Tag: Featured Articles

Envisioning Transformational Change in Who Builds Wealth and How by Kelly ODonnell Homewise

Envisioning Transformational Change in Who Builds Wealth and How

By Kelly O’Donnell, Homewise

Kelly ODonnell Homewise(Above: Interior of the live/work units in El Camino Crossing, a mixed-use development in Santa Fe, New Mexico; Courtesy of Homewise)

What could the next 30 years bring? At Homewise we are working towards a future in which a growing and increasingly diverse spectrum of Americans have the opportunity to build intergenerational wealth and foster strong communities through homeownership. We believe that this work, if taken to scale and adequately resourced, could transform the distribution of wealth and opportunity in America within 30 years.

Homeownership is widely recognized as the primary mechanism by which Americans build wealth. It is also a powerful tool of neighborhood stabilization and community development; but homeownership is a tool to which only some Americans have access and from which some Americans benefit far more than others. Homeowners have higher net worth than renters, regardless of race; but White Americans are 50 percent more likely than Black or Hispanic Americans to own their homes.

White households also generate higher average returns from their housing investments than do African American and Hispanic households. This is due to differences in income and education as well as more insidious but equally pervasive factors such as racial segregation, predatory mortgage lending practices, devaluation of property in minority communities, and the heightened likelihood that families with few liquid assets have of experiencing foreclosure or other forms of distressed sale. White households are significantly less likely than households of color to be preyed upon by subprime lenders and/or lose their homes to foreclosure.

During the housing crisis of the previous decade, almost 8 percent of African American and Hispanic families lost their homes to foreclosure, compared to under 5 percent of White families, and while the ‘typical’ White family lost 16 percent of its assets during this time, the typical African American family lost over half its assets and the typical Hispanic family saw its wealth decline by two-thirds.

The uneven access and disproportionate risk non-White Americans confront in their efforts to become homeowners must be remedied if we are to fully harness the power of homeownership to reduce disparities and drive beneficial social change. Critical to these efforts are policies and programs that prepare people for homeownership and, once ready, provide them with resources, like down payment assistance, that enable them to purchase homes they can afford in neighborhoods of their choice. Cultivating successful homeowners also requires standing with them through financial setbacks and helping them to avoid foreclosure. Homewise does this work every day on behalf of ordinary New Mexicans, but delivering these comprehensive services at the scale needed to chart measurable progress at the national level requires a strong and well-resourced commitment in every state and at every level of government.

Peering 30 years down the road at a future in which the potential benefits of homeownership are fully realized for all Americans, we at Homewise see a country in which:

  • Americans embrace affordable homeownership as a commodity beneficial to all and, rather than organizing to prevent affordable housing from going up in their neighborhoods, coalesce around more inclusive community goals that preserve everyone’s property values such as walkable streets and safe schools.
  • Competition from responsible lenders for market share in communities of color deprives subprime mortgage lenders of access to their target demographic thereby decreasing the disproportionate financial risk many non-White households take on when becoming homeowners.
Live-Work El Camino Crossing-Homewise
Live/work building in El Camino Crossing, a mixed-use development in Santa Fe, New Mexico.
  • Sufficient capital to support the growth of homeownership, especially among low-income households and households of color, flows from diverse funding sources. Recognizing the sweeping economic and social benefits of affordable homeownership, new individual and institutional investors and funders join longstanding supporters in making long-term, low-cost capital available to community lenders and developers of affordable homes. This vision stands in stark contrast to the current reality in which raising adequate capital remains an ongoing struggle for developers of affordable housing. Homewise obtains capital from numerous sources, some traditional and others, like the Homewise Community Investment Fund, both innovative and homegrown. The Community Investment Fund provides a diversified source of capital to support mortgage lending and successful homeownership in New Mexico as well as an opportunity for individual investors to generate quantifiable community benefits with their investment portfolio. Investments in the fund are pooled and used to finance fixed-rate mortgages for low- and moderate-income households, energy and water conserving home improvement loans and the development of affordable homes.
  • Systematic under-investment in communities of color is displaced by well-resourced community development efforts that are driven by the needs and priorities of community members and increase the community’s capacity for sustainable economic growth. Here again, Homewise has undertaken, on a modest scale, the sort of efforts needed nationwide. The Community Development team at Homewise learns all it can about the communities in which Homewise works through surveys and direct outreach to residents and local businesses. This information drives the development of strategies that strengthen neighborhoods in ways that are responsive to specific community priorities, strengths and challenges. For example in Santa Fe, an extremely tight housing market with a dearth of workforce housing, Homewise builds new mixed-use developments to increase homeownership while simultaneously fostering proximity, walkability and neighborhood vibrancy. In Albuquerque, where the need for starter homes is less acute, but decades of sprawl development has decimated portions of the urban core, Homewise buys and restores empty residential and commercial buildings and then helps community members and local businesses back into them, so that locals are not displaced by rising property values. These redevelopment efforts preserve neighborhoods while also catalyzing new investment in communities that have experienced decades of disinvestment.
  • The role of affordable homeownership in addressing broader social issues such as climate change, community health, and education is recognized and leveraged. Homeownership practitioners play a central role in the development of housing policy, but also in crafting policy solutions to broader issues that intersect with affordable housing, such as urban sprawl, chronic disease, and equitable access to high-quality public education. Through these intersections, strong partnerships and collaborations are forged between homeownership advocates and environmental advocates, neighborhood associations, community groups, employers, educators, economic developers, and numerous other traditional and non-traditional allies.
Residential Home in El Camino Crossing-Homewise
Residence in El Camino Crossing, a mixed-use development in Santa Fe, New Mexico.
  • Homeownership initiatives are adequately resourced and regarded as viable alternatives to subsidized rental housing rather than overly complex niche programs from which relatively few are permitted to benefit. Homeownership with a conventional 30-year fixed mortgage is more stable and often costs less than renting and is the only truly sustainable form of affordable housing. One-time down payment assistance paired with financial education and coaching can provide a permanent solution to a family’s housing problems without any additional costs to the public sector. As an investment, this compares quite favorably to the cost of paying the same family’s rent every month for years. It is our hope that 30 years from now, US housing policy reflects this fact.
  • US anti-poverty policy recognizes and rewards the willingness and ability of low-income households to invest wisely in their financial futures and, in so doing, embraces truly sustainable, affordable homeownership solutions.

