A friend of ours from Calvert recently spotted a copy of The Resilient Investor that has a pretty sweet view of downtown San Francisco. The occasion was the 10th anniversary party of the New Resource Bank, an evolutionary financial institution that puts account-holders’ funds to work in an array of green and sustainable businesses, non-profits, and development projects. While we tend to point readers to local banks in their own regions, New Resource is an excellent option to consider if your local options aren’t satisfying. The cherry on top is that they were the first publicly-traded B-Corporation; that’s a real commitment to doing things a better way!
Did you know that despite the lack of any federal laws protecting LGBT people from discrimination, three-quarters of Fortune 500 companies have policies in place to do just that? The “S” part of corporate ESG (Environmental, Social, and Governance) standards and SRI (Socially Responsible Investing) has been coming alive in increasingly dynamic ways in recent years.
This year, as three southern states passed laws that actively codified anti-LGBT discrimination, some of the loudest—and most effective—voices raised against these initiatives came from large companies. As summarized by The New Yorker:
Last month, executives at more than eighty companies—including Apple, Pfizer, Microsoft, and Marriott—signed a public letter to the governor of North Carolina urging him to repeal the state’s new law. Lionsgate Studio is moving production of a new sitcom out of the state, Deutsche Bank cancelled plans to create new jobs there, and PayPal has cancelled plans for a global operations center. In Mississippi, G.E., Pepsi, Dow, and others attacked the law there as “bad for our employees and bad for business.” Disney said that it would stop making movies in Georgia, which has become a major venue for film production, if the governor signed the bill. Something similar happened last year in Indiana, after the state passed a religious-freedom law allowing businesses to discriminate against L.G.B.T. customers and employees. At least a dozen business conventions relocated.
The article goes on to look at the ways this leadership by corporate interests upends both progressive and conservative orthodoxy. Progressives often decry the influence of business on government decision-making, but this time it’s a welcome addition to grassroots voices against regressive new state laws. Meanwhile, as the New Yorker’s James Surowiecki notes, “to many conservative business leaders, today’s social-conservative agenda looks anachronistic and is harmful to the bottom line; it makes it hard to hire and keep talented employees who won’t tolerate discrimination.”
Though we’ve long been champions of the idea that business can play a key role in reshaping society in positive ways, this vocal leadership on perhaps the leading social justice issue of the day is a welcome surprise.
Readers of The Resilient Investor will remember that our picture of more vibrant local economies is rooted in a shift from national and international trade networks toward increasingly vibrant regional economic systems. A recent article in the NYTimes speaks to the emerging regional character of the US economy and society, suggesting that national policy should be redirected from state-specific funding, and instead nourish the already-emerging regional networks, which can then breathe new life into their surrounding rural areas and depressed smaller cities:
America is increasingly divided not between red states and blue states, but between connected hubs and disconnected backwaters. Bruce Katz of the Brookings Institution has pointed out that of America’s 350 major metro areas, the cities with more than three million people have rebounded far better from the financial crisis. Meanwhile, smaller cities like Dayton, Ohio, already floundering, have been falling further behind, as have countless disconnected small towns across the country.
Here’s the map of the US that the authors suggest we begin to plan around (click for larger version):
Ah, good old Grist. Too often lost in the modern online cacophony, I’m always grateful for the bits of their work that float to the surface of my info-stream. This one tackles an asset that totally blurs the tangible/personal line, your own body. Resilient investing tend to lump most of the body-related stuff into the “personal assets” row: health, career, learning. But once we die, well, our body gets pretty darn tangible for our loved ones, and this Grist piece, Find out how you can reduce your footprint even after you’ve kicked the bucket, is a great primer on what to do—and what not to do—with your tangible remains. As they set the stage:
As the sole species responsible for filling the oceans with plastic, pumping the atmosphere full of pollution, clear cutting the world’s forests, and bringing about what could be the sixth great mass extinction, it’s perhaps fitting that when we die, we turn our own corpses into toxic flesh bags that ensure ecological damage for years and years to come. It’s as if someone dared us to come up with the most environmentally harmful burial practices imaginable, and we dutifully complied, stopping just short of strapping vials of radioactive waste to our chests on our way to the grave.
Okay, you got my attention! So what are my options? Well, for starters,
The World Bank plans to continue its aggressive funding of climate-related projects over the next four years, gradually increasing its combined total funding and leveraged co-financing from private investors to $29 billion per year, 28% of its total outlays (up from today’s 21%) and enough to meet nearly a third of the global target of $100 billion per year that was set at the Paris climate talks. In addition to these funding plans, all World Bank programs will consider climate impacts in future investments.
