Redefining Investing

ESG investing is expanding—and adds to returns

Two new reports highlight the expanding adoption of Environmental, Social, and Governance (ESG) criteria among money managers, as well as the benefits to the bottom line that accrue to ESG-savvy investors.

The biennial Report on US Sustainable, Responsible and Impact Investing Trends from US SIF, the trade organization for the SRI industry, shows a continuation of the rapid adoption of ESG criteria among mainstream money managers that was noted in the previous Trends Report. In the last two years, the value of portfolios that include consideration of ESG factors has mushroomed by 69%, to over 8 trillion dollars, under the management of 777 money managers and institutional investors, and over 1000 community investing financial institutions. While the number of more active money managers who filed shareholder resolutions

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Equity crowdfunding off to promising start

In May, the SEC finalized its long-anticipated new rule that opens the door for more investors to take part in the most exciting—and risky—realm in the investing universe: innovative startups.  Previously, only “accredited” investors ($200K/yr income or $1 million in assets) were allowed to take these risks, and thus to reap the outsized rewards that can accrue to early investors in companies that are not yet available in the public stock markets.

Indiegogo announced this week that it will begin allowing small companies to offer equity investments on its platform, rather than just the rewards-based pre-sales that have been the core of crowdfunding up til now.  Many small companies have used crowdfunding platforms to get rolling and prove that there’s a ready market for their new products, only to turn to the super-rich when the time came to scale up for mass marketing their innovations.  Oculus, for example, raised millions from early adopters, but it was equity funders who reaped the windfall when the company was sold to Facebook for $2 billion.

In these early months, the potential is just beginning to be realized.  According to WeFunder, the largest equity crowdfunding portal so far, about 55 companies have successfully raised a combined total of $12 million from small investors.  WeFunder is currently hosting several dozen offerings, which range from

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Small towns: lure your kids home to launch a start-up

Not long ago, I stumbled across The Daily Yonder, an excellent website that focuses on rural economic and social issues (try their Weekly Yonder email to get a taste). This week, they featured an inspiring interview with Maury Forman, Senior Manager for Rural Strategies and Entrepreneurship for the Washington State Department of Commerce, who urges small towns and cities to cultivate an entrepreneurial culture that can entice young and middle-aged kids who left town to return to start small businesses. In contrast to the concern about “brain drain” in small towns, he says, “Let kids get out and explore. People keep saying we want to keep our kids after high school. I think we should let them go out and explore new ideas, new things, and then come back educated and experienced, so that they can start a business, and create new jobs, and live in healthier communities.”

Forman enthuses:

I actually think it’s easier to do economic development in rural areas than it is in big cities. …. When you have small successes in rural, they’re big successes; the thrill is so much bigger there than it is if Seattle hires 10 employees. It’s going to make the newspaper in a rural community. I find rural communities to be easier to work with, more fun to work with, they take life a little less seriously.

Forman has also collaborated with a colleague to put together one of the best concise primers on raising capital that we’ve seen, and they’re giving it away free online. Startup Wisdom: 27 Strategies for Raising Business Capital offers succinct 2 or 3 page overviews of everything from crowdfunding to local investing clubs to grants (while also making nods to the lottery and even lemonade stands!). It won’t get you all the way to being funded, but it’s a perfect first read to help you narrow down the avenues you want to investigate further. They put this booklet together after finding that many potential rural entrepreneurs were struggling with Step 1, since “banks were not loaning to people in order to get businesses started. They didn’t like the idea. It was a risk. The whole bank idea of making bank loans just wasn’t in the banks’ interest, especially in micro-loans. That’s really what many small communities are looking for, probably under $50,000.”

Forman is offering just the kind of practical, localized guidance that can invigorate the regional vitality that is essential to the flourishing resilient economies and social networks that we envision in The Resilient Investor.  Here’s to both local communities and early- to mid-career rural expatriates taking this advice to heart!

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Investors are responding to climate and societal crises

In the face of continued grim climate news and disturbing societal trends, it is increasingly clear that governments cannot marshall the resources—or perhaps even the will—necessary to the tasks before us. Increasingly, though, forward-looking investors are stepping in to help lead the way forward. Two recent reports offer some encouraging signs that global finance does indeed include many actors who are committed to the changes that we need.