The next 30 years could see the emergence of a more equitable and prosperous America – one in which our housing and lending systems are purged of systemic inequities and the cycle of poverty is broken. Making this vision a reality will require hard work, thoughtful policy, and sustained public investments in the programs and processes that make homeownership more accessible and beneficial to the broadest possible spectrum of Americans.

 

Article by Kelly O’Donnell, who joined Homewise in 2021 as the Director of Homewisdom. Prior to Homewise, O’Donnell was a research faculty member at the University of New Mexico and a private economic and public finance consultant for governments and nonprofits in New Mexico and nationwide. Prior to that, she held a series of senior leadership roles in New Mexico state government including Director of Tax Policy, Deputy Cabinet Secretary for Economic Development and Superintendent of the New Mexico Regulation and Licensing Department and served as research director for New Mexico Voices for Children. She holds a PhD in Economics from the University of New Mexico.

Featured Articles, Impact Investing, Sustainable Business

Market Infrastructure Built Over the Past Three Decades Will Help Fuel the Next 30 Years by John Streur Calvert

Market Infrastructure Built Over the Past Three Decades Will Help Fuel the Next 30 Years

By John Streur, Calvert Research and Management

John Streur Calvert(Above: Getty Images, Courtesy of Calvert)

As we look forward to the next 30 years, we believe that capital markets are on the precipice of an increase in the impact of corporate environmental, social and governance (ESG) performance on security prices. We expect a corresponding acceleration of capital deployed to solve the environmental challenges we face today, such as excessive greenhouse gas (GHG) emissions and plastic pollution. We also expect substantial improvement in corporate diversity, equity and inclusion performance. At this moment, with war in Ukraine, the pandemic still raging globally and inflation hurting the poor the hardest, it may seem hard to accept an optimistic outlook for the future. However, with independent innovators like GreenMoney and Calvert laying the groundwork for the past few decades, we are now seeing the infrastructure that responsible investors like us have built having a real impact on transparency and capital flows.

GreenMoney has been and is a critical part of that market infrastructure, providing information about responsible investing, advocating for positive change, connecting investors and working to drive real-world improvement for all people. Over the entire 30 years of innovation and leadership by GreenMoney, Calvert has been there too, proudly.

Congratulations on the impact GreenMoney has had, and thank you for letting Calvert be part of it as we acknowledge our own anniversary of Calvert’s first socially responsible strategy 40 years ago this year.

Let’s take a look at the market infrastructure that has been built during this period to better understand our view of the future. As long-term responsible investors, we are interested in understanding the externalities a company creates in the course of its business. However, because externalities are generally negative impacts that a company has on the environment or on people directly, and that the company often hopes to avoid having to pay for or be penalized for, they are not eager to disclose information about the specific details of these externalities. Carbon emissions, human rights violations, pollution, weak performance on diversity and unsafe products are among the innumerable other adverse impacts companies have and for which they would prefer not to be held responsible. The market infrastructure necessary to create transparency into these issues, with sufficient detail to be able to use the information in investment decisions by every single investor, is what has been built or is in the final stages of development.

Markets are in the final stage of development of a regulatory framework across markets in the U.S., EU and U.K. that will increase the amount and quality of information about externalities related to carbon and methane emissions. This is on top of various requirements already in force in many major Asian nations, including China, mandating listed company disclosure of GHG emissions. In many markets, new or proposed regulations will require companies to provide additional human capital management and diversity information. Government regulations that require companies to disclose their performance on material environmental factors related to climate change will allow investors to better quantify and price these externalities, which is the market mechanism that sends signals to innovators and entrepreneurs about opportunities to develop new products and strategies that solve the problems caused by the corporate externality.

It is the transparency that these regulations call for that will help to accelerate the changes we need to solve the environmental and social challenges of today. Governments are also attempting to create market signals to speed capital deployment to solve climate and environmental problems. For instance, the United States is in the process of passing its very first climate legislation, which uses incentives to spur investment into renewable energy. California recently passed legislation that requires plastics to be recyclable and that also charges companies that use large amounts of plastic packaging a fee, which will be used to offset costs the state incurs in cleaning up plastic waste.

After decades of work, we now see a coordinated effort to strengthen market function through greater transparency, investors are increasingly using this information in the security price discovery process and government action to incentivize investment into solutions. We have already seen the development of new industries (renewable energy, electric vehicles) and companies, prior to this infrastructure and government action. We now expect to see an increase in capital formation and a real acceleration in real-world solutions.

Calvert Research & Mgmt
Image courtesy of Calvert Research and Management

For different reasons, but through similar mechanisms of information flow and transparency, we also expect acceleration in the improvements in diversity, equity and inclusion at corporations. The percentage of the highly skilled labor force made up of women and minorities is increasing worldwide. Companies are lagging in their ability to attract and retain women and minorities in their own employee ranks, and this is a material missed opportunity that companies are attempting to address. As we gain greater transparency into the demographics of individual companies, we find that virtually all companies know and want to improve, but struggle to do so. As more investors understand the opportunities that come along with better performance for all employees, shareholders are taking action to encourage companies to improve board and C-suite diversity. Companies are responding, and positive change is happening.

One question we often get about the future of ESG investing is, “If everyone uses ESG information, will there be any difference between mainstream and socially responsible investing?’’ The differences are very likely to be the same differences we see between mainstream investors and responsible investors today. There have always been independent thinkers and actors, innovators and change agents, and there has always been a mainstream herd following. Yes, almost all investors will consider ESG information in investment decisions, and this will make a difference to real-world outcomes. However, clients have always understood intentionality. There are those driving for positive change versus those clinging to status quo and protecting entrenched interests and power. That won’t change, and that is why we need another 30 years from GreenMoney and Calvert!

We also believe that there will be a wave of new, independent, innovative investment firms and financial technology firms focused on ESG investing and positive change that will compete successfully with the mainstream investment industry. The changes we discuss above regarding transparency, information flow and government action and significant forces will signal innovators to start companies to solve climate and social challenges in the “real’’ world, and also spur new company formation in our own industry.

