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%. The Trends Report contains self-reported data from 365 investment management firms and more than 1000 community development financial institutions and vehicles. The numbers illustrate significant growth in assets in SRI opportunities across all categories over the past two years:
730 mutual funds, ETFs, and other registered companies (200 more than 2016);
780 venture capital, private equity, real estate and hedge funds (350 more than in 2016); and,
1000 community investing institutions and funds whose assets have expanded by more than 50 percent since 2016 (e.g., community credit union assets have doubled during this period).
The growing popularity of socially responsible investment (SRI) can largely be attributed to investor demand, according to the report, resulting from a change in retail investor priorities as well as the stated mission and social purpose of institutional investors. A recent Eaton Vance study of 1000 financial advisors showed that about 80% of investors now ask for sustainable and responsible investment options. The entry of several large mainstream investment firms (e.g., Blackrock, Oppenheimer) has further validated the SRI approach in the eyes of conventional investors, while online platforms offering ESG options and the proliferation of ESG ratings systems for funds have increased investor awareness of and interest in this approach.
Many environmental and social issues—from climate change and Indigenous land rights to gun violence and racial and gender discrimination—have spurred public campaigns to move money from objectionable to ethically tenable options, particular in light of the governing Republican opposition to measures and regulations that address these issues.
Climate change, for example, is currently the leading ESG issue for money managers. Many have established fossil-fuel-free investment policies and filed nearly 300 shareholder resolutions that ask companies to acknowledge and report on the business risks of climate change. Other shareholder engagements, which include more than 1000 dialogues with corporate managers and over 700 ESG-related resolutions in 2018 focus on political contributions disclosure, tobacco, gun and weapons manufacturing, human rights in conflict minerals countries, alcohol, corruption, and governance (including the rights of shareholders to nominate directors to corporate boards and place such candidates on proxy ballots, a policy now in practice with 65% of S&P 500 companies). Money managers also report that nearly $2 trillion of assets under management now have restrictions on investments in weapons, a nearly five-fold increase from 2016.
Excerpted and adapted from The Resilient Investor.
In Local Dollars, Local Sense, a thorough survey of the local investment movement, Michael Shuman makes a compelling case that small businesses comprise about half the GDP of the United States, but most investors are completely missing out. Overinvesting in Wall Street and under investing in Main Street (and other Close to Home Strategies) is a diversification problem that this book, and especially this Strategy, intends to help you overcome. As we mentioned earlier, while this type of financial investment has been difficult at best for most of us, there are encouraging developments underway.
While everyone is involved with at least some, and usually many, “close to home” activities, there are two groups for whom this has become the main focus of their resilient investing practice. The first works to enliven local economies, primarily because of the positive effects that enhanced community resilience would offer under any future scenario, and secondarily as a hedge against systemic economic shocks. They bank local, buy local, and invest in local businesses. Transition Towns, and many other local and regional initiatives are engaged in such proactive “going local” efforts. Others draw investments close to home to prepare for systemic breakdown, with an emphasis on personal and family survival, and in some cases, to strengthen regional resilience. Their goal is to increase their odds of surviving “the end of the world as we know it.” Some are “preppers,” caching food, water, and ammunition on the edge of civilization, while others are deep ecologists who believe we’ve passed irreversible ecological tipping points, and that their energy is best used in personal and regional preparedness.
We might playfully label folks from these two perspectives “bloomers” and “doomers.” For the bloomers, with the intention of building community resilience, the paramount goals are diverse local ownership, sustainability, and helping “dollars stay in the local economy to improve quality of life for all.” Doomers, who aim to ride out “the big reset” through personal resilience, see self-sufficiency and protection against threats as primary; some also stress moral integrity and charity. Both perspectives put a premium on good soil, heirloom skills, personal health, and freedom from dependency. Close-to-home investors include both of these camps and more, including those who take small actions as modest hedges against the possibility of systemic shocks and to fosters cherished human values. As long-standing community activists, we’re motivated more by the desire to be proactive, but we also resonate with the wisdom of “be prepared.”
Excerpted and adapted from The Resilient Investor by Hal Brill, Michael Kramer, and Christopher Peck
The world in which we live is volatile, uncertain, complex and ambiguous. There’s an unfathomable intertwining of relationships that underlie the global economy and the physical world, making predictions virtually impossible. As financial advisors, it hasn’t been easy for us to overcome our desire for certainty about where the world is heading. But once we acknowledged that the world may not be sitting on the most solid of foundations, and that our clients hold a range of views about our possible futures, it became essential to explore strategies that speak to both emerging innovations and local resilience.
