Conscious Capitalism In The News is a weekly curation of articles from around the web about conscious capitalism, socially responsible investing, impact investing, and how consumers and investors are changing the world.
In our current globalized economic model, the vast majority of consumers have little to no connection with the origins of the products they purchase. This relative ignorance has contributed to the unethical business practices that characterize many corporations.
However, many people around the world are beginning to demand products that are ethically produced. From fair trade coffee, to direct consumer-producer relationships at farmer´s markets, there are several ways in which the conscientious consumer is helping to bring about vital changes in how our global economy works, and who it works for.
More and more people are willing to spend a little bit more money for products produced locally. Not only is the quality of locally produced products often superior to the mass production of our global economic system, but these consumers want to develop meaningful relationships with people who produce the consumer items they need and depend on.
Look For The B Corps
The B Corporation Certification is a label that many conscientious consumers look for when making purchasing decisions. The B Corp Certification is a private certification issued to for-profit companies by B Lab, a global non-profit organization with offices around the world. Their rigorous certification process is founded on the triple bottom line of social sustainability and environmental performance standards, accountability standards, and public transparency standards.
Over the last two years, interest in sustainable investing has grown. The idea continues to draw strong support, and familiarity with it only appears to be spreading. A new report by Morgan Stanley states that 61% of Millennials have taken at least one sustainability oriented investment action in the last year. Sustainable, responsible and impact investing rose 33% between 2014-2016 to $8.72 trillion and it is likely that investor interest will keep rising. This latest survey of 1,000 total active individual investors tracked both how investors perceive sustainable investing and whether they are acting on that interest.
Findings from the report:
- 75% of Millennials say their investments can influence climate change;
- 84% of Millennials say their investments can help lift people out of poverty;
- Millennials “are twice as likely as the overall pool to invest in companies or funds that target social or environmental outcomes;”
- More than half (53%) of investors believe sustainable investing requires a financial trade-off.
While investors have a hard time believing they can invest in a sustainable way and still make money, Amit Bouri of the Global Impact Investing Network says that while “there’s a natural inclination to think impact investing is too good to be true, across a number of studies, risk adjusted rates of return are achievable.” When compared to conventional funds, “sustainable funds are in line with the norm.”
Janet Brown, NoLoad FundX
- Good ESG factors have been linked to good performance, and funds that have done well recently tend to continue doing well in coming months or even years.
- New environmental, social and governance (ESG) ratings for mutual funds give investors far more funds to choose from. You are no longer limited to funds that self-identify as ‘sustainable’ or ‘socially responsible.’
- Some funds are impact investors: they engage with the companies they invest in and work to help them do better. Impact-focused funds have had many successes.
Jason Teed and Ron Rowland, Invest with an Edge
- With publicly traded companies facing increasing regulation, more companies appear to be considering environmental, social, and governance factors in their own operations.
- The more we know about ESG risks, the more it becomes evident that taking them into account produces higher returns and lower risks for companies
- While ESG investing has become more popular over the last 20 years, in the millennial generation, it’s almost a requirement.
- Deutsche-Bank performed an analysis of more than 2,000 empirical studies dating back to the 1970s and found that about 90% of the studies suggested that ESG investing provides superior returns to passive investing.
Chloe Lutts Jensen, Cabot Dividend Investor
- The ‘twist’ with ESG is that investors believe companies with good ESG scores will also be more successful and that they make less risky investments. Thus, an oil company that tries to cut corners is more likely to have a devastating spill and suffer the consequences. In contrast, companies that treat their employees well are not only less likely to face damaging lawsuits, but will also benefit from more productive employees.
- ESG strategy is gaining in popularity: institutional funds’ total ESG assets doubled between 2012 and 2016.
- More responsible companies do tend to be better investments.
The market for environmentally and socially responsible investing has multiplied over the past years as investors and companies have recognized the importance of corporate social responsibility. According to research from financial research firm Eurekahedge, ESG investors are well rewarded for their efforts to encourage companies to be better corporate citizens.
Eurekahedge tracks the performance of 33 fund managers that incorporate an ESG framework in their investment process via the Eurekahedge ESG Fund Index. This index is up 8.36% according to the financial research firm’s latest monthly report. It seems these socially responsible funds are achieving outperformance with lower than average risk.
China, Hong Kong, Indonesia, Korea, Singapore, Switzerland, Taiwan, Thailand, Vietnam – these are just some of cities and regions that were represented at a Pan-Asian gathering of change makers focused on impact investing in Seoul, Korea earlier this year. The conference was largely a gathering of next generation leaders in Asia who have high hopes and big dreams for how capital can be used in the days ahead to address some of society’s most daunting challenges.
The gathering was hosted by The ImPact—a network that educates families on how to make impact investments more effectively.
Highlights from the conference:
- In China, Alibaba’s co-founder, Jack Ma, took his first tour of Africa and followed it up with an announcement of the creation of a $10 million African Young Entrepreneurs fund.
- ImpactAlpha reported on the Singapore-based Impact Investment Exchange, which was launched with a vision of building a more inclusive financial system through impact investing.
- India‘s Dodla Dairy Limited (Dodla), a fresh dairy product company offering a wide range of milk products throughout South India, received a $50 million investment from the Rise Fund, the impact-focused fund managed by TPG Growth.
- In Hanoi, impact is reaching next-generation entrepreneurs who are building great companies and planning how to best use their resources for more social impact.