We are already seeing this happen, and many new entrants are doing excellent work and pushing the mainstream in the process. Institutional investors and retail investors indicate that they plan to invest more heavily into responsible and ESG strategies. There are new firms being created today that are doing what GreenMoney and Calvert set about to do 30 or 40 years ago. As this market expands, we are seeing waves of product innovation in our industry already, and we are really just getting started.

Along with new firms, new products, much greater transparency and positive government initiative will come increasing competition and professionalization of the responsible investing approach. One area we are confident will become central to the approach is the identification, quantification, analysis and, ultimately, market pricing of externalities. Expertise in this specific area is likely to be a critical differentiator between the firms that come to be the leaders of the next 30 years and the pack.

We have a very positive view of the future because the groundwork and infrastructure built will cause existing positive trends to accelerate. Yes, this is an uncertain time due to war, inflation, and a pandemic on top of climate change and inequality. However, for long-term, multi-decade players, the trends emerging today in responsible investing and better real-world outcomes are impossible to ignore. It seems like it took far too long to get to this point. But we are there, and the next 30 years will be very different.

 

Article by John Streur, president and chief executive officer for Calvert Research and Management. John is also president and a trustee of the Calvert Funds as well as a board director of Calvert Impact Capital and chair of its Audit and Finance Committee. He guided the creation of the Calvert Principles for Responsible Investment, the Calvert Research System and the Calvert Indices, and has placed focus on investment research and emphasis on environmental, social and governance (ESG) factors integrated with investment decisions. He joined Calvert Research and Management in 2016.

John began his career in the investment management industry in 1987. Before joining Calvert Research and Management, he was president and chief executive officer with Calvert Investments. He has managed socially responsible investments at the request of institutional clients, including public funds, religious institutions, and college and university endowments since 1991. Previously, he was president, director and principal of Portfolio 21, a boutique firm specializing in global environmental investing, and spent 20 years at AMG Funds (and its predecessors), a firm he co-founded and where he served as president, CEO and chair of the Investment Committee.

John is a founding member of the Investor Advisory Group for the Sustainable Accounting Standards Board (SASB), a group of leading asset owners and asset managers committed to improving the quality and comparability of sustainability-related disclosure by corporations for use by investors.

Disclosures

Risk Considerations Investing involves risk including the risk of loss. There is no guarantee that any investment strategy, including those with an ESG focus, will work under all market conditions. Investors should evaluate their ability to invest for the long-term, especially during periods of downturn in the market.

The views and opinions are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) and its subsidiaries and affiliates (collectively the Firm”), and may not be reflected in all the strategies and products that the Firm offers.

This material is a general communication, which is not impartial, is for informational and educational purposes only, not a recommendation to purchase or sell specific securities, or to adopt any particular investment strategy. Information does not address financial objectives, situation or specific needs of individual investors.

Calvert Research and Management is part of Morgan Stanley Investment Management, the asset management division of Morgan Stanley.

Energy & Climate, Featured Articles, Impact Investing, Sustainable Business

GMs vision for a more sustainable and equitable future by Kristen Siemen

The Next 30 Years: GM’s Vision for a More Sustainable and Equitable Future

By Kristen Siemen, General Motors

 

 

Kristen Siemen GM - GreenMoneyOver two years ago, businesses were forced to adapt to the extraordinary circumstances caused by the COVID-19 pandemic. The world experienced disruptions on a massive scale, which pushed companies like General Motors to find new and more tactical ways of doing business.

For GM, the pandemic became an opportunity for even more company-wide innovation. With the development and launch of electric vehicles like the Bolt EUV, the Cadillac LYRIQ and the GMC Hummer EV Pickup, we showed ourselves and the world just how agile and creative we could be, even during a difficult and challenging time for everyone across the globe.

Today, we’re using what we’ve learned during these unprecedented times to propel forward our vision of an all-electric, more sustainable and more inclusive future.

Here’s what we see happening in the next 30 years.

Putting Everyone in an EV

We know climate change is an urgent priority, and we know EVs can be a critical part of the solution. It will take millions of new EVs hitting the road every year to reach the zero-emissions future we’re striving for.

Understanding that our customers want and need options, GM is addressing multiple aspects of what it takes to help put everyone in an EV, and we envision a future in which EVs fit a wide range of lifestyles and price points. We are rapidly building out our own batteries, software, manufacturing, and customer experience to make that a reality while also laying the critical foundations for customer education and charging infrastructure.

GM’s versatile Ultium platform provides the building blocks for everything, from mass market to high performance vehicles – all from a single, common cell in most markets and a set of interchangeable propulsion components. © 2020 Steve Fecht and General Motors

A key part of GM’s strategy is our Ultium EV Platform, a combined EV architecture and propulsion system, from which GM will quickly be able to scale a full lineup of ground-up EVs. Instead of designing a new battery system for each new EV, GM is using its Ultium Platform for many of its future EVs — from high-volume crossovers like the recently revealed 2024 Chevy Equinox EV at an estimated MSRP around $30,0001, to the 2024 Chevy Silverado EV pickup truck, Cadillac LYRIQ and the GMC Hummer EV Pickup. Ultium affords GM’s EVs competitive range and performance, sporty driving and will help expedite the company’s transition to an all-electric future.

GM has announced significant battery capacity expansion at four battery cell manufacturing plants and already has binding agreements securing many battery raw materials and precursors to support our goal of one million units of EV capacity in North America annually by 2025. We plan to invest $35 billion in electric and autonomous vehicles through 2025 and convert 50 percent of our manufacturing footprint to EV production by 2030.

GM 2024 Equinox Interior
General Motors Chair and CEO Mary Barra confirmed during her 2022 CES keynote address that Chevrolet will launch the Chevrolet Equinox EV in the 2024 model year. © 2020 Steve Fecht and General Motors

Because we can’t help everybody have access to an EV if we don’t ensure everybody has access to EV chargers, we’re building out charging infrastructure and creating a convenient charging experience with Ultium Charge 360. Ultium Charge 360, which gives customers access to more than 100,000 charging stalls in the U.S. and Canada through agreements with 11 different operators, GM vehicle mobile apps and other products and services, will make charging your EV at least as easy as filling up a tank of gas, if not even simpler.