Domestically, a progress report on an impact investing initiative from the White House Office of Social Innovation and Civic Participation shows actual investments to be outpacing and outperforming the initial commitments and expectations. When this private-investment initiative was announced in June 2014, they had $1.5 billion in new commitments to impact investments from private funds, foundation programs and endowments, investment banks, small family foundations, and nonprofit organizations. By the time the dust settled on the first round of planning, that total had grown to $2.5 billion to be invested over the five years from 2014-2019. The recent report followed up and found that in just the first eighteen months, through December 2015, almost half of this total had already been invested, suggesting that in the long run the goal may well be exceeded.  This is especially likely when we turn to the returns coming in on the early investments, which universally have exceeded expectations.  It turns out—no surprise to the SRI community—that investing in projects with strong social and environmental impact is very good business!  So far, about two-thirds has been invested for social impact and one-third for environmental impact, especially climate solutions. 81% has been invested here in the U.S.

financing_sustainable_development_momentum_to_transformation-212x300Internationally, the news is also encouraging. A recent UN report outlines the challenges before us: to meet both the UN’s 2030 Sustainable Development goals and the targets in the Paris climate agreement, $90 trillion of investment is needed over the next 15 years.  This amounts to about 8% of global GDP over this timeframe, a daunting but not unrealistic goal.  But to get there, it will mean marshaling the same power of private financing. As former Secretary of the Treasury Hank Paulson points out in an op-ed entitled How to Raise Trillions for Green Investments:

“The good news is that there is a global abundance of private capital. To unlock these riches, governments must create conditions that encourage private investment in clean technologies and sustainable development. With smart, well-designed and coordinated policies, financing models and instruments like bonds and incentive programs, countries have the potential to solve some of the planet’s most pressing environmental challenges while still maintaining economic growth.”

Paulson is especially enthused about the explosive growth of green bonds, which nearly quadrupled from 2013 to 2015, up to $42 billion.  Of this, 40% is being deployed in China, where the government there has set ambitious green energy and building targets.  The Building Energy Efficiency and Green Development Fund is a public-private partnership that will bring leading-edge technologies from U.S. companies to China to increase the energy-efficiency of new buildings there. (One more reason to NOT start a trade war with China!)

All this investment is still just the first few drops in the $90 trillion bucket, but the rapid ramping up of these and other green investment commitments suggests that the financial powers that be are finally waking up to the scope of our challenge and are ready to put their massive wealth to work making the changes that are needed. Time will tell whether it will be enough, but we’re encouraged that it’s happening on a scale we haven’t seen before.

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“Women Invested” series spotlights leading SRI voices

A new series of free online interviews with twelve leaders of the socially responsive investing movement is now rolling out, with one new interview available each Tuesday.  The “Women Invested” series is hosted by our Natural Investments colleagues Malaika Maphalala and Carrie Van Winkle.

The diverse line-up of guests ranges from managers of capital management firms Green Century Capital and Trillium Asset Management to community investing champions from Calvert Foundation and Nia Community, the co-owners of Namasté Solar, the farm manager at Iroquois Valley Farms, and many others.

Check out the Women Invested site for full bios of all the featured guests as well for both audio and video versions of the interviews.   You can also click through here for a preview of the bios.

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Feds tweak rules to encourage social investing by foundations

A new set of regulations issued by the US Department of Treasury opens the door for private foundations to direct more of their investments to socially and environmentally beneficial projects.  Foundations are careful to separate their investment portfolio, used to grow their asset base, from the funds used to further their charitable mission, distributed in the form of grants or loans.  In recent years, many foundations that wanted to support social entrepreneurship or make loans to organizations within the areas of their missions had to treat these as part of their grant-making budget, rather than as part of their investment portfolio.

The new rules clarify that foundations “can factor in how the anticipated charitable outcomes from the investment might further the foundation’s mission in addition to the financial returns that are typically considered.  Thus, a foundation may prudently choose to make investments that provide both a charitable and a financial return without fear of facing a tax penalty.”

For more on this welcome new Zone 8 and 9 development, see this press release, issued by the Director of what sounds like a fantastic place to work: the White House Office of Social Innovation and Civic Participation.

Also, see this recent article from the Natural Investment News, in which our own Michael Kramer discussed the implications of the new rules and related changes at the IRS.

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Is impact investing about market-rate returns—or redistribution and reparations?

In the wake of a recent conference on Finance & Democracy, Leslie Christian highlighted a fundamental tension within the philanthropic and impact investing community: at what point, if ever, do those with extreme wealth begin easing up on the “do well” side of the equation, and start putting more of their resources into the “doing good” mission?  In a brief post titled Confluence…or Collision?, Christian is pleased to see that “the rarefied world of Wall Street investing and its ‘good investors’ is now being infiltrated and questioned by a small, vocal, and growing number of people with wealth who are eager to question and redefine investing.”  She shares a striking moment, when one of the conference participants rose to challenge the underlying mindset of the managers of the Rockefeller Brothers Fund, which has been praised for its decision to divest from fossil fuels:

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Slow money can jumpstart your resilient investing plan

Did you hear the joke about why the farmer crossed the road? The punchline is that she wanted to go to the bank to ask about getting a loan. Not very funny, except that by the logic of bankers and Wall Street, the idea that a farmer would qualify for financing might elicit a guffaw or two. Small-scale farming is considered a high-risk, low-return activity that any prudent investor should steer clear of.

And yet, wending their way across the highway to the farm, who’s that? Why, it’s a gaggle of Slow Money investors, taking action on their desire to build local food systems. Are they just being charitable, driven by idealism to donate a bit towards keeping a neighborhood farm alive? Not at all—they actually are investors, doing exactly what a traditional investor does. They are considering their own financial situation and how it fits into their overall portfolio. They are asking lots of questions, getting to know the business, assessing the risks, and looking for ways that not only their money, but their expertise, could help assure the success of their investment. And they are negotiating a deal that works for both parties.

