In our society, women’s money experiences are vastly different than men’s.? Money is divided along gender lines in ways that might not be obvious at first. Women are at a disadvantage when it comes to earning and saving. It also costs more to be a woman.? These differences add up and ultimately impact a woman’s ability to retire in an equal manner as a man.
Women are at a disadvantage when it comes to earning and saving. It also costs more to be a woman.
The Pay Gap
On average, women still live longer than men do. This means that, to have the same quality of life after retirement, women have to save more than men. Their retirement pot has to be bigger because it has to last for a longer period of time.
Women also have to save more as a percentage of their income.?Let?s say we take the popular statistic that women make 78 cents to every dollar that men make. If men save 10 cents of that dollar, women have save 10 cents from 78 cents to be on an equal footing.? In addition, because we live longer, we have to save even more (say, 12 or 15 cents out of that 78 cents).
We all know how hard it is to save 10%, 15% or 20% of our take-home pay.? On a lower base, it?s even harder for women because it?s not like rent or food is cheaper for women. In fact, when it comes to women, many consumables are even more expensive.
Women generally live longer than men do and have to save more as a percentage of their income for retirement.
Gender specific consumable goods are more expensive for women.? There are more examples than we can count: vitamins, razors, shaving cream, drugstore lotion, dry cleaning.??These products and services cost more once they are branded pink.? According to the NYC Department of Consumer affairs, women pay more for pink packaged products 42% of the time.? Even if we say the price difference is only 5% more, we’re not just talking about a single item.?There can be 10-20 regularly purchased items, each priced at 5% more!
These additional costs add up.? Combining in the wage gap, it?s clear how women can end up retiring in very different financial circumstances than men.
According to the NYC Department of Consumer affairs, women can pay more for “pink packaged” products 42% of the time.
It is well known that women often take time off to raise children, or take care of aging parents.? As a result, women?s earning potential is greatly disadvantaged.? What?s more, they are also likely to be living off savings during these pauses.? How likely is it that a woman will be able to save for retirement during this time?
Some may argue that perhaps a woman has fewer costs during this time because her husband may still be working.? But what about professional single women who are choosing to raise children solo?? What about divorced women who have to take care of their elderly mothers? What about single mothers?
So as it turns out, women may have fewer years to save for retirement.
Women have fewer years to save, have to save more, all the while earning less with higher costs, to live a comparable life to their male cohorts.?
Financial Services under-serve women. When/if women marry, financial advisors often address the husband or have him as the primary contact.? They may even dismiss the women?s concerns or objectives. She may feel talked down to because she isn’t familiar with?the financial jargon an advisor is using. Discouraged, she may tune out these conversations and withdraw. Resigning herself to letting ?the man of the house? take care of these decisions can be detrimental, as we outline in the Distressed Decisions section below.
Because financial information has been historically directed at men, fewer women invest in stocks than their male counterparts. These under-invested women are not fully participating in the wealth accumulation.? In a society with a shrinking middle class and greater inequality in executive vs. employee pay, women face the double whammy of being the both employee and not sharing in the benefit of higher corporate profits as other male shareholders.
Because financial information has been historically directed at men, fewer women invest in stocks than their male counterparts.
Women are more likely to assume control over finances during the most difficult times. This is usually during or after a divorce, or after the death of their spouse, but it could also be because of the death of a parent.? I have several professional female friends whose fathers run their investment portfolio. And it?s not uncommon to hear of a woman who has no idea what is in their investments because their husbands take care of it.? They feel their father or husband has the expertise. Though this may or may not be untrue, the situation is not sustainable.
In the case of divorce or death, these women may have to make critical financial decisions when it is cognitively hardest for them to do so.?I remember when my father passed away, I had trouble choosing pink or red roses for his wreath. I just couldn?t think.? Now imagine if that decision was something that had some serious financial bearing. It’s easy to see how these difficult times are when financial mistakes are likely to be made.
Women are more likely to assume control over finances during the most difficult times.
Social status for women requires her to spend. I’m not talking only about designer shoes or handbags. What I’m talking about is much more insidious. Society expects women to be “generous”.? To achieve social status, women are often pitched to serve on volunteer boards, or to chair fundraising committees. They are encouraged to donate their time and money.
