This week: 5 ways to invest consciously, conscious capitalism in real estate, Brown Uni gets rid of student loans, why ESG is the future of ETFs, and more…
Want to invest consciously but don’t know where to start?
Ibrahim AlHusseini investor, philanthropist, and founder of FullCycle Energy (a fund that finances projects which convert waste into clean fuel,) presents 5 of the easiest ways to start.
Switch your bank
As was revealed during the Dakota Access Pipeline protests, many traditional banks are heavily invested in fossil fuels. In addition, many hold investments tobacco and weaponry. There has been a rise of responsible banks that are divested from these destructive products. Aspiration Bank’s motto “Do well, Do good” speaks for itself. They are completely divested from the fossil fuel industry. Other impact focused banks are Beneficial State Bank and New Resource Bank. These banks have deep commitments to the environment, sustainability, and community-level prosperity.
Look for companies that are certified B corps
What do Patagonia and Etsy have in common? They are Certified B Corporations which means they have met the legal and performance requirements of the Benefit Corporation Declaration of Independence. To qualify they must adhere to goals of doing no harm and spreading benefit to all. Companies that earn the B Corp label commit to a set of practices and values which incorporate environmental sustainability and social responsibility into their business model and finances.
Seek out sustainable fund managers with experience in conscious investing
While conscious capitalism has definitely entered the mainstream for good, it is wise to remember that this is a new market. Many larger and traditional brokerage firms are jumping into the impact space, but not all have the same depth of experience or acumen. Some simply do it because it is a trend that they want to capitalize on. It’s really important to choose a money manager with an established reputation and extensive experience in impact investing. Ask your fund managers about their prior experience and especially how they align your investments with the UN’s Sustainable Development Goals. Make sure that their team of experts know how to measure and quantify the ability of a fund to meet environmental and social returns as well as financial returns.
Take advantage of new tools and services
The internet has allowed everyday people access to investments, including impact investments, that were previously only accessible to the very wealthy. Today there is a broad set of tools and services that help individual investors find select impact companies and projects. For example, Swell is an impact platform that allows conscious investors access to investment projects across six categories: green technology, zero waste, renewable energy, clean water, healthy living and disease eradication. Enable Impact, WeFunder and Rabble also focus on driving capital toward investments that focus on more than just a financial return.
Join the community and get informed
The democratization of information made available by the internet gives today’s consumers and investors a new and unique opportunity to learn and become involved. Websites (like Wellwallet.com), conferences, and networks facilitate collective learning. Search for websites and communities involved in the conscious capitalism movement and take part. Learn from industry leaders who publish studies and hold conferences. The annual Business for Social Responsibility (BSR), SOCAP (Social Capital) and GIIN (Global Impact Investment Network) conferences are all excellent opportunities to meet others in the space, learn from industry leaders and evaluate current opportunities or challenges.
When Nick and Chad Engle of Costa Mesa decided to start a real estate business, they wondered how they could give back.
“I’d read a lot about conscious capitalism and giving back, and I always had kind of kicked myself that I didn’t do more.” – Nick Engle
They did some research and found a company, From Houses To Homes, that had been building houses in Guatemala since 2004. So they went down to Antigua, Guatemala in October and discovered that the company was doing a lot more than building houses. They were supporting families by helping with healthcare and education as well. And they’d already built 1200 houses.
The brothers, who previously had no experience in construction, jumped in and started carrying concrete bags up to building sites, learning as they went.
Now, for every home they build in the US, they build one in Antigua. So far they’ve built 17 homes and their goal is to get to 30 by the year’s end.
The brothers say that visiting the families who are in the homes that CASA built motivates them to continue. Like the single mother they helped who is supporting three kids under the age of 7 on part-time wages.
“We knew what to expect,” says Nick, “but it was emotional.”
Though they know they have their work cut out for them in Guatemala, they have dreams of doing something similar back in the US – to build an entire region in Orange County.
Chad says that the most common reaction they get from people when they say they are building houses for others is disbelief.
“People will say ‘what do you mean you’re going to build a home?’ Then we show them the video, and people want to know how they can help, too.”
Brown University has just completed its first round of funding to replace student loans with scholarships in its 2018 financial aid packages by hitting its 30 million initial funding goal.
Less than three months ago, Brown announced it was launching a fundraising campaign to completely remove student loans from financial aid packages for current and incoming undergraduate students, with plans to start next academic year if the university met a key fundraising goal. It has.
