This article is from our archives as part of the 100th issue special, celebrating twenty-five years of quarterly newsletters.
Policy matters. Natural Investments has participated in public policy conversations and attended meetings on the Hill in Washington, D.C., for years and will continue to serve as a voice for fair and just financial regulations.
It’s been over a year since the fall of Lehman Brothers sparked major tremors in the U.S. financial system that rippled around the planet. Though lawmakers called for reform, much of the financial services industry remains unchanged a year later. The wholesale restructuring advocated by the social investment industry, economists, and academics has thus far been met with strong opposition from the industry, and Congress’ lack of expertise left them unable to do anything other than infuse large banks with cash.
The needed structural changes in our system remain conceptual and haven’t even been fully debated. Yes, there were calls for bonuses to be recalled and executive pay to be restricted,
This article is from our archives as part of the 100th issue special, celebrating twenty-five years of quarterly newsletters.
Community investment is one of three pillars of socially responsible investing, alongside screening and shareholder advocacy. As natural disasters increase with climate change in the 21st century, this article illustrates why Natural Investments has always made community investing a key component of any client portfolio.
In the fifteen months since hurricanes devastated the Gulf Coast Region, we have participated in revitalizing communities by investing in affordable housing, minority-owned businesses, and redeveloping urban and rural areas torn apart by the storms.
Community development financial institutions (CDFIs) have channeled capital to low-income and displaced people who are traditionally underserved by conventional banks, providing credit to those who have insufficient income or lack credit or collateral. This assistance has been and continues to be critical for those hardest hit by Hurricane Katrina. Because the CDFIs were already in these communities, they had the infrastructure and relationships in place to offer immediate and prolonged help throughout the recovery effort.
Vintage Natural Investment Services logo as part of the 100th issue special, celebrating twenty-five years of quarterly newsletters.
Before we were financial advisers, most of us were educators who felt called to drive positive change through teaching, writing, innovating, movement-building, and leading by example in sustainability and social justice. We have nurtured this commitment over three decades at Natural Investments by working with our investors to realize our shared vision of a more sustainable and equitable future. And we’ve seized the opportunity to share inspiring updates with you every quarter—vital, consistent reminders of what can be accomplished through the intentional stewardship of assets.
This issue of our newsletter is our 100th. Over the past twenty-five years, we have written hundreds of articles, as well as three books, chronicling the growth of our movement for sustainable, responsible, and impact focused investing. Socially responsible investing has moved from the margins into the mainstream, and we have celebrated the investment opportunities and advocacy victories that bring people into better relationships with each other and the natural world. We have played a meaningful role in a paradigm shift that the business community cannot ignore.
While Natural Investments principals have always been thought leaders in the sustainable, responsible, and impact investment (SRI) movement—we’re the only firm in the world to have published three books on the subject—we have generally gone about our business in a quiet manner.
We’ve intentionally remained small by institutional standards, and while we’ve garnered the respect of our SRI peers, we are not a household name. In 2018, our profile changed considerably, in ways that affirm our commitment to integrity in SRI over all else.
We have arrived at a watershed moment in US history, when the principles and practices of sustainable, responsible, and impact investing are finally becoming mainstream. The biennial report on U.S. Sustainable, Responsible, and Impact Investing Trends 2018 (the Trends Report), published by US SIF Foundation, reveals a 38% increase over two years in the assets under professional management that integrate environmental and social corporate governance (ESG) criteria. This means that currently, one in every four dollars under professional management in this country, or $12 trillion, is invested using ethical or socially responsible criteria.
Twenty years ago, SRI assets tallied just over $600 billion. The new data shows that assets have increased 18-fold since 1995—an astounding annual growth rate of nearly 14%.
The frontline battle over the limits of corporate power is turning into a full-fledged war, as the legislative and executive branches of the US government accelerate their push to deregulate companies and curb shareholder influence.
Shareholders like the ones we work with, of course, want companies to act responsibly and profit without exploiting employees, communities, and the environment. But we are up against corporations with an entirely different agenda— and with hefty lobbying budgets. In response to the sea change in Washington, socially responsible investors (SRI), including Natural Investments, formed the Shareholder Rights Group in 2016. Our mission is to defend the right of shareholders to engage with public companies on governance and long-term value creation. We hired attorney Sanford Lewis to
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Socially responsible investing (SRI) is a diverse field with various aims, standards, goals, and objectives focused on sustainability, responsibility, and positive impact (SRI, again). The industry includes both corporate and community development dimensions and covers everything from startup innovation, international micro-finance, and ecosystem services to changing corporate policies and practices, advocating for regulatory and legislative improvements, and facilitating evolutionary shifts in the financial system.
As we pointed out in The Resilient Investor, we must embrace change on many levels—personally, locally, and globally—in communities, boardrooms, and nature if we are to adapt to a more complex and uncertain trajectory for human civilization.
While the media and conventional investors may be obsessed with the next tech IPO or tax breaks for major corporations, we keep our focus attuned to our long-term vision of a world in balance, and that includes careful consideration of how we can support the social and racial justice and regenerative environmental activity that will allow us to thrive in these turbulent times. In other words, when investors, including SRI proponents, are focused on exclusively on short-term growth—large companies merging and acquiring others and startups going public from nothing—we will fail to remedy the underlying social issues that stagnate the economy in the long term.