Autonomizing Transportation

Imagine a world with no car crashes and no traffic, where you’re free to get around no matter your age, your stage of life or your physical capabilities. Self-driving vehicles offer promising potential to contribute to this future and support all three pillars of GM’s zero crashes, zero emissions and zero congestion vision.

GM is investing in Cruise, which became the first company to offer a fully driverless commercial ride-hailing service to the public in a major U.S. city. This first-of-its-kind service in San Francisco is provided in the fully autonomous Cruise AV, which is a zero-emission vehicle based on the Chevy Bolt EV. The Cruise AV has already logged over a quarter of a million driverless miles and thousands of driverless rides in San Francisco an effort to make the dream of self-driving a reality. The next step in GM and Cruise’s self-driving journey is the Cruise Origin, a purpose-built, zero-emission, shared autonomous vehicle designed to operate without a human driver. The Cruise Origin represents the pinnacle of GM’s leadership in automation, electrification and mobility.

Cruise AV, ©Bax+Towner

Cruise’s AVs represent a significant step in the journey towards achieving a zero-emissions future, in addition to offering accessible mobility options for seniors, people who are blind or have low vision and other communities that have traditionally faced barriers to accessing reliable transportation. Self-driving vehicles like these that remove the human driver aim to significantly reduce or eliminate the risks associated with human driver error, with the goal of reducing the number of injuries and fatalities on our roadways. GM and Cruise are working hard to deploy autonomous vehicles at scale to help create a safe, less-congested future for all.

HD Cruise Origin, ©Vasyl, stock.adobe.com

Electrifying Everything

Our vision of an all-electric future encompasses so much more than just personal electric vehicles; it even extends beyond the transportation industry. One of the things we are most excited about for the future is that we want to broaden the application of our technology to electrify everything: planes, trains, semi-trucks, boats, and more.

Through our hydrogen fuel cell technology, which is a great compliment to our Ultium batteries, we want to help other industries meet their clean energy targets.

We’ll aim to get there by leveraging both our Ultium Platform and our HYDROTEC fuel cell power cube.

Ultium’s capacity to power many types of vehicles is already being proven with BrightDrop, a connected ecosystem of electrified delivery products and fleet management services helping make last-mile deliveries smarter, safer and more efficient. HYDROTEC fuel cell generators could ultimately replace diesel-burning generators with fewer emissions at worksites, buildings, movie sets, data centers, outdoor concerts and festivals. They could also back up or temporarily replace grid-sourced electricity for residential and small commercial enterprises at times of power disruption.

Innovation in how we use these platforms will help extend the zero-emissions mission across land, air and sea.

Cadillac LYRIQ pairs next-generation battery technology with a bold design statement which introduces a new face, proportion and presence for the brand’s new generation of EVs. © 2020 Steve Fecht and General Motors

Prioritizing an Equitable, All-Electric Future

We recognize that no two communities experience climate change in the same way and that some are more vulnerable to climate impacts or lack the resources to fully participate in and benefit from the transition to a more sustainable future. As the effects of climate change take hold across the globe, it has never been more urgent to ensure our sustainability solutions are guided by inclusion and equity.

We envision an all-electric transition that includes our current and future workforce, customers and communities that may be more likely to experience the impact of climate change disproportionately. At GM, that means prioritizing Equitable Climate Action.

GM’s Equitable Climate Action initiative is rooted in four key areas:

  • The Future of Work – This includes our current workforce and the pipeline of future talent. We will help our current workforce transition to an all-electric future, and we will help support the future workforce as the market shifts to more clean energy jobs through education, training and investments in STEM.
  • EV Access – We want to put everyone into EVs, so we’ll offer a wide selection of EVs across a range of price points. GM was the first company to introduce an affordable, high mileage EV with the Chevrolet Bolt EV in 2017, and that vehicle is now more affordable than ever. We believe this will increase EV accessibility and adoption so more consumers can enjoy the benefits of affordable EV ownership.
  • Infrastructure Equity – We want to see ubiquitous charging solutions that can help meet customer needs wherever they are. We must address concerns about charging deserts and other scenarios that can hinder EV ownership and are working with our dealers and 3rd parties to accomplish this.
  • Climate Equity – We are committed to helping fund organizations that are closing the climate equity gap at the community level and across these four key areas. Through our $50 million Climate Equity Fund, to date we’re working with a total of 39 grantees to accelerate the transition to an inclusive zero-emissions mobility future.
Cadillac Lyriq-GM
Cadillac LYRIQ pairs next-generation battery technology with a bold design statement which introduces a new face, proportion and presence for the brand’s new generation of EVs. © 2020 Steve Fecht and General Motors

It’s no secret — GM is driving towards an all-electric, more sustainable future and moving faster than ever. We’re committed to driving the industry forward with a range of EVs in several sizes and styles that meet customers where they are on price, while prioritizing sustainable solutions, diversity, equity and inclusion as we transition.

Our sights are set on continuing to excite and inspire everyone about the road ahead and we know that our culture, strong values, robust strategies and proven execution will allow us to accelerate towards the promise of a more equitable, all-electric future, together.

 

Article by Kristen Siemen  Appointed to Chief Sustainability Officer in February 2021, Kristen Siemen helps to lead General Motors to a future with zero emissions as the company continues to take bold actions against climate change, including GM’s commitment to become carbon neutral in its products and operations by 2040. Under Siemen’s leadership, GM has received numerous recognitions including JUST Capital’s MOST JUST Companies, the Dow Jones Sustainability Indices Gold Class for corporate sustainability leadership, and Ethisphere’s World’s Most Ethical Companies for demonstrating exceptional leadership and commitment to business integrity.

Siemen is also passionate about promoting inclusion and gender equality. She was instrumental in creating GM’s career reentry program, “Take 2,” serves as GM’s key executive for the Society of Women Engineers and is the co-lead for the GM Women Ally Program. Since transitioning into her role as CSO, Siemen has garnered several individual recognitions for exemplary leadership, most notably including Crain’s Notable Leaders in Sustainability, Future 50 Tech, and Sustainability Mag’s Top 100 Women in Sustainability. Siemen serves on the Oakland University School of Engineering & Computer Science Advisory Board, where she received both her bachelor’s and master’s degrees in Electrical Engineering.

