It is of no small consequence that an administration predisposed to discounting climate science and dismantling environmental guardrails did not do more to bury the fourth National Climate Assessment. Aside from dropping it over a holiday weekend, not much has stood in the way of its wide release, and it has its own dedicated .gov URL. The science speaks for itself, the number of agencies participating in and validating the science underscores the conclusions, and plenty has been and will be written about the top-line takeaways in case earth, wind and fire have not been sufficient to make the point for the last several years.
Today is Giving Tuesday. Numerous worthwhile charities are raising their hands and asking for our attention and our dollars in pursuit of their missions. The difficulty with a one-day campaign is that, while it may bring in new dollars from existing donor relationships, there is a low probability of establishing durable relationships with new donors. Whether the connection is spiritual or practical, driven by a single crisis or by a lifelong pursuit, connecting givers with worthy recipients is a process. Not only does a donor, whether organization or individual, need to find that alignment of purpose, that donor also needs to go through some degree of due diligence to see whether the receiving organization is a good steward of donated capital and creating meaningful and measurable impact with it over time.
Let today not just be a flash in the pan, but let it be the start of an ongoing process for kind and caring individuals, families, and institutions to discover and build long term relationships with impactful organizations creating positive change in the world. As part of that, donors should also consider solutions that help create a platform for purposeful giving that could last months, years or even generations. Consider donor advised funds (DAFs), private foundations, community trusts, and other solutions that make it possible to institutionalize giving, make larger financial commitments that can be disbursed systematically, and provide partners and resources to help identify and evaluate potential recipients.
With the possible exception of Amazon, trying to be all things to all people is less and less a winning strategy. Consumers increasingly pick products and services on more narrowly defined, and more personal, criteria. Companies are responding by picking more narrowly defined customer groups to serve. What this demonstrates is an alignment of social or environmental purpose with good business strategy. Customers and companies get into a virtuous and self-reinforcing cycle of positive change and deeper market penetration as companies respond to customers’ ESG expectations and customers respond to companies that proactively work to reflect their interests.
This article discusses distinguishing between the posers and the prophets using an ESG lens. (In)authenticity is a powerful factor in determining depth of commitment and quality of execution that has profound consequences for both financial and ESG performance. It is posted to CityWire USA’s website here, or can be downloaded as a PDF here.
I have been doing a lot of work on how to relate what and how we consume everything else around us with how we consume financial services. The great divide has been rooted in equal parts in a lack of understanding that the same rules could apply, and in a belief, misguided I will assert, that the sole objective of investing should be financial return.
Maybe this is a byproduct of well-intentioned but heavy-handed regulation, and maybe some of it is the cowardice of investment professionals and fiduciaries who do not want to take a single step outside of the lines inside which they are protected when delivering mediocre or even inferior results. “Here is food. It is nutritious and diversified and portioned according to the US recommended daily allowances. I understand it doesn’t taste good, but my responsibility wasn’t to make sure you enjoyed it. It was to make sure you don’t die of starvation.” We don’t consume anything else where the bare minimum is also the maximum expectation.
There is no reason, even in a well regulated environment, that consumer behaviors that apply elsewhere shouldn’t apply to investing. A movement back to the way we used to make and consume, local and artisanal, is afoot. We want to see the supply chain. We want to know where things came from, that those things were sustainably and responsibly obtained, that they are healthful and mindful, and that they support our local communities. That small-batch mentality, from arts and crafts to food to beer to clothing, has taken hold particularly with Millennial consumers. A local, sustainable, community-oriented focus is available in investment products as well. Read my latest article in CityWire USA pro buyer magazine on how investing small helps to foster sustainability and serve consumer demands while still delivering on core investment mandates.
Everything that exists has a story. It might not be an interesting story, but there is a narrative for what was before, what is, and what will be. It might have been the case in the early days of SRI that the investment case was built too much around storytelling and not enough around economic fundamentals. We have now overcorrected in an attempt to be included and inclusive, and lost the motivational hook for why individuals and institutions commit to this type of investing over “traditional” options. This is not philanthropy, but there is a lot to learn from charities about how to motivate people to allocate capital with a purpose. This article in CityWire found in our Library touches on the goals beyond total return that inspire investors of all stripes to make their portfolios reflect their values and behaviors in the rest of their lives.