Don’t misunderstand, these charities do need donations. Volunteering can be highly rewarding and fulfilling.? (I encourage everyone to participate in philanthropy.) But if a woman doesn?t want to donate or volunteer, we must not judge her to be selfish or petty. Many women simply have too much on their plates to take time away from their work and/or children to participate.
To achieve social status, women are often pitched to serve on volunteer boards, or to chair fundraising committees.
What can women do?
It’s apparent that gender, income and investing are interconnected. Women face systematic money challenges, from earning and spending to investing and retention.? Personal finance for women is not as simple as “spend less than you earn.”
There are women who are in different situations, some of these issues may apply to them, and some may not.? Some of these observations may even apply to men as well.? My aim is to spur discussion, not to single any group out or to nitpick about where we might fit in the Venn diagram of inequality. However, unless people are transparent about their particular financial challenges, they can do very little about them.
Personal finance for women is not as simple as “spend less than you earn.”
1) Start an investment account or contribute just 1% more.
If you haven’t started to invest for your retirement, start. Don’t let fear of financial terminology or the belief that you don’t understand what you are doing dissuade you. Today, you don’t need a broker to start investing. With the advent of roboadvisors and financial technology, it’s easy to start investing, even with as little as $50.
2) If someone is managing your investments, take the initiative and call them to discuss it.
If you have someone managing your investments, don’t be afraid to ask what you are invested in. Ask questions about your investments so that you can research and learn about them. You may decide that you wish to change them, or re-allocate your funds to different investment vehicles. And be sure to find out how your advisor is paid. Many advisors make a commission from suggesting (often high cost) investment products to you. There are many fee-only advisors that will not take a percentage of your total net worth.
3) Ask for a raise if you haven?t gotten one in a couple of years.
Don’t assume that being offered a raise is par for the course. No employer is going to give away money if they don’t have to. If you haven’t seen an increase in your salary, take the bull by the horns and ask for a raise.
4) Take responsibility for your financial education.
Women of today are at an advantage when it comes to financial education. Why? Because we have the internet. Sure, it’s a given that many of us did not learn about finances in school, but don’t let that stop you from using one of the greatest resources available. Everything you need to learn about is online. Take responsibility and dive in.
5) Buy generic or male-branded consumer products.
No one is going to notice if you shave your legs with a blue or pink razor. In fact, there are ways to save money on shaving and also save our environment. Stop paying for things just because a brand’s marketing department has convinced us that we need it.
6) Talk about money.
Don’t let your a lack of knowledge hold you back from having discussions about money. Share budgeting tips with a friend. Ask close friends about their investment strategies. If they don’t have any, share what you are learning. The more women open up about money, the less uncomfortable we will be discussing financial issues. With each step we take, we can start to turn this tide.
Pauline Yan is?an investment portfolio manager at a multinational financial institution based in Canada.??She has earned the right to use the CFA and CAIA designations.??Her passion is in coaching and supporting women in financial literacy and achieving their financial goals.? You can reach Pauline at SundayBrunchCafe.
You can express your values through many decisions. You care about the health and well-being of your family and planet, so you might decide to buy organic, ride the bike to work, avoid bottled water, recycle, and shop locally.
That?s a great start, but where does your money sleep at night?
?Impact investing? and ?social finance? are shifting the dominant financial paradigm of opaque, anonymous, and indirect investments that is based only on quantification of gain. Three women who are working in this movement are featured here.
?Finance is the mother of all human systems. There is no system that humans have ever built that is faster, more global, or more powerful. Finance is our most effective instrument for catalyzing positive change for people and planet.? ~?Donna Morton, Change Finance
What are two key investment trends?
1. Demographics continue to shift in the financial markets.
In America, there is a massive wealth transfer from older white men into the hands of women, wives, and daughters, including millennials.
Yet the financial industry is dominated by men. Currently, only 2% of CEOs on Wall Street are women, and 78% of management teams on Wall Street are exclusively men. Only 3-10% of venture capital goes to women-led enterprises, although opportunities for women are rising as the power dynamics are shifting and as more girls are encouraged to envision entrepreneurial endeavor.