Footnote:
[1] MSRP excludes DFC, tax, title, license, dealer fees and optional equipment and is subject to change.

Energy & Climate, Featured Articles, Impact Investing, Sustainable Business

Jesse Jackson Tim Smith Donna Katzin demonstrating against Citibank's apartheid govt lending-GreenMoney

Reflecting on the ESG Industry’s Strong Foundation and Bright Future

By Tim Smith, Boston Trust Walden

Tim Smith Boston Trust Walden--Reflecting on the ESG Industrys Strong Foundation(Above:  Jesse Jackson, Tim Smith and Donna Katzin at a demonstration in the 1980’s calling on Citibank to end lending to the apartheid government in front of the bank’s headquarters in NYC.)

In light of my forthcoming retirement in December 2022, I am especially pleased to be included in this 30th anniversary issue of GreenMoney. It has been a tremendous privilege to be embedded in the evolution of ESG Investing for 50 years, first at ICCR and then at Boston Trust Walden.

This is an occasion to look ahead at the ESG industry’s future. But that is best done by reflecting on the foundation laid by investors over the last plus 50 years. In 1971, the Episcopal Church filed the first shareholder resolution calling on General Motors to leave South Africa because of its racist system of apartheid, a historic moment. That resolution ushered in a new era of shareowner engagement, including two decades of work on South Africa. Global economic pressure from investors and governments played an important catalytic role in making the apartheid regime negotiate, leading to a peaceful transition to power sharing and the election of Nelson Mandela as President.

Also, the ESG industry’s history is marked by major long-term campaigns, like the infant formula campaign leading to a global code of conduct, saving the lives of hundreds of thousands of infants. And early work on issues of diversity, human rights, climate, and the environment – both in direct operations and throughout global supply chains – were essential stepping stones for future work.

Building on that past, let’s look at some encouraging signs that promise a bright future for the industry’s ESG work. At the same time, let’s also look pragmatically at the challenges for the next quarter century. Obviously, this is a best guess on my part, but that is the nature of crystal ball gazing, isn’t it?

Clearly there has been an explosion of interest and involvement in ESG or Sustainable and Responsible Impact Investing (SRI), especially in the last two decades. For example, US SIF’s 2020 Report on US Sustainable and Impact Investing Trends points to a total of over $17 Trillion in US AUM in ESG, an increase of 42% since 2018. And the Principles for Responsible Investing has 3750 global investor members with over $110 Trillion of AUM (depending on market swings, of course). These asset managers and asset owners pledge to integrate ESG into their investment practices believing these issues have a distinct impact on the bottom line. Many also commit to active ownership, urging transparency from the companies in which they invest. Of course, we could all debate the actual figures and how legitimate these ESG practices are, but it is undeniable that ESG investing is expanding in the marketplace. This “genie is not going back in the bottle.”

Simultaneously, the growth of sustainability within the business community has increasingly been accompanied by specific measurable goals and objectives. Certainly, many companies embrace the belief that sustainability protects and advances shareholder value. Such statements are a concrete and welcome validation of the ESG work of investors. A considerable majority of large global corporations now produce sustainability reports to publicize their commitments and progress. I could go on for pages regarding specific decisions and changes by corporations in response to shareholder engagement on issues spanning climate change, board and workforce diversity, governance reforms, consumer protection, etc. (www.iccr.org and www.ceres.org have extensive catalogs of shareowner impact over the years). I believe such reporting and transparency is going to expand in depth and breadth going forward.

Another significant change is the influence and power of proxy voting on ESG issues by asset owners and managers. There has been a huge shift in recent years on votes in support of shareholder proposals (35 resolutions received majority votes in both 2021 and 2022, as well as scores of votes in the 35%-49% range) demonstrating broad investor support on specific issues like racial justice, climate change, plastic pollution, and board diversity. These voting changes are described in updated proxy voting policies, or Stewardship Reports, and of course in NPX reports displaying every vote. And this voting power is held by some of the largest asset managers in the world, such as State Street Global Advisors, BlackRock, T. Rowe Price, and Vanguard. While it is hard to imagine these firms filing resolutions, their engagements with companies in support of ESG issues sends a powerful message that is hard for a business to ignore.

In addition, even though the final vote has not yet occurred, the dramatic Securities and Exchange Commission’s (SEC) proposed rule calling for specific corporate climate disclosures signals federal government support for a new and necessary level of ESG disclosure by companies, further affirming the importance of investors’ work seeking improved disclosure.

Larry Fink, BlackRock’s CEO, has said, “the tectonic shift towards sustainable investing is still accelerating.” I agree the future is bright for ESG investing. And we are likely to see more investment managers be prodded and held accountable by their clients to embrace continuous improvement in ESG practices. Many large asset owners now hold their investment managers accountable on ESG. This accountability is also likely to grow because when the “markets speak,” managers listen.

But despite such promise, I fear the next quarter century is not likely to be smooth sailing. What I refer to as “the old opposition” is attempting to rebrand and attack ESG to reverse the tides. Former Vice President Mike Pence has described ESG as a “new trend of woke capitalism” and the enemy of the free enterprise system.

Such attacks have grown in 2022 as ideological opponents argue that ESG is a violation of fiduciary duty and will result in poorer portfolio performance. For example, the state of Texas recently passed legislation threatening to end business relations with investment firms that “boycott fossil fuel companies.” Such threats can certainly impede ESG expansion and sadly may well become part of the political polarization growing in the U.S.

Finally, I expect the future, as in the past, will include investors with a range of ESG motives and mandates. Pension funds may emphasize that ESG incorporation is a prudent move that protects long-term shareowner value. Foundations may stress alignment with their missions. Some individuals may strive to ensure their investments are consistent with their values, while others may seek tangible environmental and social impact from their investments. The Sustainable Investing umbrella can certainly comfortably include investors led by different North Stars, especially when they so often have similar messages on vital issues like climate, diversity, and governance, to name but a few.

In summary, while investor motives and constraints may differ, the larger umbrella of SRI/ESG Investing is likely to expand in size and grow in its real-world impact. While there is inevitably more work to be done, I am deeply proud to have contributed to this enormous economic shift in partnership with so many of you.