Debt should not deter students of modest means from coming to Brown. – Brown president Christina Paxson
Scholarships will begin replacing loans in Brown students’ financial aid packages for the 2018-19 academic year. Both incoming freshman and returning undergraduate students will have access to these resources.
The response so far to The Brown Promise has been nothing short of phenomenal – Brown president Christina Paxson.
Brown needs an additional $90 million to hit a $120 million sustainability goal for the program to become permanent.
While ETFs have had a strong run with more than $3.3 trillion in assets, if volatility arises in 2018, interest in non-traditionally weighted ETFs, such as ESG (Environmental, Social and Governance) can be expected.
It is “an imperative” among asset managers to attract a new generation of clients demanding values-based strategies. – CEO, Thompson Peak Advisory, Sue Thompson, (former managing director at BlackRock’s iShares)
Some advisors still seem reluctant to accept that today’s ESG strategies can beat the market. Also, there isn’t a one-size-fits-all-values ETF.
“Factor investing could be the antidote—an ETF can weight to environment or governance issues,” instead of, or in addition to, traditional factors such as size and volatility, says Thompson.
According to ETFGI partner Deborah Fuhr, one of the industry’s leading commentators, and an early identifier of the significance of the ETFs over seventeen years ago, many are saying ESG is another form of smart beta.
Guided by the principles of conscious capitalism, Satori Capital lives the sustainable investing model and has earned 5th place in Pensions & Investments’ Best Places to Work in Money Management program.
With approximately $900 million in assets under management across a private equity and hedge fund platform, the Dallas-based firm offers its 24 employees flexible scheduling, allowances towards gym memberships, and wellbeing coaches as part of their employment package.
“I always tell friends that I am the same person at the office that I am on the weekend. There is no playing the ‘corporate politics’ game. Communication among the business units and across the firm is frequent and detailed. Feedback and coaching is communicated weekly in one-on-ones with my supervisor,” wrote one employee in response to the Best Place To Work survey.
“We aim to be true strategic partners. This requires a workplace that is transparent and service-oriented and a recruiting process that is led by our values.” – Randy Eisenman, co-founder and managing partner, Satori Capital.
Morgan Stanley has launched Access Investing, a roboadvisory product whose SRI (Socially Responsible Investing) portfolios also include impact-investing criteria.
Morgan Stanley’s own studies have shown that 86% of millennials say they are interested in socially responsible, or values-oriented investing.
By offering a diverse set of portfolios, we are enabling our clients to invest in what they believe. – Lisa Shalett, head of investment and portfolio solutions at Morgan Stanley Wealth Management
Their impact portfolio invests in globally diversified mutual funds and ETFs that own companies that integrate environmental, social, and governance, or ESG, factors. For example, you can add a theme of climate action or gender diversity to an impact portfolio.
Tensie Whelan, director of the Center for Sustainable Business at New York University’s Stern School of Business, talks about the growing bottom-line case for sustainable practices. Highlights from the interview:
Why has there been such a change in corporate attitudes toward environmental issues?
Supply chains are now transparent to everybody and approximately 80% of most companies’ value is now intangible; it’s in their reputation. Companies need to manage for that radical transparency, and sustainability issues—social, as well as environmental—are a big part of that.
What’s the impact of companies with governance programs?
The financial case for sustainability is the high correlation between good environmental and social governance performance and good stock performance. Also, lower cost of capital and better operational performance. When you’re incorporating sustainability and you have a significant greenhouse–gas emission commitment, that drives innovation because you’ve got to develop new processes, products, and services. It drives risk reduction because you’re less dependent on a volatile commodity or because there’s less reputational risk. You also can drive employee engagement and retention.
What happens when companies adopt sustainable practices?
An example is the beef industry in Brazil and its commitments to deforestation-free and sustainable agriculture. Ranchers saw 2.3 times an increase in productivity, a sevenfold increase in profitability, and the quality of beef went from zero to 70%. Small ranchers saw their income go up millions, and those benefits accrued up the supply chain.
What can companies do to bring in a broader array of stakeholders other than shareholders?
Investors are beginning to see that this a problem they need to address. If you manage your affairs solely for shareholders at the expense of hiring and retaining good employees, ultimately shareholders will suffer. Managing for employees and customers is also managing for the shareholders.
Is the current (Trump) administration a setback for sustainability initiatives?
Companies are making these changes regardless of what’s happening in Washington. While some companies may take advantage of the next four years, international companies just can’t afford to go back on their sustainability commitments. Even in the US, people are holding brands accountable and are asking for brands to take positions in ways they have never done before.
Photo by Steve Harvey