2. Interest is increasing in investment options that align with values, including environmental and social benefits.
Most significant is the divestment from fossil fuels?$5.5 trillion has already been divested from this sector. Impact investors are no longer okay with simply minimizing harm by screening out oil, guns, and other areas with negative externalities through socially responsible investing. Increasingly, investors are focused on ensuring that they are creating a positive social or environmental impact.
?Money and power are not what make us happy. Love, relationships, and connection is what brings joy.? ~?Deb Nelson, RSF Social Finance
This is not a Zero Sum Game
Initially, it can be painful to uncover the ethical messiness and tangible destruction in the wake of conventional investments. In this game there are winners and losers, more for me is less for you, and we compete for limited resources. It is not uncommon for an investor to discover that some of her money is invested in the production of bombs and bullets. Do not feel guilty or ashamed?transfer the investment and feel enlightened!
?What you can measure you can manage, yet not everything that matters can be measured.? ~?Amberjae Freeman, Swell Investing
In truth our security is interwoven: positive, productive connections and investments are the foundation of true wealth.?When making a financial decision, assess the value of often unmeasured things, like relationships, environmental impact, and health. Money is not the only measure of value.
Amplify the influence of your money with impact investing.
Pioneers in this field are developing financial relationships that are direct, transparent, and personal. At RSF Social Finance, borrowers and grantees are a diverse group of entrepreneurs with one thing in common: a social mission that drives what they do and how they do it. Organizations that borrow from RSF are working toward social, economic, and ecological benefit. Most of their largest investors and donors are women, which has had a large impact on their integrated and collaborative approach.
?An integrated approach to dealing with money is the first step to transitioning from an extractive economy to a regenerative economy.? ~? Deb Nelson, RSF Social Finance
?Integrated capital? refers to the variety of support received, including money, mentors, and relationships. RSF collaboratives use philanthropic funds to provide integrated capital to projects that support purpose-driven entrepreneurs who also value things like fair trade, soil health, women?s leadership, biodynamics, and local food.
Deb describes how her work focuses on ?creating financial relationships instead of conducting financial transactions.?
What are options for investing in alignment with your values?
Socially responsible investing (SRI) is predominantly about screening out ?bad? companies who participate in business that you don?t morally agree with. Impact investing takes screening a step further by analyzing the impact of each company through environmental, social, and governance (ESG) factors. Evidence shows that ESG factors, when integrated into investment analysis and portfolio construction, offers investors long-term performance advantages. Money managers are rapidly expanding research and expertise of ESG factors as tools for analyzing risks and opportunities.
Donna Morton says, ?We are a force that catalyzes financial activists to create this shift to move our money out of harm into healing. Use finance as an instrument for driving change. Where capital flows, momentum occurs. Our fund enables investors to drive impact, creating an economy in service to life through financial activism.?
Consider the following portals to improving the performance and impact of your investments:
Aspiration is offering conscious banking with no fees and amazing impact. Check out their offer and their amazing story.
RSF Social Finance?is a non-profit, financial-services organization offering investing, lending, and philanthropic services to individuals and enterprises. RSF has over one thousand clients and over $200 million in consolidated assets. They have formed a growing community of motivated, values-driven investors, donors, and entrepreneurs. Each dollar that circulates through the relationships created by RSF Social Finance multiplies to create true wealth that is meaningful, because it effects positive change as it creates value. Minimum investment is $1,000. Deb Nelson was interviewed here.
Change Finance is a majority women-owned and -managed financial company offering exchange traded funds (ETFs) that are truly fossil-free. Their methodology is informed by the United Nations Sustainable Development Goals (SDGs). Change Finance provides impact-focused, performance-oriented investments using the SDGs. Donna Morton was interviewed here.
Crystal Arnold is the founder of Money-Morphosis and the Money-Wise Women podcast. After graduating from Southern Oregon University in 2007 with a degree in international economics, she has designed and facilitated workshops, community events, and discussion panels about money. She has inspired thousands of people to have a healthier relationship with money. Her courses serve to financially empower participants. Her written work has appeared in journals, magazines, and in the book called Reinhabiting the Village. She is currently Director of Education at the Post Growth Institute, and coauthoring a book called ?Offers and Needs Markets: A Process to Reveal and Mobilize Community Wealth.? She lives in Oregon with her husband and two children.
Diane MacEachern wants you to use your purse to build a better world. The bestselling author and founder of Big Green Purse has been working on environmental issues for most of her life.
