement to recognize social and environmental benefits as a legitimate purpose of corporate activity, alongside making money, has added two new states to the growing roster of those adding “Benefit Corporation” as a state-recognized legal designation. Both Hawaii and California recently passed Benefit Corporation statutes, joining four other states with such laws on the books; legislation has been introduced in five others as well.
According to B Lab, which both certifies companies as “B Corporations” (a formal process that is not state-recognized) and promotes the adoption of legal “Benefit Corporation” structure and mandates at the state level, state-registered Benefit Corporations “are legally required to pursue the creation of material positive impact on society and the environment, while meeting higher standards of accountability and transparency. Current law requires corporations to prioritize the financial interests of shareholders over the interests of workers, communities, and the environment.”
What an amazing visualization of the impact, and even more important, the exchange that takes place though Kiva’s network. As you may know (you DO know if you’re a regular reader of NI’s newsletter!), Kiva is an online network that allows individuals to offer microloans directly to specific loan recipients in the third world. Enough words: this video says it all!
This week’s Sunday Times features a profile of Jeremy Grantham, one of the country’s more successful asset managers, whose last two quarterly letters to investors (widely read in the financial world) have shed some decidedly mainstream light on ideas that will be familiar to NI clients. In particular, he’s stressing that we’ve overshot the earth’s carrying capacity, and that we’re entering an era of limited growth potential, driven largely by the fact that natural resources of all kinds are no longer simply there for the taking – we’re not talking just peak oil, but “peak everything,” from metals to key agricultural nutrients like potassium and phosphorus.
On a practical level, Grantham sees commodity prices rising nearly across the board (so urges buying in now); on a social level, he feels the US 2010 Congress missed what may be our best opportunity to address global warming, but notes that “People are naturally much more responsive to finite resources than they are to climate change. Global warming is bad news. Finite resources is investment advice.” He believes this shift in emphasis plays to Americans’ strength. “Americans are just about the worst at dealing with long-term problems, down there with Uzbekistan,” he said, “but they respond to a market signal better than almost anyone. They roll the dice bigger and quicker than most.”
…among the ways investors might respond to limited resources, beyond simply trying to grab up a lot of what Grantham calls “stuff in the ground,” are many that also address climate change: for instance, investing in farms and forests managed for the long haul, or in companies that retrofit buildings for energy efficiency, build ultralight vehicles or develop non-hydrocarbon-based power.
Here at Natural Investing, we’ve been mighty inspired by the Slow Money movement from the moment Woody Tasch began sharing his earliest ponderings. So we’re especially excited to be one of several sponsors of the 3rd Slow Money National Gathering, taking place in San Francisco this fall.
Here’s how they describe themselves:
Is Slow Money an investment strategy or a movement? Yes! It’s a new kind of social investing for the 21st century. Slow Money national gatherings are quickly emerging as a significant new venue for networking, investing and social change. More than 1000 people from 34 states and several foreign countries attended our first two national gatherings, and more than $4.25 million has been invested in 16 of the small food enterprises that have presented. Since last year’s event at Shelburne Farms, Vermont, 11 local Slow Money chapters have begun investing in their regions.
Join this emerging network of thought leaders, investors, donors, entrepreneurs, farmers, and activists for our Third National Gathering this October in San Francisco, and collaborate with folks from around the country who are finding new ways to connect money, culture and the soil.
Hal loved the first national gathering, which he wrote about here. We encourage our clients and readers to join Natural Investing’s Christopher Peck in San Francisco for this year’s event! Click on through here for more details. And, check this link for a collection of Natural Investing Blog posts that have featured Slow Money on both the national and local levels.
The excellent Think Progress blog clued me in about the UN’s 2011 World Economic and Social Survey, which highlights the importance of investing in new technology to ensure a sustainable, safe, and prosperous future for our planet:
“The “green economy” has been promoted as the key concept in this regard—the concept that embodies the promise of a new development paradigm, whose application has the potential to ensure the preservation of the earth’s ecosystem along new economic growth pathways while contributing at the same time to poverty reduction.”
The Think Progress post goes on to highlight the report’s three key themes, all of which are familiar to Natural Investors. Investing in green tech is the obvious one, but given equal importance is the necessity to invest in the resilience of societies in the developing world as they adapt to a changing climate.