Author Archive

Michael Kramer

Welcome to my archive of newsletter articles and blog posts. For more information on my service offerings, please go to my advisor webpage.

What do Sustainable Shareholders Want from DC?

The annual US Social Investment Forum (US SIF) conference, “Markets, Mission & Materiality,” held this spring in Washington D.C., offered the opportunity for sustainable investors to meet with Congress and the SEC regarding issues of concern to shareholders. Sponsored by UBS, Bloomberg, MSCI, and numerous sustainable and responsible money managers and research firms, the event highlighted the latest developments and national policy priorities of the industry, which represents 11% of all the professionally managed money in the capital markets. Here’s a quick overview of what we were discussing with DC decision-makers.

Eliminating corporate money in politics. In a meeting with SEC Chair Mary Jo White, US SIF continued to press for corporate political disclosure to be put on the rulemaking agenda for the agency. Despite 750,000+ citizen letters of support for the provision – an SEC record – the agency has yet to weigh in. Sustainable shareholders believe corporate political contributions are a potential risk to share value, especially the “dark” money contributed to groups and associations.

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Natural Investments’ 2013 Social Impact

The impact of sustainable, responsible, and impact investing is based on your ownership of companies that are shaping responsible business practices and leading us further into the green economy, along with your loans to entities that help people out of poverty and into home ownership and entrepreneurship, build or revitalize urban and rural communities, and help regions recover from natural disasters. In collaboration with thousands of like-minded investors, your investments influence corporate policy and federal and state regulations, while empowering people in communities to take control of their financial future. Your commitment is also matched by the Natural Investments family of advisors; each of us is personally involved in local and national efforts to build a just and sustainable economy. Among the highlights of these leading edge efforts in 2013:

Shareholder Engagement

Through your ownership of mutual funds and NI’s direct engagement, we continue to use our collective voice to shift the policies of the companies you own, as well as those you intentionally avoid:

We participated in direct engagement with Costco as they implement the Sustainable Seafood Policy we helped them create; they’re making progress!

In response to the tragedies in Bangladesh garment factories, we participated in the Bangladesh Investor Initiative, which is seeking major improvements in working conditions and building codes, along with increased pay standards. While there are over 1500 factories in need of independent inspection, we were successful in getting two new apparel industry groups formed—the independent Accord on Fire and Building Safety and the industry-sponsored (and weaker) Alliance for Bangladesh Worker Safety—and we are directly engaging U.S. companies to join these efforts or adhere to comparable standards.

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Impact Investing: The Business of Doing Good

One of the most in-depth articles we’ve seen on Impact Investing was recently published in Hawai’i Business, and not surprisingly, it features the work of our own Michael Kramer.  Impact Investing has emerged in recent years as one of the highest-profile evolutions of the SRI principle of doing well financially while doing good for people and planet.  At the same time, there has been some friction, as some who embrace this new model suggest that SRI is, by contrast, low impact; this article gets at these questions in a more complete way than many.

Much of the piece profiles the Ulupono Initiative, an impact investing project of Pierre Omidyar (the funder behind First Look Media, the independent journalism venture featuring Greg Greenwald, Jeremy Scahill, and Matt Taibbi). Ulupono is actively investing in many initiatives across the Hawai’ian islands; this excerpt captures the essence of the impact investing mindset:

“Pierre has this nomenclature he likes to use,” says Murray Clay, a managing partner at the Ulupono Initiative. “He starts with the idea of ‘charitable giving,’ which he defines as ‘meeting people’s immediate needs.’ So, Meals on Wheels, Habitat for Humanity – people providing food, shelter, cloths, medical care – that’s charitable giving. The next step is ‘philanthropic giving,’ which, unlike charitable giving, is not about meeting immediate physical needs; it’s about solving long-term problems. If you think people aren’t getting good jobs, for example, it might be that better education will help solve that problem over the long term. So, philanthropic giving is about solving those kinds of long-term problems. The next step is either ‘philanthropic investing’ or ‘impact investing.’ Those terms are used interchangeably. The idea is that you’re bringing the for-profit model into play. But, instead of just making money, you’re making money and having impact at the same time to try to solve some of those problems. So, you’re not just measuring returns; you’re measuring returns and impact.”

