When I boarded the El on January 20, I felt encouraged by the bits of pink I saw throughout the packed train car. “Please, let us look at least close to the size of last year’s Chicago Women’s March,” I remember thinking. I tempered my hope by reminding myself that the anger over the 2016 election might have subsided—and that many who marched in the unprecedented global display of resistance in 2017 could be burned out after a year-long assault by the new administration.
I met a friend at our appointed spot, Hero Coffee Bar on South Dearborn, and we joined the stream of pink plumage coursing down Michigan Ave. Even if we were only half of the quarter-million demonstrators counted on the frigid Chicago streets last year, it would be enough. The signs and the speeches buoyed me. On this unusually warm, sunlit January day, we chanted and marched, riding an electrifying surge of energy.
The stamina and strength of organized resistance to the destructive policies of the current administration has manifested not just in the streets, but also in a marked rise in interest for women-led investments within the finance world over the last year. We have seen encouraging growth in women-centric investment funds operating in the impact investment field. What’s more exciting is that the trend for more equitable treatment in finance is not only relegated to the US. A recently issued gender equality bond in Australia was 20x oversubscribed upon release.
In the decades leading up to the 2016 election, SRI investors had labored for years on gender parity issues without gaining much traction. Although numerous studies have shown that companies with more equitable gender representation, at the board level and in management, perform better financially, only 2% of venture capital dollars went to women entrepreneurs in 2017.
Natural Investments has long advocated for gender equity and more diverse boards through shareholder dialogue. Indeed, one long-standing and important aspect of the Natural Investments Heart Rating is a company’s diversity and inclusion policy. We have also always believed in the promise of gender-lens investing, based on research showing that investing in women has a 50% greater positive impact on primary drivers of long-term, intergenerational change, as well as the reduction of hunger and poverty.
Although investment that directs capital into women-led enterprises is certainly not new, we are thrilled to see the increase in interest and demand. Natural Investments advisors have developed specialized expertise in mutual funds, notes, and microenterprises in developing countries that bolster female-driven businesses and initiatives. We have also hosted a Women Invested interview series, highlighting professional women in the SRI field championing these causes.
As an SRI professional who rarely marched before the 2016 election, I am still riding high off the energy of the 2018 Women’s March. Whereas I once thought of civic protests as largely symbolic as compared to the more tangible work of socially responsible investing, I now understand that hitting the streets is an important way to motivate ourselves and others to undertake more substantive actions like moving our money, divesting from fossil fuel, and engaging with companies and elected officials to advocate for a sustainable future.
After my day on the streets of Chicago, I returned home after the march feeling tired yet accomplished, and of course, eager to see the numbers. So, how did we do? News outlets reported the next day that Chicago’s turnout saw 300,000 attendees—a 20% increase over the 2017 march in our city and indicative of huge and boisterous rallies across the country. Even more inspiring was the news that more than 20,000 women have contacted Emily’s List about running for political office as of 2017, up from only 920 women who contacted the group in 2016. These are all positive indicators of a new body politic fueled by “sheros” ready to change the world.
A grass-fed dairy farm in Virginia
In early November, 2017, my Natural Investments colleagues and I attended the 28th annual SRI (Sustainable, Responsible, Impact Investing) Conference in San Diego. I always get excited about this conference because it is the premier educational and networking event for financial advisors, fund managers, and others connected to our industry. It has become a touchstone for me—not just because of the wonderful people I meet, or the inspiring investment opportunities—but because it helps me reconnect with why we do this work.
When I arrived, I heard that the conference had set a new attendance record, with many of the 800+ attendees being newcomers from Wall Street looking to break into SRI. There were some grumblings that big corporate interests have identified SRI as a growing, profitable business and have been moving in on the SRI space, and the speakers seemed to recognize this. They made it clear that all were welcome, but that we are united by a common purpose: to use the power of our investments for the good of people and planet. It isn’t about financial returns, they said (because we know research has established that SRI performance is competitive), but what we are able to accomplish on the ground, in the real world.
To that end, the United Nations Sustainable Development Goals (SDGs) emerged as a major theme of the conference. World leaders adopted the SDGs in 2015, calling for all sectors of society to work toward gender and racial equity, clean power and water for all, a sustainable economy, and the end of poverty and hunger, among other ambitious goals. For SRI professionals, the SDGs can provide more clarity of purpose than the more nebulous phrase “positive impact,” which can easily be misunderstood or misused by newcomers.