Wall Street “professionals” can’t relate to this new breed of more creative and engaged investors because

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NZ community buys long-private beach via crowdfunding

It’s an all-too-familiar scenario: a prized corner of your local landscape is suddenly up for sale, slated for houses or a hotel.  Maybe it’s a place where generations of locals have had informal access, or perhaps it’s always been kept tantalizingly private.  Either way, the new plan is a step too far. . . . and it sure would be great if it were saved by a conservation group, or for a state park, or maybe just by a public-minded conservationist.

But nowadays, we don’t have to wish for a savior: a community effort in New Zealand recently made history by crowdfunding over $2 million to purchase an 18-acre beach and open this pristine beauty to the public!  The effort caught wider public attention, thanks both to the novelty of the initiative and its location near a popular National Park, and attracted donations from 40,000 people—along with a modest commitment from the New Zealand government—to outbid nearly a hundred other prospective buyers.

That’s what we call some inspired Zone 4/9 investing, coming together to protect an important tangible asset for the people, using the latest evolutionary finance models! Chalk one up for the power of creative thinking by two locals who organized the crowdfunding effort after a holiday conversation.  “At 10:57 last night we delivered a pristine piece of beach and bush into the hands of all New Zealanders to look after and to cherish and to treasure and enjoy forever,” announced Duane Major, one of the two, after the successful fulfillment of their ambitious dream.


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Bringing home the gold: Resilient Investor wins Personal Finance book of the year!

The Resilient Investor has won the 2016 Axiom Business Book Awards Gold Medal in the “personal finance” category!  Nearly 500 books were entered for Axiom awards this year, in 22 categories; we’re honored to be among the winners.  Golds in other categories went to one of our favorite future-thinkers, Philip Tetlock, and to Jeremy Balkin’s recent book on impact investing.

“This year’s Axiom Award-winning books offer the freshest ideas from the world’s brightest minds,” said a spokesman from the Jenkins Group, one of the sponsors of the awards; other sponsors include Independent Publisher Magazine and Inc. magazine.  Winners came from a blend of established New York publishers, university presses, and independent and self-publishers of various sizes. Women are also well-represented, with 26 female authors among the 100 total authors and co-authors.

We’ve always known that our book offered a fresh and timely perspective on personal finance and life planning; it’s especially rewarding to be recognized by an award that spotlights “cutting-edge books that help people young and old succeed in a fast-changing world.”  The Resilient Investor is a concise introduction to our approach; in under 150 pages, it offers an engaging new framework that can help build personal, social, and ecological resilience in the face of today’s unprecedented challenges and opportunities.

Feeble stock market propped up by success of its own 1%

One of the key drivers to the development of the resilient investing system is the recognition that we can no longer count on the steady long-term growth of the stock market to be the driver for growing our assets. Frequent extreme volatility, with the market struggling to keep up with inflation over the course of a decade of downs and ups, as well as uncertainty about whether ecological limits, increased costs of scarce raw materials, or social unrest will undermine the steady-growth machine of the global economy, all led us to step back a bit and look at ways to “wean from Wall Street.”

Still, even in a year of sputtering markets and big global economic disruptions, the S&P 500 is holding steady, so that’s a good thing, right?  Well, maybe, maybe not.  It turns out that five companies (yup, 1%) are responsible for keeping the ship on an even keel.  If we disregarded the big years from “mega-cap” companies Amazon, Alphabet/Google, Microsoft, Facebook, and GE, the market would be down 2.2%—and unless you hold some of the big winners, you may be down as well.  Amazon is up over 100% year-to-date and the other four are up 16-40%, while the rest of the “gang of 500” underperformed so much that the index as a whole only eked out a 0.06% gain.

Just another reminder that resilient investors will want to continue to pursue a much broader approach to diversification than simply having your eggs in a range of Wall Street baskets. Our book The Resilient Investor discusses ways of weaning off Wall Street that include community investing, a focus on personal and tangible assets, and a wide range of related strategies.




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2 excellent Resilient Investor author interviews!

Co-author Christopher Peck was recently interviewed by Pat Lynch of WomensRadio, in advance of his upcoming talk at the San Francisco Green Festival.  In a nice concise thirteen minutes, he introduces the core principles of resilient investing and offers a quick overview of his career as a holistic financial planner.  Listen below, or on the WomensRadio site.

Michael Kramer also offers a great, brief overview in a recent interview at the Sustainability Unconference in his home state of Hawaii; click through to hear his summary of the system, and take a look at this short article that illustrates the system as well. Stay tuned to the end to witness the historic first utterance of what’s sure to become a major socio-philosophical movement (or Muppet character?) when Scott Mooney of Triple Pundit dubs Michael an “apolocaloptimist!”

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