?I was thinking about how to capture the message ? every woman has a big green purse. Whether they have a lot or a little money, every single woman has power in her purse.? ~Diane MacEachern
Someone who Walks the Talk
Diane is a true advocate and was involved in many grassroots campaigns, from strengthening of the Superfund Act, to keeping drilling out of national wildlife and banning of underground testing of nuclear weapons in Colorado.
Here are some of her career highlights:
Masters in natural resources and environment management and policy
Founder of Vanguard Communications, an public policy communications firm focused on environment, healthcare, energy, human rights, women?s rights and children?s welfare.
Seven years as vice chair of the Alaska Wilderness League, helping to protect wilderness in Alaska
Don?t Count on Capital Hill
While her focus on public policy was fruitful, she learned that the tides could change quickly with a single election. She began looking for ways to make impact that was not dependent on government regulation. ?According to Diane, ?The Big Green Purse is more relevant than ever, because we can?t count on Capital Hill.?
Why Women Have More Power than they Realize
So Diane began to look elsewhere. She had been interested in the intersection between women, health and environment. She spent time researching pressure points. It turns out that $0.80 on the dollar is spent by women in the marketplace.
?We realized that women care about the environment and are concerned about their health and the health of their families.?
Diane knew that mobilizing consumer clout to make big market shifts could drive manufacturing to change their ways. Commerce could be used as a way to put pressure on manufacturers to clean up their act. It was also the fastest way to protect consumers.
So she began to educate and write about healthy living and not buying things that were bad for people and planet. ?Big Green Purse provides great ideas for living a better life, including DIY, energy efficiency, green home ideas, personal care, and more. Diane shares with her readers ideas for using the power of the purse to drive cleaner, safer, and greener products.
The Dream: measurable impact
When Diane first started Big Green Purse, her team decided to test a small campaign. They inspired people to commit to shifting $1,000 of household budget to greener products and services. As it turned out, 6,000 people signed up for the challenge. That had $6 million in marketplace impact.
Her dream is to expand the concept of using our consumer power to drive even greater impact.
This week’s conscious capitalism in the news: Impact investing -?What is it? Can anybody do it? Greenwashing -?What is it? Who’s doing it? How can you spot it??A tsunami of women impact investors on the horizon, The Gap Inc. steps up its sustainable water game, and more…
Traditionally, we pay our bills, make our investments, and perhaps, if we have something left over, write a check or two to our favorite charity. Impact investing takes care of the last two in this list. Combining philanthropy and investing gives us the opportunity to both vote with our dollars and generate a return.
What is impact investing?
Impact investments are investments made into companies, organizations, and funds with the intention to generate measurable social and environmental impact alongside a financial return. – GIIN
Impact investing opportunities generally involve organizations that have a stated mission or purpose. This could be anything from creating affordable housing domestically, providing clean water to those without it in developing countries, or reducing the pollution in our oceans.
Do I have to be an accredited investor to participate?
No. Anyone can do it. There are several ways everyday folks who are not accredited investors can take advantage of generating returns (both monetarily and materially) and making an impact in an area they care about.
Mutual funds, ETFs, and Separately Managed Accounts
There are increasingly more and more mutual funds that promote environmental and social causes. More recently, financial technology has made investing in green or socially responsible mutual funds available to everyone without the need for a broker. Companies like Swell offer investment opportunities for as low as $50.
Community Supported Agriculture (CSA) initiatives are steadily increasing across the country. Put simply, an investor subscribes to a particular community farming organization, or harvest, and receives, as a return, food directly from them. This paradigm cuts out the middlemen and gives investors access to fresh, healthy food. (Look into any CSA initiatives in your area.)
Microfinancing provides small loans towards projects that have a social return. It could be providing microentrepreneurs at the base of the economic pyramid with small business loans. It could be providing funding for a new school in a small developing corner of the world. There are a myriad of opportunities out there. Google away. Microfinancing institutions connect the investor to the project so that you can invest in a space that you both believe in and believe has the potential for financial success.?
Buying shares in green tech supports a needed move away from fossil fuels in a competitive and booming industry. These opportunities can range from solar, wind, geothermal, and hydro to efficient building materials, energy storage and more. This space is growing rapidly and offers a variety of options.