Projects in the pipeline include quadrupling funding for climate-resilient transport, a project in Mexico to reduce deforestation and forest degredation in an areas the size of Connecticut, and seven solar PV projects in Jordan, and development of an early-warning system for extreme weather events in areas that would help protect one hundred million people.
While much of what we share here features innovative community initiatives or leading-edge financial world developments, it’s important to remember the foundational role of the top row of the Resilient Investing Map, your Personal Assets. And up there, most of our energy goes into Zone 1 (family, health, relationships) and Zone 2 (work and lifestyle). So here’s a little nudge to keep some juice flowing in your Zone 3 as well (personal/spiritual growth, learning, inspiration).
This recent essay from James Shelley is the sort of thing that can be worth a few minutes of your time; we recommend that you find a few channels of inspiration and insight that you can turn to on a regular basis, ones that take you out of your normal areas of expertise and personal or career focus, and offer the chance to think anew about how you’re shaping your life.
Here, Shelley fleshes out a concept dubbed micro-ambition, a “passionate dedication to the pursuit of short-term goals:”
To be ‘micro-ambitious’ means embracing the present opportunity — whatever it is — and making of it everything you can. After all, just as the present is a coalescence of your past so far, rest assured that the next thing will be built on the foundations you lay today. So build well. Go ‘all-in’ on whatever opportunity you have now. ….
The next opportunity worthy of your attention will probably show up in your peripheral vision, some unpredictable consequence of having “put your head down” to invest your best effort in the present enterprise. Micro-ambition is all about focusing on projects… not crossing some imaginary, arbitrarily defined ‘finish line’ in the future.
Being dedicated evolutionaries, we like this nugget: “Micro-ambition assumes from the outset that continual learning and self-reinvention are par for the course.” He goes on:
Regardless of where your paycheque comes from, do you think of life as a racetrack or a labyrinth? Are your current projects a means to an end, or a chapter in a twisting, unpredictable plot? In reality, of course, these are not absolute dichotomies. (There are plenty of careerists who leverage their position to create incredible opportunities and plenty of freelancers who fret over the legacy of their careers.) This is ultimately a question of attitude. How do you approach the present?
This sort of reflection may seem like a distraction, or useless philosophizing, especially if it’s coming in from an angle that isn’t quite in your usual wheelhouse. But making immediate practical use of new perspectives isn’t always the point. The more important payback from time invested in stepping off your usual trail and taking in something unexpected is that making a habit of doing so will, over time, introduce some other pathways that you do find a deep resonance with, ones that continue to shape your life over time. This is the delight and reward of your Zone 3 investments; they don’t all pay off, but the ones that do are especially valuable.
A quick and simple think piece on reducing consumption caught our eye this week. 9 Intentional Ways to Challenge Consumerism in Your Life addresses a topic that lies at the heart of resilient investing’s Zone 5 (Tangible Assets/Sustainable Global Economy), yet one that we rarely take the time to really grapple with. Joshua Becker, author of Simplify and Clutterfree with Kids offers up (you guessed it) nine themes to consider, and the comment thread that follows is also rewarding. His core thought is the one in our headline: mindless consumption always becomes excess consumption. If this triggers a twinge for you, then you’d probably benefit from taking a look at what Becker has to say. These two struck us as especially fruitful:
Following up on this post from a couple weeks ago, here are two more striking indications that fossil fuel investing is becoming a losing game. An analysis by Canadian research company Corporate Knights has found that 14 of the world’s largest institutional investors would have done much better over the past 3 years if they had divested from their major fossil fuel holdings and expanded investment in environmentally-oriented companies they already own. The fourteen have a collective total of just over a trillion dollar in holdings, a figure that would have been 22 billion dollars (2%) higher had they divested. The Bill and Melinda Gates Foundation was especially hard-hit; it totals about $40 billion, and left $1.9 billion (4.6%) on the table by sticking with its fossil fuel holdings. The divestment criteria used is similar to the earlier comparison using the S&P 500 as a benchmark, targeting the Carbon Underground 200 (companies that have the largest as-yet-untapped reserves of coal, oil, and gas), plus utilities that generate more than 30% of their power using coal.
Meanwhile, MSCI, one of the world’s leading providers of financial indexes, made a simple tweak in its All Country World Index (ACWI), simply dropping 124 companies that have large reserves of oil, gas, or coal on their books. The resultant fossil fuel free global index outperformed the ACWI by 60% in its first year (gaining 6.5%, versus 4.1%). Tom Kuh, head of ESG indexes for MSCI, stressed that “Carbon is increasingly becoming a factor that investors are looking at in understanding risk in their portfolios.” Responding to this concern, MSCI will be providing carbon footprints for all of its indexes beginning next year.