In another area of the conference, dozens of companies staffed booths where attendees could learn more about their services. I saw several of the fund managers I’ve come to know over the years, and received personal updates on how they are investing and what they expect going forward. One of them was a regenerative agriculture fund that invests in conventional farmland and leases it on favorable terms to local farmers, who then convert it to organic production. This fund creates local jobs, improves soils, and fights climate change—while investors can benefit from rent payments and the improving value of the farmland. Although this fund is unique, it’s a great indication of the real world impact our industry is having.
I was struck by how many new funds were represented at the conference. Our industry is indeed growing! One fund occupies a new niche—global real estate investments that have been screened for environmental, social, and governance (ESG) issues. It’s important for investors to own both domestic and international real estate for diversification purposes, yet socially responsible investors have never had a fund dedicated to doing this in a sustainable way. I got the opportunity to meet the fund manager right there in person and learn about how this investment works. Our team will certainly be following up with more research on this new option. I ended up visiting nearly all of the other new funds as well, taking notes and asking friendly yet probing questions to help me get a sense of whether these new products could add value to our clients’ portfolios.
During the conference, my Natural Investments colleagues and I arranged private meetings with several managers to delve deeper into their offerings. We learned about the financial details, but more importantly, we got to know the people behind these investments. That’s why it’s so important to attend this event—it’s the best way to get a real sense of the expertise and integrity of the people we work with. I came away from the conference thoroughly inspired, filled with new information and insights and a renewed sense of purpose for the job I do.
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 helped 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.
Releasing my “noble poverty” mindset has been an exhilarating journey.
When I first heard the term “noble poverty,” I had a visceral reaction of relief at finally having a name for a condition I had lived with since I was a child.
Mikelann Valterra, founder of the Women’s Earning Institute, has defined noble poverty as “the belief that there is virtue in not having money and that good people do not have it.” People with this mindset live by the phrase “It is better to be good and poor than rich and evil.”
The roots of the noble poverty mindset I used to carry run deep. I was raised in a devout Catholic family in a small rural town in Kentucky. My parents had me when they were both nineteen and worked hard to make a sweet little home for my siblings and me, but they struggled over money. The conflicts over power and control were exacerbated during their divorce, when I was a teen.
My experience of church teachings gave me clear messages about money: “You cannot serve both God and money,” “The love of money is the root of all evil,” and the most memorable to me as a child, “It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.”
I first started earning money through small jobs: brushing my grandmother’s hair for ten cents and later babysitting. At sixteen, I worked at a local video and record store and did my own tax returns. I worked two to three jobs at once to put myself through college, and even still, I took out as much in student loans as I could to pay my tuition; I was part of the first generation of students to incur unprecedented educational loan debt without fully grasping the consequences.
I went on to get an M.S.S.W. in social work and worked for nonprofit organizations with refugee and immigrant families and affordable housing. In my early thirties, when I began teaching financial literacy, I realized that I needed to start a retirement account and found an SRI mutual fund for my first IRA.
Even then, by age forty, I was still living with a mindset of noble poverty. I realized that I wanted to retire from this way of thinking and living. I came to understand that my calling was socially responsible investing, and I began doing deeper personal money work to liberate myself from the noble poverty mindset as I helped people align their money with their values.
As they say, when the student is ready the teacher will appear. Lynne Twist, author of The Soul of Money, taught me that we live in a world of abundance, not one of scarcity. From her work with Buckminster Fuller, she saw that our systems that are still catching up with the reality of abundance. I now work with my clients to leverage their investments to transform these systems, so that fair trade, gender equity, inclusion, and economic justice become integral to our economy.
Barbara Stanny, in her book Sacred Success, taught me about women and our relationship to both money and power. She says that women’s challenges with money are often really challenges in their relationship with power. I continue to explore this for myself and help my clients in their own challenges with power.
There are many other teachers, of course, who have helped shaped the unique path I find myself on today. I am thankful to have defined my own “brand of joy,” an idea coined by Tanya Geisler that emphasizes the WHY of my work. As we begin a new year, I am thrilled to be continuing this journey with my clients and colleagues.
Added profits are likely to benefit executives more than workers.
The fourth quarter was positive for stocks, topping off another year of growth for the markets. Large company stocks in the US rose 6.6% for the quarter and 21.8% for the year. Small US company stocks were up 3.3% for the quarter and 14.6% for the year, while foreign stocks rose 4.2% for the quarter and 25% on the year. Bonds were up 0.4% for the quarter and 3.5% for the year.
The drivers that have moved markets all year continued during the fourth quarter: optimism among traders about anticipated tax cuts and deregulation, which they believe will stimulate the economy, at least in the short-term. Positive US and global economic data have also further supported market gains.