We have the tremendous opportunity to not just keep pace with the traditional capital markets, but to reinvent them entirely. The decisions we make today have the potential to shift attitudes, transform systems, and build the sustainable economy of the future. – GIIN 2017 Annual Impact Investor Survey
The buzz in the investment world about women investors is that because women are generally more likely to search for products and companies with connections to what is important to them, they are also more likely to engage with investments where issues of social responsibility and the environment are prioritized.
It is said that women investors generally tend to take a more holistic approach to investing as they are more interested in investments that support their values in tandem with financial returns.
A study?of women aged 25 to 70 with household income over $75,000?by Calvert Investments?reflected that 95% of ranked “helping others,” and 90% ranked “environmental responsibility,” as important.
Currently, women control 51% of the personal wealth in the United States. That $14 trillion is expected to rise to $22 trillion by 2020.
Meanwhile, Impact investing has grown into a multi-billion dollar market. The Global Impact Investing Network (GIIN) anticipates that impact investing market will continue to expand to $500 billion by 2020.
An increasing number of companies are working towards attracting women investors who are committed to seeing social and environmental returns along with their financial returns. And they are using social media and influencer marketing to do it.
The coupling of a new breed of investor with a new breed of investment vehicle, both of which prioritize environmental, social and governmental concerns, is a potential tsunami push for creating social and environmental change within the markets. If the financial experts making these predictions are correct, we should see some exciting stuff happening soon.
The Roadmap details six categories of action to drive progress:
Strengthen the identity of impact investing by establishing clear principles and standards for practice;
Change the paradigm that governs investment behavior and expectations about the responsibility of finance in society via asset owner leadership and updated finance theory;
Design tools and services that support the incorporation of impact into the routine analysis, allocation, and deal-making activities of investors;
Develop products suited to the needs and preferences of the full spectrum of investors, from retail to institutional and of various types of investees;
Increase the supply of trained investment professionals and the pipeline of investment-ready enterprises through targeted professional education;
Introduce policies and regulation that both remove barriers and incentivize impact investing.
The Roadmap also discusses broader trends that will affect investing overall such as automation, fintech, blockchain, big data, crowdfunding, and wealth transfers to women and younger generations. While the report acknowledges the distance that impact investing has come over the last decade, it does not shy away from the challenges facing our world today.
Notwithstanding the progress to celebrate in the impact investing industry, the needs to address continue to loom large. Exploding inequality is kindling great political turbulence in many parts of the world, even as close to a billion people live in poverty .- Roadmap for The Future of Impact Investing, GIIN.
Since 2014, Gap Inc. projects have saved more than 2.4 billion liters of water. Recently, Gap Inc. has announced a new goal of saving 10 billion liters of water by the end of 2020 – ?the equivalent of the daily drinking water needs of 5 billion people – by committing to continue both product innovation and efficiency improvements at fabric mills and laundries.
In addition, Gap Inc. is taking action globally to reduce its environmental footprint in its retail operations and across its supply chain. It has committed to a 50% reduction of greenhouse gas emissions in its owned and operated facilities globally, and to divert 80 percent of its waste in the U.S. from landfills by the end of 2020.
We believe that access to clean and safe drinking water is a fundamental human right, so we strive to ensure that the process of making our clothes is safe for people and communities. It?s not only the right thing for people and the planet, it?s also crucial for our business growth. – David Hayer, Senior Vice President of Global Sustainability and President of Gap Foundation at Gap Inc.
Environmental, social and governance (ESG) indices are sometimes overgeneralized in the media as a mere trend from the conscious capitalism movement?when in reality, they are a superior form of risk management.
Projects such as mining, fossil fuel extraction, chemical plants, pipelines, and factories carry intensive risk that can not only affect the environment, employees and surrounding inhabitants, but also investors. One need not look any further than the BP Horizon incident which destroyed shareholder wealth by 55% and resulted in billions in fines.
Banking and insurance industries are particularly interested in being able to access information on infrastructure projects. And corporations themselves are increasingly interested in monitoring and evaluating their own ESG risks in their supply chain.