There seems to be no shortage of “practical visionaries” with big ideas about how we’re reshaping our global and local economies to be more just, ecological, and responsible. A joint initiative of EcoTrust and e3 (economists for equity and the environment) called Future Economy is producing reports that seek to answer the key question about such initiatives: are they mostly hype and hope, or are they something really new that’s emerging and can make a large-scale difference?
The first minute or so of this video gets at the purpose here:
The fossil fuel divestment movement has faced some fairly stiff headwinds from institutional money managers who insist that universities, foundations, or individual investors will suffer financially if they choose to forgo investment in energy companies that have, historically, been among the best-performing stocks to hold. But a recent analysis by Fossil Free Indexes paints a very different picture: if you take the S&P 500, and remove companies that are among the Carbon Underground 200 (companies that have the largest as-yet-untapped reserves of coal, oil, and gas), replacing some of them to maintain a balanced portfolio, your investment returns can be higher than they’d have been if you stayed on the business-as-usual path. Applying this criteria to the past ten years, you’d have earned about an extra 1% per year. This includes several years early on when the fossil fuel free approach slightly underperformed; it appears that in recent years, you’d have done much better than that (e.g., more than 2% a year over the past 3 years):
Did you know that Calvert Foundation’s new Vested portal has lowered the entry point for its social investment opportunities to $20? Social impact investing is one of the best ways to get real bang for your buck, but until recently there were few options for people with modest savings to participate. Most impact investments are risky enough that they’re only available to accredited investors, though local and regional loan funds and Calvert’s Community Investment Notes made it safer by bundling many social-impact projects into a mutual-fund-like packages. Still, depending on the outfit, minimum investments were generally $1000 or more.
Vested opens these doors much wider, and offers beginning investors a wealth of choices: you pick the amount of your investment, and the term, as well as the type of social impact you’d like to have. Investments for 3 years or longer pay interest rates comparable to or higher than most savings accounts. Most exciting, you can choose from an array of targeted purposes, and with the low entry point, it’s easy to spread your money around a bit into several areas of interest. Familiar themes like women’s empowerment, microfinance, and small businesses are augmented by other intriguing areas of focus, including aging and education in the U.S. or fair trade overseas. For those who want their money to make a real difference in the world, this kind of direct investment in on-the-ground initiatives has far more impact than buying shares of even a do-gooder company. Your social returns are significant, while your money makes roughly what it would just sitting in your bank.
I’ve long been a subscriber to The Atlantic, and particularly enjoy James Fallows’ contributions to their website (incredible on both China and small cities as “American Futures” trailblazers). But golly, this month’s big feature on Al Gore’s investment firm is pretty heavy on hyperbole, starting with the title: The Planet-Saving, Capitalism-Subverting, Surprisingly Lucrative Investment Secrets of Al Gore. Granted, this is par for the course in headline-writing—this post pleads guilty as well!—and Fallows’ intent with the article is mostly to get “sustainable capitalism” onto the wider public radar, and we’re all for that. Still, most of what is presented here as groundbreaking is, to our quarter-century-in-SRI eyes, old news. To wit:
What this means in practical terms is that Gore and his Generation colleagues have done the theoretically impossible: Over the past decade, they have made more money, in the Darwinian competition of international finance, by applying an environmentally conscious model of “sustainable” investing than have most fund managers who were guided by a straight-ahead pursuit of profit at any environmental or social price.
Convincing quotes from three experts all seem to agree this flies in the face of conventional wisdom. Where have they been? When we wrote Investing With Your Values in 1999 (published by Bloomberg, not exactly a fringe outfit), there was already a solid track record of clear parity and frequently out-performance by SRI funds; our own Jack Brill had completed a 5-year New York Times mock-management quarterly feature, running a strong second with the only SRI portfolio. Indeed, the co-authors of our new book were in the audience at the annual SRI Conference in 2005 when David Blood, who had recently launched Generations Investment Management with Gore, told the gathered crowd, “You were right. You’ve been right for 25 years. Incorporating social, environmental, and corporate governance considerations into the stock selection process adds value.” We were happy to welcome Blood to the club in 2005, and we’re surely excited that Generation’s first ten years of results can be added to the steady stream of mainstream reports confirming and expanding on the message that socially and environmentally responsible firms outperform their values-neutral peers.
UPDATE: Fallows generously excerpted this post as part of his ongoing followup thread on the Gore article that features reader feedback. We’re flattered and pleased to be part of that dialogue.
One of Generation’s favorite metaphors also struck us close to home: the idea that looking beyond the narrow question of financial performance to consider a broader “spectrum” of information provides a stronger foundation for making investment decisions. Each of our last two books has explicitly aimed to expand our view of investing,