The other bottom lines: social and environmental returns
By Susan Taylor
How do you quantify pollution prevented or people treated fairly? How do you measure the economic benefits that ripple outward from energy-efficient, low-income housing that wouldn’t even exist without people who invest for impact in the world? Such issues can’t be quantified as easily as financial performance, yet these are the metrics of the social and environmental investor.
Twenty years ago, NI developed the NI Social Rating to evaluate and compare sustainable and responsible mutual funds. Funds are ranked on a scale of one to five hearts – an apt symbol for social investing – based on screening for environmental, social, and corporate governance factors and for shareholder advocacy and community investing. The hearts tell a story of the focus and mission of the respective mutual funds. And embedded within those hearts are the stories of the people for whom social investing makes all the difference.
One of the five-heart rated mutual funds held by many NI investors is Domini Social Bond Fund. Its holdings include such community development investments as a “Job Builder” CD with Hope Federal Credit Union of Jackson, MS, an investment designed to support small businesses in economically distressed communities in areas still suffering the effects of Hurricane Katrina.
Portfolio 21, another mutual fund held by many NI investors, focuses on environmental impact, actively looking for companies that are positioning their products and their operating methods to adapt to our planet’s future of resource constraints. For example, Portfolio 21 holds shares in Potlatch, a timber and wood products company whose 1.4 million acres are certified to Forest Stewardship Council® standards of sustainably grown and harvested forests.
The mutual fund also holds Staples, the office supply company that already has achieved an average of 40% recycled content in its paper products, and the French company Air Liquide, which provides oxygen and hydrogen for lower-emission industrial processes and cleaner fuels. An investor in Portfolio 21 is investing in these companies and a long list of environmentally progressive leaders around the world, having impact now and in the future.
The CRA Fund, managed by Community Capital Management, is a fixed income mutual fund that invests in such projects as an affordable, multifamily housing property that incorporated recycling of building materials, water conservation features, and energy efficiency. Homeowners can find more affordable housing and cut their utility expenses and carbon footprint at the same time; all this made possible in part by NI’s investors in the CRA Fund.
Shares of the CRA Fund are also investments in food from coast to coast. Community Capital invested in a bond issued by the Greater Boston Food Bank, financing the building to be used for the food bank’s food distribution programs. Energy-efficient and community-friendly, the building roughly doubles the food bank’s operating space. Community Capital also purchased a Small Business Administration loan that financed Sotos Produce Market, a fresh fruit and vegetable market in a low-income, food desert neighborhood of Compton, CA.
Arguably, the highest social impact investment in many NI investors’ portfolios is the Calvert Foundation’s Community Investment Note.
The mission of the non-profit Calvert Foundation is to create a more equitable and sustainable society by getting capital into the hands of people who may not be able to get loans from more traditional sources to support the value they can add to their communities and to their lives.
For example, the Calvert Foundation recently made a low-interest loan to d.Light, a company that makes and distributes solar lanterns. Poor families in some developing countries spend 10 to 30 percent of their income on kerosene—expensive and dangerous, with emissions that cause health problems by degrading indoor air quality. d.Light ’s solar lanterns helped an estimated half million people last year alone have safe, affordable, pollution-free light despite their lack of electricity.
Calvert Community Investment Notes support groups like Cape Cod Fisheries Trust in New England. In part because commercial fishing permits there are so expensive, much fishing has become industrial scale, done by trolling, which depletes the fish stock at an unsustainable rate. Not waiting for regulation to change fishing methods, the Cape Cod Fisheries Trust collectively buys commercial permits and leases them at low cost to smaller, local fishing operations. In exchange, the fishers agree to harvest the catch with small boats and traditional gear, methods that will ensure fish stock for the future.
The Calvert Foundation also targets loans to Oikocredit, one of the world’s largest sources of private funding to the microfinance sector. Among its many projects, Oikocredit provides financing to a locally run organization in India that gives small loans to women for their tailoring or food preparation businesses. Oikocredit partners with a savings and credit cooperative to create a mobile banking project that gives people in a remote district of Northern Kenya access to financial services and health information. They also provide financing for a Philippine entrepreneur who turns wasted coconut shells into charcoal fuel briquettes, which helps preserve local forests, then uses the process’ by-product as an environmentally sound fertilizer and pesticide.
Safe lighting, sustainable fish stocks, and community development are in part made possible by low-interest loans from the Calvert Foundation, which are, in turn, supported by NI investors in Calvert Community Investment Notes.
Only rarely might social impact alone justify holding any investment. After all, an investment is intended to help us reach our long-term financial goals. But NI investors seek a triple bottom line: financial performance, social performance, and environmental performance. Clearly, NI investors make a difference in the world with their assets, weighing in on the side of social justice and environmental sustainability.
See the recently updated NI Social Ratings at our website
This article first appeared in the Spring 2012 edition of the Natural Investment News
Trackback from your site.