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.
Jon Hale, the director of sustainable investing research at Morningstar, examines whether the new US administration’s antics such as attempting to bring back coal, pulling the US out of the Paris Agreement, and favoring broad deregulation of business, is having a negative effect on sustainable investing. He concludes that, conversely, Trump in the White House is having a galvanizing effect.
Sustainable investors have actually become more committed to the idea, and others have been pulled in as well, in attempts to counter Trumpism outside of the political sphere. Institutional investors have even led the charge for greater climate risk disclosure at ExxonMobil and Occidental Petroleum, and many have signed a pledge to keep working towards fulfilling the carbon emissions reductions in the Paris Agreement.
Interest also continues to build amongst retail investors, as financial advisors continue to educate themselves about sustainable investing, and asset managers launch more ultra low-cost market index funds. In addition, a dozen open-end funds or ETFs have been launched so far this year in the US, including the first sustainable target-date funds for defined-contribution retirement savings plans, and two sustainable index funds from fund-giant Fidelity.
Finally, usage of ESG data on the Morningstar platform has quadrupled since Trump’s January inauguration, an indication that the subject is on the minds of an increasing number of users. With more Morningstar users referencing sustainability ratings, retail investors putting money into sustainable funds, and those funds generally outperforming for the first half, Trump being in the White House appears to have done little to slow the momentum of sustainable investing in the US.
Sacrificing Financial Returns to Invest Ethically Is An Outdated Myth – Your Investment Property Mag
The Responsible Investment Benchmark Report 2017 Australia, an industry body that represents responsible and ethical investors across Australia and New Zealand, recently reported that nearly half of Australia’s assets are invested via some type of responsible investment strategy, reflecting an increase of 9% compared to 2015, and a four-fold increase from three years ago. This increase was largely led by considerable institutional investment into themed funds such as sustainable agriculture/forestry funds and green-themed property funds, as well as the strong emergence of low carbon funds. By calculating average performance using the asset-weighted returns reported by each responsible investment fund, and a similar methodology to compare the performance of mainstream funds, the Responsible Investment Benchmark Report 2017 also determined that core responsible investment funds actually outperformed their mainstream counterparts over three-, five-, and 10-year periods.
Traditional financial analysis has been highly industrialized and is dependent on the interpretation of enormous amounts of backward-facing data that is mainly historical in nature. Although it plays an essential role in identifying how assets perform under different conditions, future financial performance is not necessarily dependent on historical financial data.
ESG analysis, however, may present forward-facing insights that can signal a company’s long-term survival and future risk considerations.
The Environmental pillar assesses the impact that the company’s operations could have on the environment.
The Social pillar evaluates how the firm and its business will impact people through social factors like employee labor conditions, health and safety standards, employee turnover, diversity and inclusion programs, and consumer relations.
And the Governance pillar examines if the firm’s board is structured to optimally support its business activities. It evaluates board independence and accountability, shareholder rights, transparency, anti-corruption and executive compensation factors.
As investors seek to have deeper insights into risk management, ESG analysis may complement a pragmatic approach to investment portfolios by combining traditional portfolio construction, supported by historical data, along with ESG’s forward-looking assessments.
Impact Shares, The first and only non-profit ETF platform, has secured an $300,000 initial investment grant from The Rockefeller Foundation in order to partner with other nonprofits working toward social missions and plans to direct all profits from its proposed suite of ETFs back to the partner non-profit organizations. Charities working with Impact Shares would specifically select ETF components based on environmental, social and governance, or ESG, principles that matter the most to them.
The first of Impact Share’s innovative social-issue related ETF’s are planned to be launched in late 2017. Ethan Powell of Impact Shares points out that, “the rise of impact investing, coupled with the growth opportunity within ETFs, creates an opportunity for organizations and charitable groups to bridge capital to their cause while generating more awareness for and additional revenue to support their mission.” The financial industry is increasingly pushing the ESG theme in an attempt to appeal to younger investors who seek to align investments with their core values.
The impact investing field has grown leaps and bounds since the Global Impact Investment Network first started tracking the growth of the field in 2010. However, to truly scale impact investing, we need to continue to engage in discourse around the challenges and solutions we are encountering in our everyday work. A data-driven visualization of impact investing transactions to-date is necessary to foster myth busting.
“Myth busting” is pushing back on misconceptions about concessionary returns, the nascent size of the industry, and fear of cannibalization of philanthropy. Myths create barriers to engagement, ensuring that the most significant problems we face across the globe remain under-invested or ignored. Transparency around historical data is key to encouraging more participation in the impact investing space and tapping into the vast amounts of capital and interest that are not yet part of the movement. For many skeptical investors and institutions, pointing to concrete examples of what impact investments look like, who’s involved, and the size and type of capital deployed is a necessary part of myth-busting.
There needs to be systematic effort to catalyze this change. By building the Impact Investing Network Map, Impact Alpha aims to tackle this problem by creating an infrastructure to showcase data that will educate and activate more investors. The Impact Investing Network Map is an easy-to-use tool that provides current and potential investors, intermediaries and social entrepreneurs, with a snapshot of the impact investing market, searchable by geography, asset class, and impact objective. Transparency is key to growing the impact investing space. Impact Alpha is asking leaders in the impact investing movement to share their available data and help map the ecosystem.
The rampant increase of information-sharing technologies is allowing people to become increasingly connected across the world. Through social media sites, smartphone apps, video streams, and a whole cluster of information technologies, we have all become acutely aware of the struggles and difficulties of other people on our globe. They are no longer dreary statistics you read about in the morning paper or hear about on the radio. They are real and in our face every day. Because of this massive collective connectedness and awareness experienced on a scale the world has never before seen, there is an increasing demand for businesses and corporations to do their part in creating positive, visible social change.
Yet there is still resistance on the part of many brands who don’t give much thought to engaging in corporate philanthropy. This is because corporate executives often have short-term tenure, so they are driven to maximize short-term shareholder profits instead of consistently acting in the best long-term interests of the brand. Corporate philanthropy is thus sidelined in favor of more immediate profit-generating strategies.
The leaders behind any brand now have a choice: adopt corporate philanthropy as an important part of their brand’s philosophy and business strategy, or get blown away by competitors who were quicker to see “the shape of things to come.” Brands which choose to shun any real efforts at executing corporate philanthropy are putting themselves on the path to extinction.
While the price tag of conventional food may make it look cheaper in stores, the actual price of organics is far less when considering the big picture, not only when it comes to agriculture and the environment, but also with regard to consumer health. The UN Food and Agriculture Organization estimates that the hidden negative impact of food production on natural and social capital amounts to over $5 trillion every year.
A recent study, entitled “True Cost Accounting in Food, Farming, and Finance” looked at nine different products from all over the world, including apples and pears from Argentina, citrus from South America and Africa, and pineapple from Costa Rica. Accountants calculated the true cost of the food, including the cost of water pollution, pesticide exposure, greenhouse gas emissions, and soil erosion, with data provided by the European Food and Safety Authority, Danish scientist Peter Fantke, and the EcoInvent database as well as the World Health Organization. Once these other factors were introduced, organic produce was the less pricey option – in every single comparison made.