The Resilient Investor

What Does Resilience Really Mean? 

Excerpted and adapted from The Resilient Investor, by Hal Brill, Michael Kramer, and Christopher Peck

For the past few years, the term “resilience” has been the buzzword du jour in economics, climate science, leadership, online security, and community planning. Surprisingly, it has managed to span the ideological spectrum even in these partisan times. The Post-Carbon Institute recently re-branded their website as resilience.org, while the World Economic Forum in Davos jumped on the bandwagon by focusing its 2013 conference on “Resilient Dynamism.” If resilience science speaks simultaneously to re-localization activists in their transition towns, as well as the 1% gathered in their enclaves, it’s clearly an idea whose time has come.

 

Let’s take a look at what is meant by resilience and why it has arisen from so many quarters as a concept that is truly emblematic of our times. In Resilience: Why Things Bounce Back, authors Andrew Zolli and Ann Marie Healy frame resilience as “the capacity of a system, enterprise, or a person to maintain its core purpose and integrity in the face of dramatically changed circumstances.” They see resilience as “an essential skill in an age of unforeseeable disruption and volatility.” A unifying and powerful lens, resilience can focus our awareness and actions at all levels—for individuals, businesses, communities, nations, and the entire planet.

Many people become aware of the importance of resilience only after a disaster. Do a search for “Hurricane Sandy & Resilience” and you’ll find numerous articles and conferences convened as decision-makers tried to figure out what we could learn from this super-storm and how we might rebuild in ways that will leave people less vulnerable. But the time to focus on resilience is before disaster strikes; in 2014, President Obama proposed a $1 billion “resilience fund” to help communities protect themselves from climate change impacts such as floods, drought, and wildfires.

Futurists and systems theorists are having a heyday, creating a menagerie of frameworks describing resilience, but it really doesn’t need to be a difficult concept; we see it all around us. Anyone who’s over 40 knows that they’re not as physically resilient as they used to be; injured children recover more quickly than injured grandparents. Healthy ecosystems bounce back from fires or storms better than degraded ecosystems. Technology companies become irrelevant if they fail to respond decisively when circumstances change: perhaps the most striking example is Kodak, once synonymous with the very idea of photography, but left in the dust by the shift to digital imaging.

For those with a strong bent on assuring that we maintain the viability of the biosphere, it’s worth taking a moment to see why resilience is starting to displace sustainability as an organizing concept. Zolli points out that sustainability tries to come up with an “equilibrium point” in which a system stays in balance but this is counter to how many natural and human systems operate. As architect and systems thinker William McDonough wryly asks, “Who simply wants a sustainable marriage?” Resilience does rely on the principles of sustainability (unsustainable investments weaken the capacity of a system to maintain integrity), but it strives for a healthy dynamism rather than stasis.

The lens of resilience makes us more cognizant that for better or worse, we have entered the age of the Anthropocene—a new term for a geological age in which humans have become the dominant factor shaping the world. Natural systems have been damaged to such a degree that we need to be prepared for random, extreme disruptions, according to Zolli and Healy. At the same time, resilience points out that we should be designing our systems, and our lives, so that we do more than survive such disruptions.  We’ll want to “capture the upside,” thriving and growing when exposed to volatility and disorder, while also seizing emerging new opportunities as they come into view.

For some, resilience has a flavor of hunkering down, waiting for disaster to hit, and coming out unscathed. That’s not a very juicy way to live, and it’s not what we mean by resilience. Our goal as investors is to make things better, for ourselves, and for the world. We are using “resilience” in its most flexible and optimistic form, still loyal to the goals of sustainability (providing for the needs of the present without harming the future), and with eyes staying sharp for emerging prospects. Here’s our new and improved definition:

Resilience helps us to thrive by anticipating and preparing for disturbance, improving the capacity to withstand shocks, rebuilding as necessary, and adapting and evolving when possible.

Resilience is a powerful remedy for our uncertain times. It helps us learn to live with the fundamental complexity of modern life, rather than trying to simplify our way out of it in order to make decisions. When the inevitable disruptions do hit the system, resilient investors will have the best possible shock absorbers to minimize being rattled, and be positioned to bounce back even better than before. Our favorite one-liner comes from Harvard business professor Rosabeth Moss Kanter, who wrote, “When surprises are the new normal, resilience is the new skill.”

Continue Reading

From “Noble Poverty” to My Brand of Joy

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.

Continue Reading

Standing Up for Standing Rock

Oceti Sakowin Camp, North Dakota

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.

 

 

Continue Reading

Retirement Planning: How We Live, as well as How Much We Need

Sufficient savings, diligent budgeting, and smart financial planning are of course crucial for a comfortable retirement. Adequate income and assets are essential for the basics— food, shelter, and healthcare—and to maintain one’s lifestyle. However, money is by no means the only important consideration in retirement.

