The sea change we seek: Economic recovery backs SRI goals

By Michael Kramer and Scott Secrest

This material first appeared in the Spring 2009 issue of the Natural Investments newsletter

There is a sea change in Washington, and it is interesting timing. The shift to a Democratic executive branch, along with a Democrat-controlled Congress for the first time in 15 years, is facilitating an ambitious set of policies and programs to both revitalize the economy and reprioritize the national agenda. Both the TARP and the American Recovery and Investment Act boosted ideas that have been championed by progressives for many years, and are now being taken seriously as critical aspects of the economic recovery plan.  Click through to read about these new federal priorities, including new financing for community-based development institutions, green energy investments, and shareholder oversight of executive pay.

TARP Boosts for Community Investing and Shareholder OK of executive pay

In addition, many of us in the field advocated for community development financial institutions to receive TARP funds. We were thrilled when in February $100 million in new financing was provided by the government to these CDFIs, which, as you know, specifically provide much needed capital, credit, and financial services to community- based lenders that are on the front lines of battling the economic crisis. CDFIs are well positioned to immediately and responsibly deploy resources to support homeowners and small businesses in the communities that need it the most. Nearly all CDFIs have seen an enormous jump in loan applications since traditional banks froze their credit lines in the early stages of the crisis. For many small businesses, particularly those in emerging green sectors that rely on credit to expand their inventories, CDFIs have literally prevented them from collapsing during this crisis. While $100 million isn’t much, the institutions will be able to leverage it four- fold to create much larger loan pools.

Of notable interest to natural investors is the American Recovery and Reinvestment Act’s framing of executive pay limitations. The SEC announced in February that most, if not all, of the companies taking funds through the Troubled Asset Relief Program – that’s 400 major corporations – will need to have a shareholder vote on executive compensation. This is a historic victory for all of us who believe in corporate accountability and shareholder voice, and it may not have been possible had this crisis not occurred. Hundreds of companies will have to hold “say on pay” votes this year. This also changes the context of the discussion by adding significant pressure on other (non-TARP) companies to implement a similar advisory vote.

The Obama stimulus bill boosts conservation, energy

In February, President Obama signed the $787 billion American Recovery and Investment Act into law. The goal is to inject the economy with money, lots of money, to help stem the economic decline, and turn the corner back to growth in the economy.

At Natural Investments, we welcome parts of the stimulus plan for their support of alternative energy and conservation measures. Here are some of the provisions:

  • Solar: Grants—instead of tax credits— will be available for offsetting 30 percent of the cost of installing a solar system.
  • Wind: The production tax credit has been extended through 2012. Businesses that operate small-wind projects can get a true 30 per- cent tax credit to help offset their capital investments.
  • Smart Grid: The government could reimburse as much as 50 percent of the costs of carrying out smart grid demonstration projects.
  • Fuel-Efficient Cars: A tax credit of up to $7,500 is available for those buying a plug-in hybrid electric car, with a smaller tax credit available to buyers of neighbor- hood electric cars, electric motorcycles and three-wheeled electric cars.
  • Energy Efficient Federal Buildings: A $5.5 billion program to make federal buildings more energy efficient, including installing solar energy systems.
  • Alternative Fueling Stations: A 50 percent tax credit, up from 30 percent, for gas stations or other businesses that install alternative fuel pumps that dispense E85 fuel, electricity, or natural gas
  • Energy-Efficient Homes: Consumers can get a 30 percent tax credit for buy- ing certain heating and cooling equipment for existing homes.
  • Batteries: $2 billion in grants for manufacturing advanced batteries for cars and other devices in the United States.

Our struggling economy presents us with plenty of reasons for concern. But, there are also reasons to be hopeful. The rampant growth economy that we’re all supposed to be trying to bring back was tearing through the world’s rainforests, mountaintops, aquifers, fisheries, soils, and other resources, driving thousands of species toward extinction, changing the climate, and leaving millions behind in the rush for rapid economic growth.

As painful as this downturn may be, it represents a chance to build a different sort of economy. One that offers dignity, livelihoods, reduced reliance on credit, and a more sustainable future for our children. More moderated, intelligent, sustainable growth in the future may be the ultimate reward for the shaking-out process we’re presently experiencing.

We ruminate over the folly that brought our economy to this enfeebled state. But, we take hope in the resilience of the U.S. economy—an economy which is in fact us and our neighbors across the country—and in the promise for more sound and sustainable economic underpinnings in the future.

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Jim Cummings

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