Massive tax-cut legislation was passed in the waning days of 2017. The lion’s share of the benefits will accrue to corporations and high-income Americans in the form of lower tax rates. This comes at a time when corporations already have robust profitability; the disparity in US incomes has never favored top earners so much. The story being sold in Washington is that the tax cuts will spur dramatic economic growth, which will benefit the middle and lower economic classes as prosperity spreads, raising the financial boats for all, as it were.
However, there are reasons to doubt that the benefits will find their way into the middle or lower classes. Despite the growth, corporations generally will keep wages flat in favor of rising profits. Economics tells us that wages rise when unemployment falls because employers must compete for workers by paying them more. But in the absence of such tight labor conditions, corporations will generally use added profits for executive bonuses, reducing debt, share buy-backs, shareholder dividends or capital projects, which may include investing in automation as a way to keep their labor costs down.
Worker wages have remained stubbornly low throughout the economic recovery that began in 2008, even though unemployment has declined and is now lower than it was prior to the recession. Research shows that primary reasons for lack of meaningful wage growth include ever-growing automation, applications of technology, and foreign outsourcing—not immigrant labor, as many anti-immigrant leaders proclaim. Corporations did not raise wages meaningfully in 2017 because they were not compelled to do so, although minimum wage increases in 18 states have just gone into effect as of January 1.
Economic growth has been running at around 2% since the 2008 recession, below the rate for some prior recovery periods and below the long-term average of about 3.2%. (It is important to note that the long-term rate was accompanied by jarring boom-and-bust cycles that included growth rates as high as 16% and as low as -10% between 1947 and 2017.)
The Fed is projecting a growth rate for 2018 of 2.5%, reflecting the economic momentum coming out of 2017 and possibly some incremental rise from tax cuts Interestingly however, the Fed’s long-term growth rate estimate remained unchanged at 1.8%, suggesting a belief that potential growth from the tax cut will be temporary in nature. The widely forecasted ballooning federal debt generated by the tax cuts will likely be longer lasting.
As we look forward into 2018, leading economic indicators are generally viewed as relatively strong and forecasts support the expectation of continued growth for the year. Among the risks we are considering is the possibility that growth spurred by tax cuts and deregulation will create an overheated economy, a situation which is likely to end in an abrupt and possibly harsh recession, and may well be accompanied by a decline in the stock market. On the other hand, it is also certainly possible that the tax cuts fail to produce the economic growth promised by the legislation’s sponsors.
Finally, we acknowledge the conclusion of Janet Yellen’s four-year term in February as the first woman Fed Chief. During her tenure, she oversaw the first interest rate hike in seven years as the Fed sought to normalize its rate policy following the tumultuous 2008 recession. She has led the Fed with dignity and poise, and history will likely judge her work at the Fed favorably.
Shareholder supremacy has roots in a legal dispute between Ford and Dodge.
The term shareholder value is often used as a way to describe the theory that a company is successful if its shareholders are enriched. In and of itself, that theory seems perfectly sensible to most investors and not inherently controversial. Socially responsible investors, however, take issue with the way today’s corporate executives have distorted shareholder value into shareholder supremacy, which they use to justify the pursuit of short-term earnings at all costs—even if it means sacrificing long-term growth, environmental responsibility, and human rights.
When executive compensation is directly tied to shareholder value, the conflicts become obviously apparent, as was seen in the case of Enron’s spectacular collapse and the subsequent discovery that the company had engaged in years of fraud to boost shareholder value and short-term profits. “Very few people haven’t heard of Enron, but very few people understand what structurally permitted it to take place,” said Dennis Vegas, a former Enron employee who joined labor leaders and progressive activists in lobbying for greater control by workers over their own retirement investments, in a 2002 interview with Mother Jones the year after the company filed for bankruptcy. When asked whether he considered himself an activist, he said, “I don’t know if that label applies. If that’s being socially responsible, I’ll take that one.”
Corporate executives often justify ethically questionable decision-making with the adage that corporations are legally bound to maximize profits to shareholders. Yet the predominant legal precedent supporting the primacy of shareholder value is a single line in the dicta of a 100-year-old court ruling that pertained to a dispute in a privately held company, according to Lynn Stout, professor of corporate and business law at Cornell and author of The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations and the Public. The dispute arose when Henry Ford learned that Horace and John Dodge, who owned Ford Motor Co. stock, wanted to start a new company to rival Ford. Ford responded by drastically reducing dividends being paid out, instead lowering prices on vehicles and increasing employee wages. The Dodge brothers sued, asserting that the dividends should be paid out. The Michigan Supreme Court split the difference, ruling in favor of increased dividends, but they were not nearly as high as the Dodge brothers had hoped. Henry Ford was still able to pay his employees higher wages and decrease the price of vehicles.
