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%.
One year ago, in January 2018, three citizens locked themselves to the front entrance of a downtown Wells Fargo bank branch in the city where I live and work, Duluth, MN. The protesters prevented business from being conducted at the branch for three hours. The reason for their actions were simple and well-articulated: they were protesting Wells Fargo Bank’s financing of Enbridge Corporation Line 3, an oil pipeline that runs 1,097 miles from the tar sands of Edmonton, Alberta, to the Enbridge oil storage facility that sits about a mile from the south shore of Lake Superior, just a few miles away from the site of the protest. Environmentalists have deep concerns about the climate impacts of the tar sands, as well as the threat the pipeline poses to local waterways and Indigenous land rights. The police eventually came to the branch to remove the locks and arrested the protesters. All three were charged with misdemeanor trespass, disorderly conduct, and obstruction of justice.
A little over one year ago, President Trump reaffirmed his intention to withdraw the United States from the Paris Climate Accord. As if on cue, an iceberg the size of Delaware broke away from the Larsen C ice shelf in Antarctica, where temperatures have risen nearly five degrees on average over the past few decades. And Hurricane Harvey, Hurricane Maria, and Hurricane Florence wrought unprecedented destruction in rapid succession upon Texas, Puerto Rico, and North Carolina, respectively.
Scientists and researchers are still working to measure the astounding human and environmental toll from the hurricanes, which are considered to be climate disasters due to their intensity. Hurricane Maria resulted in nearly 3,000 deaths and left Puerto Rico without electricity, telecommunications, or water services for months. Hurricane Harvey caused at least 100 recorded releases of toxic chemicals in a region with 500 chemical plants and 10 oil refineries. NASA’s satellite images of North Carolina after Hurricane Florence show inky black currents of organic matter—mostly sewage from massive chicken and hog farms in the area—seeping into the blue waters of North Carolina’s coastline.
The community I call home, Duluth, MN, happens to be perched on a steep hillside that runs down to the shores of the largest freshwater lake in the world, Lake Superior. There’s hardly a place in town where you can’t turn around and see the lake stretching out across the horizon. With such an expansive geographical feature nearby, it’s not surprising that people who live here share a special affinity for the lake, borne out in the names of local businesses (Lake Superior Brewing Company, Lake Superior Garden Center), local colleges (Lake Superior College), and the plethora of Lake Superior tattoos that adorn the bodies of many young locals.
Because Duluth people love Lake Superior with such fervor, we were outraged when we read about a recent study published in the peer-reviewed journal Plos One that found eight of nine tap water samples taken from all five Great Lakes, including our beloved Lake Superior, contained plastics. It was especially alarming for the significant population of beer lovers in our community to learn that scientists also found micro-plastics in all of the 12 brands of beer brewed with water drawn from the Great Lakes.
FACTFULNESS: Ten Reasons We’re Wrong About the World – and Why Things Are Better Than You Think
By Hans Rosling
Hardcover: 352 pp. Flatiron Books
The conundrum about this book is that it really should be read by those folks who never read books. You know who I’m talking about. The late Hans Rosling, who died in 2017 after an impressive career in education and public health, urges us to let the data tell the story, rather than imposing a narrative based on our “dramatic instincts.” He highlights ten ways that our instinctual bias and craving for drama, similar to our craving for sugar and lethargy, undermine our wellbeing.
Many people are motivated by the desire to be as prepared as possible for an uncertain future, but they recognize that this is no easy task. We encourage you to take a big picture view of the world and consider the many ways that the future could unfold. You’ll want to envision where you would like to be going in both the near-term and in years to come, and to keep abreast of the wide and growing range of investment choices available to you. By thinking in this broad, creative way, resilient investinggives you the tools to design a personalized plan. This will show you where you’re currently investing your time and money, highlight areas that you might be over or under emphasizing, and provide the guidance you’ll need to move forward in your chosen directions.
As you put your plan into action, you’ll notice a newfound sense of calm, one that rests on the knowledge that you’ve taken measured steps to future-proof your life and are ready to ride out the inevitable storms and surprises that come your way. You can’t eliminate risk, but you can dial down your stress levels and have more peace of mind by knowing that you’re prepared. Having a comprehensive and diverse set of investments will provide genuine benefits when one or another market you’ve invested in has a downturn (whether it be a sudden drop in the Dow, a dry spell that decreases yields in your garden or regional food network, or an unexpected health challenge). While it is always painful to suffer a hit in one area, investments in other Zones will likely be doing better and help carry you through.
“I want my money to have a positive impact in the world but my dad (uncle, mom, broker) said that was a stupid idea. Is it?”
That depends. If what you mean by “a positive impact in the world” is that your broker simply screens out investments in certain companies or industries, well, sorry, yes, that on its own might be a bad idea. That approach could damage a portfolio.
If you’re serious about getting your money to make a real difference for people and the planet by investing in all kinds of good things with smarter financial analyses and strategies, yes, we believe this is a really good idea.
“Ok, but how can I do all that?”
Natural Investments maintains stringent and thoroughly researched investment due diligence standards and procedures. No system is perfect, but we have developed a strong process over the last few decades of work. Here are some of the pillars of our investment strategy:
There is no question that the political world is wildly turbulent these days. If you are like me, you may often fall prey to the depressing news coming out of Washington, D.C. Every day it seems like some environmental regulation is being rolled back, the government is oppressing a new group, or that we are on the brink of a budgetary crisis. All of this is before we even talk about global warming. So what is a progressive investor to do?
I was recently reminded of a line that President Bill Clinton likes to use, which is to look at “trendline not headlines.” In today’s world, there couldn’t be better advice. In the age of clickbait headlines, social media frenzy, and scary sound bite news, this can be hard to keep in mind—but the trendline does tell a more accurate story.
So let’s take a dive into some trend lines and see what is actually happening.
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.
Both stock and bond markets finished the quarter with solid gains. Large company stocks in the U.S. were up 3.1%, while smaller companies gained 2.5%. Foreign stocks were in the black as well, up 6.1%. Bonds advanced 1.4%, even as the Fed raised interest rates.
Federal Reserve officials forged ahead with another interest rate hike in June, the third in six months, and maintained their outlook for one more hike this year. The Fed announcement struck a careful balance between showing resolve to continue increasing interest rates toward more historically normal levels, and acknowledging concern over unexpectedly low inflation this year. While we may think of inflation as a bad thing, the Fed sees benefits in it—in the right measure.