RepRisk is a global business intelligence provider for due diligence on ESG and responsible business conduct risks. Using AI and human analysis, Reprisk focuses on companies and projects exposed to ESG risk. Reprisk has now included new data on over 25,000 projects in addition to over 100,000 private and public companies. Data is key in evaluating ESG risk for all stakeholders.
Business conduct risks related to human rights, labor, the environment, and corruption can now translate into reputational, compliance, and financial risks for a company. – RepRisk
BP rebranded from British Petroleum to Beyond Petroleum, but it is still predominantly an oil and gas company. Now the Norwegian company Statoil is proposing to change its name to “Equinor.” The rebranding will cost? $32 million. Why are oil companies doing this?
Some oil companies have been attempting to distinguish themselves as ?energy companies? rather than ?oil companies? under increasing public scrutiny. In short, while the companies themselves change very little, they hope that the public perception of them will change. This is called greenwashing.
Statoil, stated that it intends to ?build a material industrial position within profitable renewable energy, and expects to invest 15-20% of total capex (capital expenditure) in new energy solutions by 2030.? So, what they are really saying is that in 12 years they plan to have a capital expenditure that is at least 80% fossil fuels.
Last October, San Francisco Bay Gourmet Coffee (owned by Costco and JBR Inc.) unveiled it?s compostable? Keurig-compatible ?No Waste OneCup.? At the time, the company labeled the ?OneCup? coffee pods as a ?No Plastic Cup,? but the ring, mesh, and part of the lid were all made of plant-based plastic.
California has a complete ban on biodegradability claims tied to any products containing plastic. A lawsuit was filed against Costco by 25 California district attorneys? offices.
In addition to paying the $500,000 in civil penalties and costs, Costco and JBR Inc. can no longer sell plastic coffee pods advertised as ?biodegradable? in California. In addition, they must obtain specific scientific certification in order to sell any pods advertising the ?compostable? label.
California consumers trying to help reduce the problem of plastic waste in landfills are often misled to believe that plastic products labeled as ?biodegradable? will break down in municipal trash. – ?Alameda County District Attorney Nancy O?Malley
Greenwashing occurs when a company spends money to try and appear ?green? via advertising and marketing without implementing business practices that avoid or minimize destructive environmental and/or social impacts. “Eco-friendly” is all the rage today, so companies may market as ?eco-friendly? whether they are or not. This leaves it up to the consumer to determine whether companies are living up to their claims.
A Canadian-based environmental marketing agency has developed a seven-part test to evaluate green claims. TerreChoice?s ?Seven Sins? of greenwashing can give you an idea what to look out for:
The Hidden Trade-off: ?A product that claims to be ?green? in one aspect, but isn?t in another. For example, paper from a sustainable forest that was processed using chlorine.
No Proof: ?An environmental claim that cannot be substantiated by easily accessible supporting information, or by reliable third-party certification. For example, tissue that claims a certain percentage of post-consumable recycled content without any evidence.
Vagueness: A claim that is so poorly defined or broad that its real meaning is likely to be misunderstood. For example, the phrase ?all-natural.? Arsenic is naturally occurring, too.
Worshiping False Labels: A product that uses words or images to give the impression of a third-party endorsement where no such endorsement exists. For example, a green leaf on a detergent bottle that is not a reputable certification, but merely an icon. Make sure certifications actually mean something. Green Seal, Energy Star, EcoLogo, USDA Organic and FSC (Forest Stewardship Council) are reputable labels.
Irrelevance: An environmental claim that may be truthful but irrelevant. For example, ?CFC-free? is a frequent claim despite the fact that CFCs are banned by law.
Lesser of Two Evils: ??Organic cigarettes,? or ?fuel-efficient? SUV.
Fibbing: Environmental claims that are simply false. For example, products claiming to be Energy Star certified that aren?t.
The trend toward ‘eco-friendly’ or ?green? products is a good one. Unfortunately, not all companies will color?within the lines. Take a closer look at the claims companies are making and decide for yourself whether or not you buy them.?
Do you know who made your clothes? Have you ever thought about the working conditions that they have to endure? In April 2017, the hashtag #WhoMadeMyClothes created 533 million impressions, a huge increase from 129 million in 2016. The hashtag was encouraged by Fashion Revolution, a global movement for transparency catalysed by the fatal Rana Plaza garment factory collapse in Bangladesh which killed 1,135 people, as a way of pressuring brands to be more transparent about the working conditions and wages of the people who make their clothes. As consciousnes capitalism arises amongst consumers about the fashion industry, the demand for transparency increases.