The article goes on to look at the work of RSF Social Finance (the investing arm of the Rudolph Steiner Foundation) and Natural Investments.  Michael fields questions about the relative impact of the Ulupono model and traditional SRI, noting, “The term ‘socially responsible investment’ has been around for more than 30 years; impact investing has only been around for a few years. The folks who champion that term are generally equity people (ed. note: wealthy, or “qualified,” investors) who invest in startups. That certainly creates impact. The issue is: What kind of impact do you want to make?”

SRI’s impact often takes place within the companies held by SRI mutual funds, owned by “regular” investors. The kinds of impact SRI investors have been creating for decades is now expanding rapidly. Michael shares some good news about Bloomberg, the industry-leading financial data provider, which has added sustainability information to their offerings, thus moving some SRI considerations into mainstream investment analysis.  In addition:

“The other thing Bloomberg recently released was something called the Carbon Risk Valuation Tool, which is specifically related to climate change and carbon cap and trade.” This service, Kramer explains, helps financial institutions analyze the risk associated with so-called ‘stranded assets,’ enormous investments in fossil-fuel reserves that, because of climate change, may never be extracted. Bloomberg calls this $6 trillion concentration of assets a “carbon bubble” that may trigger another worldwide economic crisis.

“There’s serious business risk to investing in those sectors,” Kramer says, “because those assets will likely become ‘stranded.’ And the fact that this is already being tracked by Bloomberg is a sign that the issues of sustainable investing have become mainstreamed.”

We heartily recommend the full article, which fleshes out the full range of impact investing activities with unusual depth and thoroughness.

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Engaging the Two Global Economies: Sustainability’s Shadowy Edges

This article is adapted from a section of our book-in-progress, The Resilient Investor, that describes our Global Sustainable Economy investment strategy; this is one of our three strategies; the other two are Close to Home (local investing) and Evolutionary (directly fostering personal and systemic change). Within the three strategies, we consider three asset types that we all invest in and with: financial assets (money), tangible assets (house/land, regional habitat and food systems, enduring goods such as solar panels), and personal assets (relationships, professional skills, personal growth).

As exciting as it may be to expand your notions of investing to include the full range of assets and strategies we’ve outlined, the fact is that much of the resilient investor’s focus remains in the familiar realm of engaging with the global economy.  That’s where most of us both build our financial assets—via salary and investment gains—and purchase many of our tangible assets: our transportation (whether personal or public; on airplanes or bikes), our nifty gadgets (from frypans to smartphones), our clothes. . . the list really does go on and on.  And, while being conscious of over-consumption, we do enjoy the fruits of this consumer product cornucopia, many of which enrich our lives and empower our work and social engagement in profound ways.  So the goal of this investment strategy is to work with the existing system in as effective a way as possible, even as we keep raising the bar toward more responsible corporate citizenship, including increasing focus on environmental ethics and social justice.

There’s lots of room for making personal choices that reflect your own particular areas of interest as you allocate your assets in this strategy.  Some of you may be adamant about reshaping the corporate structures and/or priorities that underlie today’s global economy.  Or, you might diligently consider the climate, habitat, or social impact of your purchasing decisions.  Others will want to focus on investing in particular green sectors (renewable energy, natural foods, local businesses, etc.), or will prioritize building a career that deeply reflects one’s values.  While a full-on global economy warrior may do all of this, most of us are more likely to pick a few fronts on which to add our two cents to the direction of the global economy.

Here’s the rub: even as we think we’re participating in the “sustainable global economy,” much of our economic activity is still taking place within the existing “extractive” economy, with all of the social and environmental exploitation issues that led us to decide not to outline a strategy that centers on it. Buy your shoes at a local shoe store, not a chain: the shoes still came from somewhere, and you might not like the backstory. That smartphone you rely on is filled with the spoils of remote mining activity and oppressive working conditions.