Passing the climate torch to the next generation

 

Article by Tim Smith, who has been part of the ESG industry since 1971. After earning a BA from the University of Toronto and Master of Divinity degree from Union Theological Seminary in New York, he joined the Interfaith Center on Corporate Responsibility (ICCR). He spent thirty years at ICCR, including 24 years as its Executive Director. He joined Boston Trust Walden Company in 2000, where he advanced the firm’s shareholder engagement efforts related to a variety of issues including climate lobbying and governance. He also frequently represented Boston Trust Walden at public events and helped to foster long-term client relationships.

In 2007, 2012, and 2013, Tim was named as one of the “Top 100 Most Influential People in Business Ethics” by Ethisphere Institute. In 2010, he received the Bavaria Award for Impact at the third annual Joan Bavaria Awards for Building Sustainability into the Capital Markets. In 2011 and 2012, he was named one of the most influential people in corporate governance by the National Association of Corporate Directors.

Tim has served on multiple boards and chaired advisory councils for several different institutions. He was the former Chair of US SIF and currently serves as chair of Shared Interest, which mobilizes economic resources for communities in Southern Africa. He also serves on the Principles Committee of Wespath, the United Methodist Pension Board, which leads the Board’s ESG and shareholder advocacy work. Finally, he served as Chair of the Sustainability Advisory Board of Kimberly-Clark.

Tim currently serves as Senior ESG Advisor at Boston Trust Walden. His retirement commences at the end of 2022. As for the next chapter, he looks forward to continuing to work on many key sustainability issues and continue to cause “good trouble,” in the words of Congressman John Lewis.

 

This commentary solely reflects the views of the author, Timothy Smith, and is subject to change without notice. This commentary is provided for informational or educational purposes only and is not an endorsement of any security and should not be relied upon for any investment decision. These views do not necessarily reflect the opinions or views of Boston Trust Walden Company or its affiliates.

Energy & Climate, Featured Articles, Impact Investing, Sustainable Business

The Climate Crisis is a Health Emergency-by Ebony Perkins

It’s Official: The Climate Crisis is a Health Emergency

By Ebony Perkins, Impact Finance Center

Above – A Self-Help financed solar project in Kinston, North Carolina. Self-Help has invested over $175 million in solar development companies that are providing a clean energy alternative to fossil fuels and opportunities for economic advancement in rural communities. These installations have created 2,250 jobs in the clean-energy sector and have provided over 280 megawatts of clean energy to the grid–enough to power 53,000 homes.

 

Ebony Perkins Impact Finance Center

GreenMoney Journal is turning 30!

The guests have arrived, the music is playing, and the celebration is about to begin.

But wait…don’t pop the champagne just yet. We still have work to do.

It’s natural to want to celebrate our progress in the fight against climate change. Since GreenMoney Journal’s founding in 1992, we’ve had a few wins—we’ve bent the emissions curve, national leaders have committed to cutting emissions even further, electric vehicle sales have skyrocketed, and clean energy costs have declined.

Investors are also strategically using their investments to support communities that are currently experiencing the direct effects of climate change in their everyday lives. Community development financial institutions have received a surge of investments in the last decade. According to the US SIF 2020 trends report, “community investing assets nearly doubled between 2014 and 2016, then increased by just over 50 percent between 2016 and 2018, and most recently grew by 44 percent between 2018 and 2020.”  Money managers have invested $266.3 billion into community investing institutions.

Yet, investments in community investing institutions are still only 1.6% of the $16.6 trillion in ESG incorporated assets. Many communities are in crisis mode as they face mounting health issues and even death because of climate change.

Though we’ve made progress in the fight against climate change, we must remain persistent and continue to protect our most vulnerable populations.

The Climate Crisis is a Health Emergency

Our most vulnerable groups — low-income and minority communities — feel the effects of our declining planet before the general population because they often lack the resources to shield them from the inevitable chain of events that occur resulting from environmental decline and failing infrastructure. They experience the effects of climate change at higher rates, are plagued by water contamination, and are more often located near landfills and hazardous waste sites than other groups. These groups are robbed of the chance to live and raise their families in safe communities where they can enjoy healthy food, drink safe water, and breathe clean air.

The World Health Organization estimates that in 2012 environmental factors contributed to 12.6 million deaths globally, nearly 23% of all deaths. In the United States, physicians are speaking out about the health risks that pregnant women, children, the elderly, and others with chronic health conditions are experiencing because of climate. They are seeing more patients with increased allergies, respiratory complications, heat-related difficulties, or mosquito-borne illnesses, among other issues.

Many individuals are now taking their health into their own hands after realizing the damaging effects of gas. Clean Energy Credit Union member John from Texas turned to the credit union after experiencing a storm that affected him and his family. He said, “I [decided] to go solar after the huge storm in Texas in February of 2021. After losing power for almost 48 hours and having to huddle around the gas fireplace just to survive, we had enough and decided to take control of our own energy production. We purchased a system large enough to produce 100% of our energy needs, with a battery backup that is generator ready. We feel much safer in our own home now that we have this system.”

Many green financial institutions recognize that no one should continue to jeopardize their health because of expensive financing options from traditional lenders. Nicole Buford, Marketing Director at Clean Energy, doubled down on their efforts to build healthier communities: “We recognize that there is a strong connection between health and the environment, and we are committed to leveraging clean energy to reduce pollution for the public’s health.”

In the future, investors will tailor their strategy in the fight against climate change to address the growing health problems vulnerable communities face. Some institutional investors are already investing in affordable housing that provides safe, environmentally-friendly living conditions. Others are increasing diversity in healthcare so patients experiencing environmentally-caused health conditions can work with a doctor or other healthcare professionals that can both identify with their plight and meet their needs.

West Oakland Community Foods Market
Community Foods Market is a full-service grocery store, health resource center and community hub that engages residents to lead healthier and more socially-connected lives. Self-Help’s $1,985,000 loan helped fund construction of the 14,000 square-foot grocery store to support the vibrant community of West Oakland.