In nature, pioneer species are often the first to become established in a barren or disturbed landscape. With great tolerance for poor conditions, erratic weather, and isolation, these tough and hardy species manage to put down roots in cracks and rocks amid inhospitable, barren landscapes. They germinate and grow in these edges, eventually creating enough surrounding fertility to allow for new species to take hold, natural succession to occur, and a thriving ecosystem to emerge over time.
Permaculture principles like this guided Natural Investments founders Hal Brill, Christopher Peck, and I when in 2007 we decided to become co-owners of this firm dedicated to socially responsible investing. We decided to operate like a guild in nature, honoring the diverse skills, gifts, and traits of each person while focusing on cultivating beneficial relationships—thereby creating an adaptable, strong, and healthy organism through which we could thrive as people and as a company.
In 1990, there were just about a dozen pioneers of socially responsible investing (SRI)—mutual funds with about $200 billion engaged in responsible investing, the bulk of which were categorized as such for excluding tobacco or companies operating in South Africa from their portfolios. As this approach slowly gained steam, more businesses started to follow suit. We were among the first to attain B Corp certification 10 years ago, which recognizes the positive environmental, social, and governance policies and practices of companies.
We have intentionally designed and fostered our operations to be in alignment with the same principles of nature, including human nature. Our approach to decision-making is inclusive and consensual. We are organized as an autonomous collective, emphasizing freedom for each member within a collaborative framework of systems, protocols, and initiatives that benefit the whole. Christopher Peck and I oversee all operations of the firm, but we invite the entire group to discuss major decisions, including our investments, strategy, policies, procedures, and overall direction. Rather than micromanage our exceptionally capable advisors, we delegate and monitor, offering support as warranted. We are transparent about company operations, invite feedback and suggestions to help us course correct if needed, and invest time and energy into building a sense of community among us.
Our advisors share leadership by taking on initiatives and performing tasks for the whole. It’s clear that they do so out of a sense of responsibility for the firm’s overall success. A horizontal approach to organizational leadership isn’t always easy, but when people are regularly and actively involved, they are engaged and empowered. For those rare instances when we cannot reach consensus, we’ve introduced a voting process.
How we communicate with each other is also an important aspect of bringing our whole selves to our work. We make time to talk on an emotional level and connect our personal lives to our work. This creates a safe container through which people can not only share life’s joys but also feel comfortable bringing up sensitive topics or personal situations, building a support system in the spirit of community.
This year, we also saw a shift in ownership of the company. After 10 years of Hal, Christopher, and I owning and managing the company equally, Hal sold some of his stake to longtime advisors Malaika Maphalala, James Frazier, and Greg Pitts. They have stepped up with new ideas, energy, responsibilities, and perspectives, reflecting our company’s plan to cultivate leadership among all its members.
Our organizational experiment as an autonomous collective has been fascinating since the outset, and 10 years after forming our first ownership triad, it’s clear that this experiment is working well enough to warrant the next plateau of expansion. For when you plant a few trees and nourish their growth, it’s not possible to know what will happen to them. As we have witnessed their healthy roots and felt their strong trunks, and as we have branched out, the bountiful foliage and fruits of our labor are now being harvested. And this year, we began to truly grow a forest.
Recent catastrophes provide an opportunity to practice a future-planning mindset.
It’s obvious that significant Earth changes are occurring these days—in the past month alone, we’ve seen several major earthquakes, ravaging fires, devastating hurricanes, and torrential flooding. When we wrote The Resilient Investor a few years ago, we anticipated future volatility and uncertainty due to climate change and other factors, but we didn’t know how immediately prescient our insights would be. The September trifecta of superstorms in the Atlantic provided a stark reminder that as resilient investors, we must incorporate disaster mitigation, in addition to disaster preparation, into our financial analysis and planning—for there are few places in the world that will be truly “safe” from the impacts of climate change.
To this end, our top priority must be a bold adjustment in how we produce and consume energy. The good news is that businesses and local governments had already begun to take steps in this direction before our current, climate-change-denying Administration took power. In fact, despite a near-total absence of leadership by the federal government, Americans are on target to meet he 2025 CO2 reduction targets set by the Paris agreement (1800 million tons of CO2); by the end of 2016, we were halfway there. Carbon-based utility generation is down 25% already, ten coal plants are closing, and many states are setting aggressive renewable energy goals.
Last fall, NI Managing Partner Michael Kramer gave a 45-minute talk at a conference in his home state of Hawaii that offers an good introduction to socially responsible investing and our variation on the theme, resilient investing. It catches Michael in a relaxed setting, and it’s recently been posted at the conference website (or click through to see it embedded below). Their teaser includes some of their favorite quotes from Michael’s talk:
“We think investors have a right to know. We want to require the disclosure of political contributions. I won’t use Verizon because I know how much money they contribute to the conservative side of the political equation… Imagine if all companies were required to disclose that publicly then you would know that and could make a decision about whether you want to own that company.” (Timecode 21:40).
“We have not fixed hardly any of the problems that caused that financial meltdown eight years ago… It is still going on because the Republicans in congress want to treat the economy like the Wild West.” (Timecode 22:20).