On May 24, President Trump signed legislation to roll back critically important regulations on the financial industry. The consumer protection measures, which were put in place under the former Obama administration as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, have now joined the long list of public-interest regulations to be terminated by this administration.
When Obama signed Dodd-Frank into law in 2010, the mortgage meltdown that had begun in 2008 was in full swing, the government was bailing out the big banks that had caused the crisis with taxpayer dollars, and Americans were furious enough that legislators were able to push through the most significant changes to financial regulation since the reforms that followed the Great Depression. These include the Volcker rule, which keeps banks from taking speculative investments, and the creation of the Consumer Financial Protection Bureau—which is responsible for regulating consumer financial companies like banks, lenders, and credit unions. The act also created stipulations for banks to create plans to wind themselves down, instead of filing for bankruptcy, in the event of another economic collapse.
For those of us who remember Columbine, the Parkland massacre and its immediate aftermath evoked a colossal feeling of failure. How could it be that two decades and dozens of mass shootings later, nothing had changed?
But as the days turned to weeks, a steely resolve grew within the Parkland students’ collective trauma. They joined forces with Black and Latino youth organizers across the country that have been laboring for decades— ignored by the mainstream media—to stop the scourge of daily gun violence and police shootings that have ravaged their communities. Together, these young people are growing the resistance movement that our generation did not. Serious gun control discussions are finally on the table in America, thanks to children who are tired of executing active shooter drills in closets or taking different routes home to avoid stray bullets.
As socially responsible investment professionals, not only are we deeply inspired; we have a range of tactics to support these young activists in their quest for commonsense gun control laws—many of which we have been using for years already.
At Natural Investments, none of our client funds hold stock in companies with assault or military weapons. Our Heart Rating process asks mutual funds about their weapons and defense holdings as well. Complete purification of the portfolio is, admittedly, difficult. In fact, Bloomberg published two articles—one for and the other against the effectiveness of divestment—within two days of each other.
The Oceti Sakowin Camp in Cannon Ball, North Dakota, where the Standing Rock Sioux and other water protectors lived as they fought to stop the Energy Transfer Company from routing the Dakota Access Pipeline through sovereign Sioux land.
How Socially Responsible Investors Supported the Dakota Access Pipeline Protests
The Dakota Access pipeline (DAPL) starts in the Bakken oil fields of North Dakota and runs nearly 1,200 miles to its terminus in Illinois, where it connects to additional pipeline infrastructure that carries the oil to refineries as far south as Texas. Along the way it crosses hundreds of streams, rivers, and other waterways, including the Missouri River less than a half-mile upstream from the Standing Rock Sioux Tribe reservation.
The project was completed and oil started flowing in June of 2017, after a prolonged protest by the Standing Rock Sioux Tribe, who were joined by water protectors from more than 100 indigenous tribal nations from across the Americas, as well as non-native allies from around the world. As the water protectors decried the violation of tribal sovereignty, the desecration of sacred sites, and the imminent threat to their only source of clean drinking water, they faced attack dogs, tear gas, rubber bullets, and water cannons in sub-freezing temperatures. These protests and concurrent lawsuits were documented by citizen journalists and eventually picked up by major news outlets.
One aspect of the stand-off that did not receive much media coverage was the role that socially responsible investors played in supporting the Standing Rock Sioux in their fight against the pipeline. At the November 2017 SRI conference, remarks by Rebecca Adamson, founder of First Peoples Worldwide (an indigenous-led grant-making organization that focuses on funding local development projects in indigenous communities while creating bridges between their communities and corporations, governments, academics, NGOs and investors in their regions) were presented by Susan White, co-chair of the Investors and Indigenous Peoples Working Group (a coalition of socially-responsible investors and others dedicated to supporting indigenous peoples rights) and Sydney Morris, chair of the Calvert Advisory Council. They provided a compelling account of the behind-the-scenes support socially responsible investors lent to the cause and the results of subsequent advocacy efforts undertaken by SRI groups:
In August 2016, the tribe asked First Peoples Worldwide and the Investors and Indigenous Peoples Working Group to lead an investor strategy aimed at diverting financing from DAPL. Investors worth more than $1.7 trillion signed a statement supporting the tribe’s request for a reroute.
Shareholder resolutions requesting better disclosure of environmental and social risks (from companies invested in the pipeline project) received record-breaking vote counts: Marathon Petroleum (38%), Enbridge (30%), and Wells Fargo (19%).
Energy Transfer Partners (the lead developer of the Dakota Access Pipeline project) stock is down more than 60% since its 2014 highs.
More than 500 NGOs and over 700,000 signatures catalyzed consumer bank account closures worth over $4 billion. Three banks divested from DAPL (BNP Paribas, DNB and ING), twelve of seventeen banks met with the tribe, and ten banks signed a statement requesting changes to the Equator Principle, (an ESG risk management framework used by ninety banks worldwide) in response to investor and civil society pressure. The fight against the DAPL has placed the costs of social risk front and center on the financial industry’s radar.
In response, First Peoples Worldwide created a seminal research effort now underway with the University of Colorado’s Leeds Business School and the American Indian Law Clinic. The first case study will be titled DAPL: Social Costs and Material Loss. Leeds Business School and the American Indian Law Clinic have formed a collaborative: First Peoples Investor Engagement Program. FPIEP has dedicated faculty and graduate students who will continue the work on quantifying social risk, designing market-based strategies for upholding Indigenous rights, harnessing the activist infrastructure that emerged from DAPL for future campaigns, and offering the Shareholder Advocacy Leadership Training to tribal leaders.