Even a few years ago, such a multifaceted approach would have been impractical, as there were few opportunities to invest in alternative strategies. Today, we are energized by the explosion of socially responsible investing (SRI) options
Best-selling author and Natural Investments client Vicki Robin recently published a fully revised fourth edition of her classic book, Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence. With more than 1 million copies sold over the past 25 years, this book has guided countless people to take control of their spending, reduce debt, increase savings, and ultimately achieve financial independence. We are honored that Vicki asked us to collaborate on revising the last chapter of this edition, and we are grateful that she was able to take a short break from her book promotion tour to speak with us.
Diversification is, at its root, a response to the ancient admonition you might have learned from grandma: don’t put all of your eggs in one basket. If that basket drops they could all break, ruining your and grandma’s breakfast! This proverb can be traced back to the 17th century, and was popularized by Cervantes in Don Quixote. (Later, Mark Twain, ever the contrarian, proposed the exact opposite: “pull all your eggs in the one basket and—watch that basket!”
The wisdom of Cervantes goes nearly unquestioned today. Virtually every reputable financial firm teaches people about diversification, extolling the importance of spreading out risk. But—and this is an important but—we contend that however well intentioned, Wall Street’s version suffers from two major omissions: first, they focus solely on one’s financial instruments, and second, they can’t model the possibilities of Breakdown/Breakthrough, so they presume that we’ll be Muddling Through for the foreseeable future.
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.
As frontrunners of the socially responsible investing movement, we at Natural Investments are “resilient investors” who are working off a radical new map of the investing universe. We invite you to navigate your own path across this vast terrain. But before we start exploring the nooks and crannies, let’s take a moment to ask the fundamental question: why invest?
Some would say this is obvious—we invest to build wealth. And what’s the point of building wealth? To be secure? To then build even more security and more wealth? Isn’t that what we all want? Well, no, at least not in the way it’s usually presented. While we take it as a given that most people want to increase their financial assets (at least up to a point) and have some nice things, traditional measurements of personal wealth are inadequate, often ignoring that which gives us the most satisfaction. Economists measure our “standard of living,” but what we’re really after is a higher “quality of life”—and while there is overlap, those two are not the same thing! The point of investing, we’d like to suggest, isn’t just about having more, but about being happy in a full, classical sense.
Let’s look back—back as far as 2500 years—for help in answering these questions. Aristotle, writing in the Nicomachean Ethics, described the point of a well-lived life, the goal we should be aiming for, as “blessedness.” For Aristotle, blessedness meant enjoying family and friends, with a deep feeling of well-being and contentment. In our day, this ideal might suggest a mature experience of knowing one’s mission, succeeding at pursuing that mission, having a solid primary relationship and close friends and family, having sufficient financial resources to live well according to your own standards, to be making a contribution and leaving a legacy one can be proud of, and staying in right relationship to the natural world that sustains life. It’s not about more—it’s about better!
We don’t think of investing as simply a professional, numbers-crunching discipline; for us it’s something much more fundamental. We believe investing should support financial goals (buy a house, start a business) and it should support the bigger and deeper and more profound purpose of a life: Aristotle’s blessedness. Investing can help each of us live a better life, and it can help improve communities and build a better world for all.
To do this, we must first break out of the confines that limit our ideas about wealth. Financial choices are just one part of a continual process of giving and receiving, balancing risk and reward, and exchanging time, energy, and money with those around you. So let’s make room for values and communities, for society and the Earth. And let’s expand our vision to include the interior realms of emotional and spiritual well-being as well, which are enduring elements of healthy human development. By doing so, we are bound to get more relevant, and more life-nourishing results.
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.
My family and I survived the Northern California firestorm of 2017. We were incredibly fortunate; unlike many our friends and residents in our area, we did not lose our home or livelihood. At the peak moment of fear, the fire came within 3,400 feet of our home. I spent hours wetting the roof, talking with panicked neighbors, and gauging the wind and the smoke. We got ready to evacuate by packing the car, letting our chickens loose, and making peace with the thought of starting over. Thankfully, some can-do neighbors with tractors plowed down the fire front, and we were spared.
Months later, our lives returned to normal. But as a planner, I am surprised at how unprepared we were when disaster arrived. We had planned for this. We’d held meetings with family and neighbors, checked on each other’s stores of water, food, and supplies, and located the water and gas shut-off valves for each home. We had back-up phone numbers of relatives, battery packs for our phones, and emergency radios. But still, we were missing critical elements. I share these insights now, with the hope that they will encourage others to prepare well in advance of fire season.