The dicta of the court’s decision said, “A business corporation is organized and carried on primarily for the profit of the stockholders.” The judges who wrote the dicta could hardly have known that today’s publicly held, transnational corporations would lean so heavily on one word—“primarily”—to justify so much unethical conduct. These days, a common feature of a company’s incorporation document is the statement that a corporation’s purpose is to do “anything lawful.” The statement leaves the option open for a board to pursue what they see fit at the moment—thereby creating leeway for ethical relativism in perpetuity—instead of being held to stringent policy on what should or should not be allowed in an ever-changing world.
As socially responsible investment advisors, we see an alternative to the primacy of shareholder value: stakeholder value. We interpret this legal precedent to mean that corporations have the right to make a wide variety of choices, including those that negatively affect shareholder value—and that the qualifier of “primarily” leaves open many options. Stakeholder value takes a long-term, holistic view of a company’s success—one that considers stakeholders other than just investors: employees, customers, the state, and the broader community. According to our view, even nature should be considered a stakeholder, since biodiversity, clean water, and healthy soils are all required for business to continue, let alone thrive.
Today we are seeing many positive examples of stakeholder values at work, whether they are B-Corporations (including Natural Investments), or traditionally structured corporations choosing to take a stand. There are companies offering living wages to all employees and demanding that its suppliers end human exploitation in their supply chains. Others are building LEED certified structures, recycling their waste in innovative ways, providing employees with childcare, and working on solutions to other pressing issues. One example that recently crossed my desk is Panasonic, a company that is transitioning to renewable energy through a four-part strategy: Saving (efficiency), Creating (solar and fuel cells), Managing (grid maximization), and Storing (Tesla is using Panasonic batteries in their latest, and most affordable so far, vehicle). Although Panasonic is not a B-Corporation, its pursuit of renewable energy exemplifies the idea of a “company as a public entity.”
As fossil fuels become more resource intensive to extract—and less desirable given their carbon toll—renewable technologies such as those being implemented by Panasonic will, in the long run, provide plenty of shareholder and stakeholder value. To access these long-term and sustainable returns, however, the company must invest resources that could be used to maximize short-term shareholder returns into research and development.
By thinking more broadly, emphasizing long-term benefits for stakeholders instead of short-term profits for shareholders, we can encourage better corporate practices and help create a future where corporate values alignment isn’t just a pipe dream.
Download NI Newsletter Summer 2017 (pdf)
On March 27, 2017, the Global Sustainable Investment Alliance (GSIA) released its biennial Global Sustainable Investment Review 2016, showing that global sustainable investment assets reached $22.89 trillion at the start of 2016, a 25% increase from 2014.
Socially responsible investment (SRI) continues to grow as a favored set of investment strategies:
- Europe accounts for 53% of these assets, the United States at 38%.
- In nearly every market represented in the report, sustainable investing has grown in both absolute and relative terms since the beginning of 2014.
- Environmental, social, and governance performance and/or criteria integration is being applied to $10.37 trillion in assets.
- Growing global concern over climate change has resulted in rising interest in green finance, including climate-aligned bonds.
- Fiduciary duty and client demand are key growth drivers for sustainable investing.
While institutional investors hold the largest percentage of SRI assets, with pension funds often comprising the largest percentage of institutional SRI assets, interest by individual and family investors is growing. The relative proportion of individual and family SRI investments in Canada, Europe, and the United States increased from 13% in 2014 to 26% at the start of 2016. Over a third of SRI assets in the United States were owned by individuals and families.
To download the full report click here.
About Global Sustainable Investment Review
Now in its third edition, the biennial Global Sustainable Investment Review is the only report presenting results from Europe, the United States, Canada, Asia, Japan, Australia, and New Zealand. The report draws on in-depth regional and national reports from GSIA members—Eurosif, Responsible Investment Association Australasia, RIA Canada, and US SIF—as well as data and insights from the Principles for Responsible Investment, JSIF (Japan), LatinSIF, and the African Investing for Impact Barometer. Together, these resources provide data points, insights, analysis, and examples of the shape of sustainable investing worldwide.
About Global Sustainable Investment Alliance
The Global Sustainable Investment Alliance (GSIA) is a collaboration of membership-based sustainable investment organizations around the world. It includes US SIF, UK SIF, Eurosif, RIA Canada, VBDO (Netherlands), and the Responsible Investment Association Australasia (RIAA). The GSIA’s mission is to deepen and expand the practice of sustainable, responsible, and impact investing through intentional international collaboration. Our vision is a world where sustainable investment is integrated into financial systems and the investment chain and where all regions of the world have coverage by vigorous membership based institutions that represent and advance the sustainable investment community. www.gsi-alliance.org
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.
Download the NI 2016 Social Impact Report (PDF)
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.