Although the Standing Rock protest did not stop the construction of the pipeline, it did catalyze these and other significant advances—not least a greatly increased awareness about the continuing impacts of colonialism on First Nations people. In 2018, the Investors and Indigenous Peoples’ Working Group (of which Natural Investments is a participant) will continue to advocate for the rights of indigenous peoples. The working group will push for companies to adopt Indigenous Peoples’ Free, Prior and Informed Consent (FPIC) policies and to cease activities that harm Indigenous lands, communities, and cultures. It will also focus on building investor, corporate, and U.S. government support for the United Nations Declaration on the Rights of Indigenous Peoples. And the group is committed to identifying opportunities, including strategic partnerships and investor support, to advance Indigenous community economic development initiatives.
“The SRI community made our voices heard, and we thank you,” said White and Morris, as they concluded their talk at the SRI Conference. Their eloquent presentation affirmed and deepened the commitment of Natural Investments to advance the rights of Indigenous peoples around the world through the powerful lever of impact investing.
With all of the chaos happening in Washington, DC it can be hard to keep up with everything that is changing. While your advisors here at Natural Investments stay up to date on a wide variety of policy issues, we particularly want to highlight a bill that would have a large impact on our industry and our ability to advocate for social change.
Earlier this year Republicans in the House introduced HR10 The “CHOICE” Act. CHOICE stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs, but in simple terms this bill is a massive give-away to large Wall Street firms. It destroys much of the regulatory framework put into place under the Dodd-Frank reforms. And, most disruptive to socially engaged investors, it puts limits on the shareholder activism work that is so critical to our ability to impact change at the businesses we invest in on your behalf.
In my role on the national policy committee of the socially responsible investment (SRI) industry’s trade association, USSIF: The Forum for Sustainable and Responsible Investment, we had a wonderful legislative priority document prepared in October for the new President. Like many others, we expected to have the opportunity to build on the many successes of our advocacy with the Obama Administration on a variety of issues to protect the public from systemic abuse by the financial industry, encourage wider adoption of SRI by fiduciaries, and facilitate investment in the green economy. For responsible investors, the Obama years were very encouraging indeed, and we at USSIF had an ambitious agenda ready to share with the Clinton Transition Team to expand on these victories for investors and the public.
Naturally with the election result, everything has changed, and we now find ourselves in a radically different political climate that demands a defensive stance to protect recent laws and regulations from being dissolved. When it comes to issues of importance to sustainable and responsible investors, the Republicans in Congress, long opponents of most regulations—especially relating to business and investing—now have an ally in a President who shares their belief in small and minimally intrusive government. That’s why within the first months of this Administration we’re already seeing efforts to unravel the reforms to the financial system that were established during the Obama Administration. They’ve already removed the Dodd-Frank provision that required companies to disclose payments (i.e., bribes) to foreign governments to extract fossil fuels and minerals from often-oppressive governments.
The Republicans have their pitchforks raised in outrage over a broad array of regulatory protections, and the fight is now on to:
Quakers are often given credit for being pioneers in the formative era of Socially Responsible Investment. As I was reading an array of early SRI publications, it was easy to see that Quaker traditions and practices have played an important role in this movement’s history. While you may not have the same faith as the thinkers and authors quoted here, the lessons and insights are applicable regardless of your spiritual background or belief.
When we remember that many of the concerns we are trying to address through our investments are global issues (climate change, deforestation, gender equity and LGBT rights, supply chain/human rights, etc.), it becomes even more important to broaden our understanding. While Quakers come from the Judeo-Christian tradition, universalism is a commonly held belief among Friends, as Quakers are often called. There is diversity among Quakers, and an openness and curiosity about others is central. As Tom Head wrote in Envisioning a Moral Economy, “To study well the other faith traditions through which all humankind knows and experiences the sacred is especially important in our era of globalization.” (Footnote 1)
Quakers are one of the three historic Peace Churches, believing there is “that of God” in all people. This has inspired a strong history, still continuing today, of social justice advocacy on pressing topics of the day, from slavery to women’s rights, prison reform, and armament issues. As early as 1688, Quaker meetings in the United States were corresponding and discussing the ethical issue of profiting from the slave trade, and in 1758 the Philadelphia yearly meeting unanimously issued a proclamation forbidding its members from participating in the slave trade.
Could you imagine a church/mosque/temple in 2017 forbidding its members to profit from the fossil fuel industry? Or forbidding its members from investing in and working with predatory or discriminatory financial institutions?
Our commitment to positive change is reflected in our advocacy, how we operate the company, and the 1% of gross revenue that we donate to worthwhile local and national charitable organizations. Our commitment to evolving corporate behavior revolves around our shareholder advocacy efforts, while our passion for protecting citizens from harm is embodied in our public policy efforts with regulators and Congress. This report includes examples of our work in 2016.
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.
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.
In mid-September, I travelled to San Francisco to participate in the annual Social Capital Markets conference known as SoCap. In its ninth year, SoCap describes itself as the place “where the global community using business as a force for social change gathers to listen to each other, and to learn, and to get things done.” I last attended SoCap three years ago, and was pleased to see how much the event has grown and evolved in that span of time. There were over 2500 people in attendance, from 60 different countries. They represented impact investment funds, international community development organizations, regenerative agriculture projects, and social enterprises, all focused on addressing critical issues like global poverty alleviation, social justice, and climate change, and the conversations were inspiring. Important questions were asked, and moving calls to action were made.
As we’ve seen Impact Investing begin to move dramatically into the mainstream, I was heartened to hear SoCap bring to the fore the priority of ensuring that the social and environmental goals at the heart of Impact Investing don’t become overshadowed by the drive of the extractive economic model currently dominating our financial system. With a huge focus on inclusive strategies for investing, there was deep attention given to addressing racial and gender inequities within our capital system, and how to transition from an Extractive Economy to a Regenerative one.