How You Can Build Healthier Communities & Fight Climate Change

You don’t have to decide between either fighting climate change or building healthier communities. Below are a few ways you can achieve both:

  • Invest your cash with green financial institutions providing healthy alternative products: Some credit unions specialize in affordable clean energy loans. Consider placing your savings at Self-Help Credit Union in a CD, IRA, or money market account so they can help others lead healthier, environmentally-friendly lives.
  • Give to nonprofits addressing the public health effects of climate change: Many organizations are serving communities experiencing these health issues. Consider donating to organizations like The Medical Society Consortium on Climate & Health or PUSH Buffalo to help them continue to raise awareness and address health inequities.
  • Speak up for populations experiencing the brunt of this health crisis: As you continue to advocate for climate change, verbally acknowledge the people currently suffering from these health issues. Although we can continue to address carbon emissions and rising sea levels, we must not forget the growing number of human lives lost each day because of this current health crisis.

 

Article by Ebony Perkins, Senior Advisor, Impact Finance Center

Ebony Perkins is a dedicated, solution-oriented social entrepreneur whose heartbeat is community. She has a demonstrated ability of working with investors and philanthropists to help them make smart and strategic decisions. As the Director of Impact Investments for a Fortune 5 company, Ebony advances their social impact and tax credit investment strategy across the country. Before that role, she served as the Vice-President & Director of Investor Relations at Self-Help Credit Union. Ebony managed a national team that helps groups and individuals invest funds in a socially responsible financial institution that supports communities of all kinds, especially those underserved by conventional lenders.

Ebony co-hosts the Renegade Capital Podcast: The Activist’s podcast for finance and investments. She interviews thought leaders who go into the ring every day to fight against the racist, sexist, and exclusive norms established by traditional financial and capital systems. Ebony is also a Senior Advisor with Impact Finance Center and is supporting the creation of a membership organization that provides shared due diligence for a diverse asset manager database. 

Ebony’s commitment to community investing is evident by her service and contributions to Clean Energy Credit Union, Conservation Trust of North Carolina, US SIF, and Women In Philanthropy. She was also recognized on the SRI Conference’s inaugural 30 Under 30 List.

Ebony holds a Master of Public Administration from the University of North Carolina at Chapel Hill and a Bachelor of Science in Marketing from Claflin University as a summa cum laude graduate. She also has an Executive Certificate in Financial Planning from Duke University.

Energy & Climate, Featured Articles, Food & Farming, Impact Investing, Sustainable Business

What would Nature do - What would Nature have ME do - by Katherine Collins

What Would Nature Do? What Would Nature Have Me Do? The Next Thirty Years

By Katherine Collins, Putnam Investments

Katherine Collins - Putnam InvestmentsWhen I was pensive as a child, I’d hop on my bike and ride to a little creek down the lane, where I could watch the caddisflies assemble their crazy pebbly houses.

When I was yearning to consolidate my thoughts after divinity school, I walked 500 miles through the fields of wheat and sunflowers in northern Spain.

When I was returning to practice in a large financial institution, I endlessly studied the interactions my honey bee hives.

In the early days of the pandemic, I began to stop on my daily walk to lean against a 200 year old oak, though it was weeks until I was aware of this habit.

And once, at a conference in Las Vegas, I hid amidst the branches of a big potted ficus tree, the only thing around that was not flashing lights or bleeping at me.

 

It is perhaps no surprise, then, that I see a great reconnection in business and investing taking root – a joining-up of finance and the wisdom of our natural world. I don’t mean a focus on investing in nature, though in many ways that is vital. I mean a focus on investing as nature, a shift in how our decisions are considered and made and monitored. This shift goes beyond the changing jargon and labels and frameworks of our profession, important though they can be. It reflects a deeper level of reunion, a reconnection of investing with the world it is meant to serve.

I acknowledge that this trend is not so visible some days.

Here in our “now,” things are pretty complicated.

Over the past two years, we have witnessed the tragic and disruptive impacts of the pandemic; continued evidence of racial injustice in the United States; record-breaking fire, hurricane, drought, and flood conditions across many parts of the world; and the ongoing polarization of civil discourse. Recent months have brought news of the horrific invasion of Ukraine, inflationary pressures, and tumult in economies and financial markets. The opportunities to improve the systems that support our well-being, livelihoods, and societies are enormous, sometimes overwhelming.

And yet.

When times are difficult, both shortcomings and strengths are revealed. Individuals, communities, companies, and societies have the chance to rediscover our most valuable assets. Amid the challenges noted above, we have also experienced the joy of reunion, the power of effective collaboration, and the glory of our natural environment. We are reminded daily of the power of social connection, positive technological advances, and effective systems of care and governance.

What are the common characteristics of these newly vivid assets?

Effectiveness over efficiency.
Connection over isolation.
Adaptation over rigidity.
Partnership over predation.

These are also the design principles at work in healthy natural systems, the ideas that sit at the heart of the practice of biomimicry.

What Would Nature Do?

Biomimicry asks us to look to nature as our most magnificent library of wisdom, not just a warehouse full of stuff. It asks us to stop before we design a process, or invent a taxonomy, or create a product, and to ask, What Would Nature Do? How is this function I’m considering present in natural systems, and what can I learn from the billions of years of cumulative experience all around me?

Fittingly, my introduction to biomimicry was itself a re-rooting. I was visiting with the incomparable Hazel Henderson at her home in Florida, where visionary scientists and teachers Janine Benyus and Dayna Baumeister introduced us to the core principles of biomimicry and natural systems design. At one point, Janine summarized by saying, “so this is how the world functions,” and I felt a huge whoosh of my own exhaled breath. This is how the world – our home – already functions. It is not so hard to imagine realigning our puny, brand-new financial systems once this reality is clear.

In some ways an investment practice or business operation aligned with natural systems might still seem a faraway dream. But I see the green shoots sprouting up everywhere I look. When a CEO reports on the benefits of their products to customers before talking about operating margins, that’s a sprout. When a CFO tells me with eyebrows raised that increasing wages is an investment and not just a cost, that’s a sprout. When my own team shares stories of the best things in our weeks before diving into our spreadsheets, that’s a sprout. When analyst and CIO commentary recognizes that all of these activities contribute to financial returns, that it’s not a zero sum, fixed pie world, that is more than a sprout; it is a sapling!

What Would Nature Have Me Do?