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Growing the Green Economy

By Michael Kramer

Sustainability as a term has only been around a couple decades, but while it has become popular, including here in Hawai`i, the simple truth is it’s been poorly understood and quite widely interpreted, to put it nicely. Let’s face it, we don’t want to sustain things the way they are, and we don’t want to simply replace fossil fuel energy with renewable sources and continue on with the way things are, because this society isn’t working very well. For it is our belief in perpetual growth that is our true nemesis, and this is merely a state of mind. It is a system of Western thought that freedom is the ultimate value, that the ideal state of human nature is the capacity to do whatever we want, without consequence, because liberty is the foundation of happiness.
This mantra has led us to harvest every natural resource with such vigor over the past 150 years. We ship resources, and the products derived from them, all over the world now, and we also know the impact of all human activity on this planet is causing a plethora of challenges on a scale none of us has seen before. We’re running out of oil, forests, minerals, fresh water, and clean air. Our ever-expanding population means there aren’t enough resources available or enough people to manage them – hence rising global unemployment. So while there is freedom to choose, there are also many constraints on us all, and more are coming. With climate change providing clear evidence of its presence, we are beginning to see our vulnerability, in the face of nature’s power.

And yet, we continue on as if nothing matters. We continue to burn carbon, breathe and eat chemicals, exploit workers, ignore the needs of communities, disrespect people and culture, and largely escape through the myriad of distractions we’ve created. It’s as if our collective survival instinct has been numbed. Sure, it’s important to appreciate the beauty of life, of this place, and to have a good time and do what brings one joy. But love goes beyond the self, does it not? Are we not social organisms, tied together through a complex web of relationships? No one lives in a vacuum, and yet we act much of the time – in education, government, community, and business – as if only our needs matter.

When we acknowledge our interconnectedness, we understand the ripple affect of all actions – onto partners and children, neighbors and strangers, customers and employees, shareholders and citizens.

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Why sustainability indices fall short

By Michael Kramer

When an index bears the Dow Jones name, it’s taken seriously around the world, and the Dow Jones Sustainability Indices (DJSI) are no exception.  The global DJSI, which focuses on the largest corporations in the world, started in 1999; regional indices have followed in recent years. While there are older and more widely used sustainability-focused indexes, the DJSI’s institutional credibility continues to garner the lion’s share of media attention. Who gets in, who moves up, and who’s in the top tier are all fodder for news stories, basking companies in a “green” spotlight.  Thanks to its high profile, the public may believe the DJSI is the sustainable and responsible investment (SRI) industry standard. But it’s not, and here’s why.

“Best-in-Class” Doesn’t Mean Much

The DJSI doesn’t exclude any sectors from consideration, in contrast to SRI industry norms. This is problematic because grading on a curve doesn’t take a stand on which sectors are – and aren’t – leading us towards a sustainable society. If companies are only benchmarking their progress against one another, how do they, or we as investors and consumers, know when they’ve achieved a truly credible sustainability standard? Should we really be celebrating companies with marginally less carbon emissions than their peers?

Update: Michael reprises this theme in his October column for, which highlights a newly-announced UN-backed sustainability index:

The U.N. Global Compact recently launched the Global Compact 100, its first index comprised of multi-sector companies ranked for their adherence to its 10 principles, which include human rights, labor standards and environmental stewardship. . . . The GC 100 includes companies long appreciated by sustainable shareholders, such as Ericsson, Hewlett Packard, Johnson Controls, Novo Nordisk and Electrolux. But there are some surprises, such as companies in sectors that include oil — even tar sands — natural gas, mining, petrochemicals, automotive and airline sectors, as well as companies with significant military contracts, such as General Electric.

If these are the best representatives of where the U.N. wants the global economy to go, let’s just say, for the record, that this is unacceptable. Any list being promoted, representative sample or not, as an example of what the world needs more of in terms of corporate practices simply should set a much higher bar.