I am apparently very fond of standing on the third rail, and not because of any particular affinity for public transit. Many of the big ideas in ESG and impact investing are based on almost universally-accepted principles for sustainable business, from access to nutrition and healthcare to clean waterways and shrinking carbon footprints. I attempted in this month’s CityWire pro buyer magazine to look into what happens when some of those universal principles cross into grey areas where stakeholders do not agree, in some cases at all. South African apartheid divestiture was a signature moment in socially responsible investing and one that reaped profound social returns. My question was what are managers doing with the BDS (Boycott, Divestiture, Sanctions) movement in the Israeli occupied territories since BDS is drawing from the South African apartheid playbook but is far more polarizing? What is attributed as good or bad is very different depending on the perspective of the stakeholder. Are managers even looking at BDS, and if so how does it integrate with a sustainable investment process designed to appeal to as broad a universe of investors as possible? You can find the article here or in the Library.
Can’t say this is surprising. From a policy point of view Scott Pruitt is antithetical to everything for which a good environmental steward stands. But, cabinet appointments are the province of the President with the advice and consent of Congress. We are getting the environmental policies for which the people voted. That is how it works. Pruitt took governance to new lows though, befitting regimes we (used to) laugh at in less developed parts of the world.
Nothing is won here though except a glimmer of hope that, even if we vehemently disagree with their policies, civil servants act with honor and honesty in service of their country. However, environmental vigilance is still critical on the part of all stakeholders even with Pruitt’s departure from the EPA. He is gone but the people who put him in that position, and will replace him, are still in power.
The news cycle has certainly spoken for itself in the last few months and the last few years. So, from the great Lakota leader Sitting Bull, who coincidentally was killed at Standing Rock: “They claim this mother of ours, the earth, for their own and fence their neighbors away; they deface her with their buildings and their refuse. The nation is like a spring freshet; it overruns its banks and destroys all who are in its path.”
My latest article in CityWire USA Professional Buyer magazine takes a brief look at how an informed and aware investment process, regardless of asset class, can begin to address in a small but significant way the historical and ongoing injustices of racism, disenfranchisement and genocide perpetrated right here in the US of A.
I was a little surprised I could get this article published in a financial services journal but extremely gratified that it was. Props to the editorial staff of CityWire USA for being bold and willing to up the ante from #MeToo a couple issues ago to #MarchForOurLives this month. I attempted to (and I hope largely succeeded) build a case away from the 2nd Amendment and politics for why a truly free and fair market has a demonstrated capacity to deal with products and companies that pose a threat to the health and welfare of the public. The market is a surprisingly democratic institution in that regard, and the view of the majority, as expressed in terms of consumer dollars and investment capital, carries a lot of power that requires no law, no legislation and no abridgment of rights to express. Consumer assault weapons, WMDs for all intents and purposes, are not just bad for society, they are bad business. Market data seems to pretty strongly back that assertion. You can find the article, “Loaded Issue”, in the Library, or you can open it directly here.
The latest piece to appear in CityWire USA’s March 26, 2018 issue can be found in the Library or behind this link. Had to take a breather from the heavy stuff to talk about how to measure… the heavy stuff.
Speaking of heavy stuff — also from CityWire USA, this news item quoting me discusses the selective introduction of firearms screens into portfolio construction. The short version of my perspective is that selective news-driven adjustments to an investment process are gimmickry. There should be an overarching philosophy behind the process that addresses the reasoning for a particular screen. In the case of consumerized military weaponry, Julie Gorte of PAX World (now Impax) put it to me best — removing companies whose products kill when used as directed. Yes, now addressing firearms discretely is absolutely important, but a strong philosophical grounding could have reduced or eliminated the exposure ahead of time, and certainly would be influential in what comes next in the realm of things that are bad for people and the planet. You can see the quote here, and stay tuned, because the next article to appear in CityWire takes on why our children need to #marchforourlives and where stakeholder responsibility resides.