Fashion Revolution has created the Fashion Transparency Index, a review of 100 of the biggest global fashion brands and retailers, ranked according to how much they disclose about their social and environmental policies, practices and impact. As more and more celebrities and stylists promote ethical fashion, its ?boho? stigma has fallen away. Today it’s trendy to buy well and buy less. ?
?Every single time you run your credit card through a machine you are making ?a vote for the kind of world we live in – Cora Hilts, co-founder of reve-en-vert.com.
Clothing production has doubled in the last 15 years. 80% of our donated used clothes end up in landfills. Clothing recyclers can?t compete with the low-cost production of Chinese manufacturing. The textile industry already accounts for more greenhouse gas emissions than all international flights and maritime shipping combined. Yet no one has more of an incentive than the clothing industry itself to address the problem. Climate change will affect cotton yields making production less predictable and more expensive. As recycling breaks down, the fashion industry is forced to look for answers to solve this systemic problem.
Sustainalytics, a global provider of ESG ratings, shares key ESG information with investors around the world. They work with hundreds of the world?s leading asset managers and pension funds. Their recent report Understanding ESG Incidents: Key Lessons for Investors is based on the analysis of over 29,000 ?incidents? that took place from 2014 to 2016. At Sustainalytics, the word ?incident? refers to a company activity that generates undesirable social or environmental effects.
Of course, a company?s incident track record contains valuable information for investors. But the findings are illuminating for consumers as well. Incidents not only reveal weaknesses in a company?s management systems and the financial effect that has on their shareholders, but also shines a light on the severe social and environmental consequences of poor governance and a single-bottom line mentality.
Where did the most incidents occur?
Whatare the top 10 riskiest industries?
Aerospace & Defense
Refiners & Pipelines
Oil & Gas Producers
Construction & Engineering
What are the top 10 high-profile incidents?
Dec-2016 Banca Monte dei Paschi di Sienna, Italy – The Italian parliament approves a state bailout worth USD 6.1 billion. This is Banca Monte dei Paschi di Sienna’s third major bailout, with company shareholders and junior bondholders contributing EUR 4.3 billion. Incident tag: ?Resilience
Oct-2016 Samsung Global – ?Samsung recalls all Note 7 devices and halts production after multiple cases of their batteries catching fire. Multiple investigations are pending, and sources estimate that the company could suffer up to USD 17 billion in lost revenue because of this incident. Incident tag: ?Quality and Safety
Sep-2016 Wells Fargo, US – Wells Fargo pays USD 190 million in regulatory fines and USD 142 million to settle a class-action lawsuit after creating two million customer accounts without authorization. Additional lawsuits and regulatory investigations are pending. Incident tag: ?Business Ethics
Aug-2016 Energy Transfer Partners, US – Protests among indigenous and community groups disrupt construction of the USD 4 billion Dakota Access Pipeline project and impose costs of USD 500 million on Energy Transfer Partners. Incident tag: ?Conflicts with Indigenous Communities
Apr-2016 Multiple: ?Panama – ?More than 500 banks are connected to fraud, tax evasion and offshoring activities after 11.5 million documents are leaked from Panamanian law firm Mossack Fonseca. The scandal leads to public scrutiny and heightened regulations. Incident tag: ?Business Ethics
Aug-2015 Exxon, US. Exxon is issued a USD 566,000 fine for occupational health and safety violations related to an explosion at its Torrance Refinery. The explosion results in an estimated gross revenue loss of USD 700 million.Incident tag: ?Health and Safety
Oct-2015 Volkswagen,Germany. Volkswagen admits to falsifying emission standards tests and later agrees to pay up to USD 18 billion in regulatory penalties and settlements. Individual and class action lawsuits continue in 17 countries. Incident tag: Business Ethics
May-2015 Toshiba,Japan. Toshiba overstates its profits by USD 400 million for the previous three years and is fined USD 61 million for fraudulent accounting, the largest fine ever imposed in Japan. The company is forced to revise its profit for this period by USD 1.3 billion. Incident tag: ?Accounting Irregularities
Nov-2014 Home Depot, US. Over 40 class action lawsuits are launched against Home Depot by customers whose personal data was compromised in a sweeping data breach. The company confirms in its Annual Report that at least 60 million customers are affected. Incidence tag: ?Data Privacy and Security
Mar-2014 Petrobras, Brazil. A government investigation reveals that Petrobras executives were involved in the largest corruption scandal in Brazil’s history, with bribes in excess of USD 3 billion received over ten years. Incident tag: ?Bribery and Corruption
Larry Fink, founder and chief executive of the investment firm BlackRock, dropped a huge ESG bomb on the world?s largest public companies in his letter advising them that they need to contribute to society as well if they want to receive the support of BlackRock. It?s a beautiful piece. The world?s largest investor declaring that he plans to hold companies accountable is nothing close to ?box ticking.?