A sustainable society is best achieved by reaching consensus on how to make a healthier society and planet. For forty years,

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2013 SRI policy priorities

By Michael Kramer

(This article first appeared in the Spring 2013 edition of the Natural Investments News)

The start of President Obama second term offers a natural opportunity to assess the nation’s financial oversight policies from the perspective of investors who stress financial responsibility and sustainability as criteria for making sound investment decisions. The fragility and volatility of the global economy has shaken investor confidence for nearly five years now, since 2008 when excessive risk-taking and either poor or nonexistent regulatory oversight led to the collapse or near-collapse of many of our largest banks, investment firms, and insurance companies. In fact, according to the Chicago Booth/Kellogg Financial Trust Index, 79% of investors have no trust in the financial system, while 64% of Americans believe, according to The 2012 Ethics and Action Survey: Voices Carry, that corporate misconduct was a significant factor in bringing about the current economic crisis.

Four years ago, the apparent receptivity of the President’s transition team to these issues gave reason for hope among sustainable and responsible investors that systemic financial reforms would be put into place and that the business risks associated with climate change would become seen as material to the financial bottom line. Though financial institutions, and the power they wield over Congress, has delayed the implementation of important financial reform laws and regulations since 2009, let’s check on the progress to date:

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Capitalism is evolving because we are making it so

By Michael Kramer

How amazing to see this headline in Forbes:
Today Marks a Tipping Point in the Evolution of Capitalism

The story notes that all-important Delaware, which registers most corporations in this country, just became the 19th state to pass “benefit corporation” legislation establishing a new class of corporations that operate for the benefit of communities, employees, and the environment and not merely shareholders. Capitalism IS evolving because we are making it so.

Read the whole article here.  It’s one of the most in-depth looks at Benefit Corps that has been published in recent years.

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Why engagement with fossil fuel companies won’t work: the impetus for divestment

NI Managing Partner Michael Kramer sat down with Bill McKibben at the recent Finance for a Sustainable Future conference, and heard the case for divestment over engagement from the horse’s mouth, so to speak.  See Michael’s June column on for the full story; here’s a teaser:

During the last 40 years, the SRI industry has used three primary strategies to foster change in the corporate world: engagement as shareholders to influence company and industry policies and practices; advocacy with regulators and policymakers to rein in abuses to protect share value; and divestment (what the industry refers to as environmental, social and governance portfolio screening). The challenge SRI investors always face is determining which strategy is appropriate for which circumstance. Historically, the SRI industry has preferred engagement, because one can use ownership to encourage companies to, for example, adopt ecological practices, embrace fair labor standards and improve diversity.

However, the core purpose of certain sectors – alcohol, tobacco, weapons, gambling, even nuclear power – have been widely accepted exclusions by SRI investors for their inherent harm or potential harm they cause to humanity. . . .And this was precisely the point McKibben made to the SRI industry: In this particular case, at this perilous moment in the history of this planet, engagement simply doesn’t achieve the desired outcome (at least, not fast enough). Past efforts to move fossil fuel companies into renewable energy or get fossil fuel companies to report on the impact of climate change on profitability largely have failed.

You may also want to take a look at Michael’s May column on GreenBiz, which looked more generally at climate change as a business risk.

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SEC considers corporate political disclosure rules

Michael Kramer‘s column in February looked at the SEC’s ongoing process of considering new rules governing disclosure of corporate political contributions. Read the whole thing at GreenBiz; here’s a teaser:

Corporate spending on political contributions and lobbying can create reputational risks — especially when S&P 500 companies spent more than $1 billion on these activities for 2010. Such risks can be managed effectively if companies examine whether their memberships in trade associations that are engaged in lobbying activities accurately represent their corporate interests and policy positions. Shareholders in turn need to understand their companies’ spending for trade association lobbying and the risks they might present. And now, the Securities and Exchange Commission is considering a rule to require public companies to disclose their spending on politics and lobbying.

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