During a recent conversation with a retired couple we serve, they shared how their community organizes an abundance of volunteer activities that offer opportunities to facilitate community engagement and encourage cooperative solutions to shared social barriers. Their enthusiasm illuminates the qualitative concerns that are central to resilient investing and highly desirable for what we might call “resilient retirement”: engaged communities, adaptability, and prioritization of the common good.

Continue Reading

Catastrophe Planning in Real Estate

As Robert Muir-Wood says in The Cure for Catastrophe: “Natural disasters are in fact human ones: we build in the wrong places and in the wrong way, putting brick buildings in earthquake country, timber ones in fire zones, and coastal cities in the paths of hurricanes.” Global climate change is already amplifying freak weather events, adding tricky considerations to today’s real estate decisions: unprecedented droughts, raging wildfires, and superstorms with their disastrous floods.

How is the smart, responsible homebuyer/homeowner to reduce exposure to such risks? No one would disagree that protecting one’s life, family, and assets is a worthy goal, but planning and preparation don’t come easily to everyone.

Continue Reading

Resilience and Disaster Mitigation

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.

Continue Reading

Bike Commuting Pays Financial, Social and Personal Returns

I bought a used bicycle in 2010, for $200. It certainly is not the fanciest, no carbon fiber or titanium, but it’s sturdy and has stood up well for the past seven years. I’ve spent some money on tune-ups, replacing tires, a new helmet, a rack, and gear bags as well. Altogether, I have spent just under $1,000 on it.

Many days I choose to commute to my office on this bike, an eight-mile round trip, which takes me about forty-five minutes total. Having done this for a number of years, that’s about 11,000 miles of travel on this bike on trips where I would otherwise have been driving.

Continue Reading

Financial Planning for Dementia

None of us wants to think about the possibility of losing our ability to make sound financial decisions, but many of us eventually will, owing to an accident or illness, especially some form of dementia. What would happen, for example, if in a period of impaired judgment you started taking large amounts of money from your accounts or were enticed to fund a get-rich-quick scheme? Is there anything that can be done to help protect you and your assets?

An easy first-line defense is the NI Sharing of Information Consent Form, which you can file with your advisor. The form gives your advisor and Natural Investments permission to contact designated people if your advisor perceives that a request or behavior is uncharacteristic of you and your goals. An unusual request does not necessarily signal a loss of capacity to make decisions, and in all likelihood the form would never be needed. But should the situation occur, a quick double-check by your adviser with someone whom you trust could prevent a potentially significant mistake. Your advisor can help you choose the best person for this role.

Continue Reading

Coming to Grips with Sudden Wealth

Did you ever know someone who was an environmental advocate, or your locavore activist friend, or a deeply religious soul—fill in the blank—who lived their lives with their values-flag writ large? Unless you know them very well, you might not be aware if they’ve had decisions to make about their money life that have challenged those core values. Spoiler alert: not all these stories have happy endings for these caring souls!

Kristine unexpectedly inherited a significant sum after someone she knew died and left her money (all names are pseudonyms). She is an aggressive activist leader, nationally known and engaged in growing the local community. She has steadfastly moved her money out of mainstream investments and into everything from CDFIs to municipal bonds to progressive alternative offerings. She wants decent returns, but prioritizes her core values as she works with her windfall. One of the new-economy heroes! In the beginning, though, it took some time and dedication to find a financial advisor that would “get” her values and support her non-traditional choices. After interviewing a few advisors and not finding the connect she wanted, a friend recommended her fee-only SRI advisor and Kristine finally found the ally she was looking for.

Shawn was a young environmental activist involved in stopping nuclear power plants in New England. As he grew his family, they used electricity as little as possible and added solar when that became financially feasible.

Continue Reading

Appreciating Appreciation

Recently I talked with a client who is considering buying a house in Sonoma County. As you might know, the housing market here in the Bay Area is variously described as “crazy,” “red hot,” “ridiculous,” and “divorced from reality.” A similar situation prevails in many cities and towns across the country. Should a smart home buyer take the leap now or wait and hope for prices to drop? How do you evaluate whether renting or buying is the best strategy?

The comment sections of innumerable personal finance blogs are strewn with the wreckage of the battle—no, the war—around this question. It’s nearly as hot as the debate over whether to pre-pay a mortgage or not (don’t get me started). As a math major, I like to look at the numbers myself, play with calculators, build my own spreadsheets. After hours of work on this my definitive answer is “it depends.” Seriously. It depends on a bunch of factors, but actually pivots on one big factor.

Continue Reading