Mr. Fink?s declaration is different because his constituency, in this case, is the business community itself. It pits him, to some degree, against many of the companies that he?s invested in, which hold the view that their only duty is to produce profits for their shareholders, an argument long espoused by economists like Milton Friedman. – Andrew Ross Sorkin, BlackRock
Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.
In the $1.7 trillion in active funds we manage, BlackRock can choose to sell the securities of a company if we are doubtful about its strategic direction or long-term growth.
Companies have been too focused on quarterly results; similarly, shareholder engagement has been too focused on annual meetings and proxy votes. If engagement is to be meaningful and productive…then engagement needs to be a year-round conversation about improving long-term value.
In order to make engagement with shareholders as productive as possible, companies must be able to describe their strategy for long-term growth. I want to reiterate our request, outlined in past letters, that you publicly articulate your company?s strategic framework for long-term value creation and explicitly affirm that it has been reviewed by your board of directors.
Your company?s strategy must articulate a path to achieve financial performance. To sustain that performance, however, you must also understand the societal impact of your business as well as the ways that broad, structural trends ? from slow wage growth to rising automation to climate change ? affect your potential for growth.
In the United States, for example, companies should explain to investors how the significant changes to tax law fit into their long-term strategy. What will you do with increased after-tax cash flow, and how will you use it to create long-term value?
Just as we seek deeper conversation between companies and shareholders, we also ask that directors assume deeper involvement with a firm?s long-term strategy. Directors whose knowledge is derived only from sporadic meetings are not fulfilling their duty to shareholders. Likewise, executives who view boards as a nuisance only undermine themselves and the company?s prospects for long-term growth.
We also will continue to emphasize the importance of a diverse board. Boards with a diverse mix of genders, ethnicities, career experiences, and ways of thinking have, as a result, a more diverse and aware mindset.?They are less likely to succumb to groupthink or miss new threats to a company?s business model. And they are better able to identify opportunities that promote long-term growth.
A company?s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth, which is why we are increasingly integrating these issues into our investment process.
As we enter 2018, BlackRock is eager to participate in discussions about long-term value creation and work to build a better framework for serving all your stakeholders. Today, our clients ? who are your company?s owners ? are asking you to demonstrate the leadership and clarity that will drive not only their own investment returns?but also the prosperity and security of their fellow citizens. We look forward to engaging with you on these issues.
Women control 51% of the wealth in the U.S. today. In addition, women currently earn the majority of bachelor’s degrees, master’s degrees, and doctoral degrees.
If women decided to invest only in companies that are doing good for People and Planet, they could create massive change. Only companies that value gender equality, sustainability, ethical business practices and conscious capitalism would be able to thrive.
?Gender lens? investing has been around for awhile, but recently its growth has been increasing as the national conversation on gender focuses on the need for equality in the workplace. If women wealth holders chose to collectively harness the power of their wealth, they could change the playing field for all women.
State Street Global Advisors, which launched an exchange-traded fund focused on women in 2016, also takes an active shareholder role. Their fund SHE focuses on companies with the highest percentage of female managers in their respective sectors.
U.S. Trust’s Women and Girls Equality strategy focuses on companies that employ more women in all areas of their businesses. They also have family-friendly corporate policies, such as child and elder care.
Having more diversity and views ? is better for companies. They tend to be more agile and envision what the future looks like better than other companies. – Jenn Bender, Senior Managing Director and Director of Research, State Street Global Advisors