A more recent reframing of this core question has recently come to me through reunion with the Harvard Divinity School community, and particularly with the legacy of Reverend Peter J. Gomes. I’m sorry to report that one of my main lessons from Divinity School is, unless you are Reverend Gomes, no one really wants to hear your sermon! Thankfully we still have the records of his orations to draw upon for inspiration and guidance.

Rev. Gomes famously upped the ante on the popular Christian phrase, “What would Jesus do?” by asking instead, “What would Jesus have me do?” This has me wondering, what if we extend our inquiry to ask, What would Nature have me do?

These two tiny words make all the difference. They move us from a place of judgment to a place of responsibility, from analysis to action. Whatever we honor, this edit tilts the question inward, and forward.

In this demand we find love.
In this demand we find hope.

Like the green shoots of biomimicry design principles, I see sparks of this hope everywhere. The buttoned-up CFO who tells us about sharing personal struggles with his team during the pandemic is a spark. The analyst whose enthusiasm for the circular economy earns the attention of a cranky old colleague is a spark. The manager who insists on a higher standard of substance over a check-the-box approach to reporting is a spark.

As I compose this curious combination of reflection and prediction, dear Hazel has just “gone virtual” (in her words). She leaves us with great bushels of seeds from her far-ranging wisdom, and great arcs of illumination from the sparks of her spirit. As we go forward with the planting, as we try to light a path ahead, how fitting it would be for us to also take up her mantra, “the wealth is in the network!” This work is joyful, and also sometimes lonely. But we are not alone.

These seeds and these sparks are my hope for the next thirty years. They are the source of my faith in what could lie ahead. Here is the work of our time, to reconnect all that has been held falsely separate.

What rewards it could bring!

Study Nature. Love Nature. Stay close to nature.
It will never fail you. – Frank Lloyd Wright

 

Putnam Investments 2022 Sustainability ReportArticle by Katherine Collins, Head of Sustainable Investing at Putnam Investments and portfolio manager for Putnam’s Sustainable Leaders and Sustainable Future strategies, with approximately $8 billion in assets under management. 

Ms. Collins has over thirty years’ experience as an active fundamental investor and was named to the inaugural Forbes “50 Over 50” list of leaders who are shaping the future of finance in 2021. She is the author of Month of Sundays and The Nature of Investing, and founder of Honeybee Capital, an independent investment research firm focused on sustainable investment themes. Earlier in her career, she served as Head of Equity Research, Portfolio Manager, and Equity Research Analyst at Fidelity Investments.

Katherine serves on several nonprofit boards, including the Santa Fe Institute, Omega Institute, and Harvard Divinity School Dean’s Council. She earned a Master of Theological Studies from Harvard Divinity School and a B.A. from Wellesley College, and is a CFA charter holder

Energy & Climate, Featured Articles, Food & Farming, Impact Investing, Sustainable Business

Investing in the Transition to a More Sustainable Economy by Joe Keefe

The Next 30 Years: Investing in the Transition to a More Sustainable Economy

By Joe Keefe, Impax Asset Management

Joe Keefe - IMPAX Asset MgmtThe next 30 years will require an epochal transition from an industrial-age economy where negative long-term environmental and social externalities are ignored to a sustainable economy where future growth is accompanied by dramatically improved environmental and social outcomes. The future of human civilization as well as countless species, and indeed of nature itself, depends on it.

The transition to a more sustainable economy will require far more intentionality than we see today, in the sense that businesses, capital markets, civil society and governments will need to reach a broad consensus on goals and set a course to reach them. We should not underestimate the immensity of this challenge. Moving to a “sustainable economy” goes beyond achieving net zero emissions by midcentury to avert a climate catastrophe – an ambitious agenda in and of itself – but to a much broader transition from a depletive economic model to a more circular, restorative economic model.

Not only are global temperatures rising but oceans and marine life are choking to death on plastic. Not only are polar ice caps melting but clean water, wetlands, fisheries and natural food systems are endangered. Not only are biblical storms, fires and floods becoming everyday news events but habitat destruction, biodiversity loss and species extinctions are proceeding at alarming rates. Planet Earth is remarkably resilient, but climate change is only the most prominent among a growing, interrelated matrix of environmental disruptions that is truly existential.

To complicate matters further, we need to understand that the task before us is not confined to environmental challenges; the transition to a more sustainable economy must be accompanied by a transition to a more equitable society. This will require repairing and strengthening the social fabric across a range of issues including pay equity and fairness, worker health and safety, paid leave and flexible work, improved access to health care, nutrition, child and elder care, education and finance as well as a host of demographic and human capital issues such as diversity, inclusion and gender equity. Growing inequality, exclusion, marginalization and oppression in a world of haves and have-nots is quite simply not a foundation on which to build a sustainable future.

In essence, what we need is a sustainability revolution equal in significance to the industrial revolution that ushered in the modern period. And in a historic moment beset by pessimism – stemming from a global pandemic, war, economic woes and social divisions – there is the added challenge of summoning the will and marshalling the resources to move forward. The task before us is enormous.

Foundations for the Transition Have Been Laid

Yet there are reasons to be hopeful – even confident and optimistic. We can be encouraged not only by what we have already accomplished but by the rich tableau of opportunity before us. Investors have been and must continue to be at the forefront of this historic transition.

Thirty years ago, few if any companies were issuing corporate responsibility or sustainability reports. Today more than 5,000 do so and many countries are about to require such reporting. Back then, there were but a handful of corporations that had embraced diversity on their boards or in senior leadership. In 2021, by contrast, 45% of Fortune 500 board appointments went to women and 41% to non-whites. Thirty years ago, there was no Institutional Investor Group on Climate Change, with members representing over $4 trillion in assets; no UN Principles on Responsible Investment, with signatories representing more than $100 trillion; no Paris Agreement; no Carbon Disclosure Project; no Investor Alliance for Human Rights; no Thirty Percent Coalition advancing corporate diversity; no Global Impact Investing Network; no Ceres; no Net Zero Asset Managers Initiative; no Task Force on Climate-Related Disclosure; no proposed SEC Rules on corporate climate disclosure.

You get the picture.

Suffice it to say that we have traveled some distance and are already witnessing the early stages of the transition to a sustainable economy. We have a lot of work to do, and clearly need to move at a faster pace, but it has begun.

Investors’ Key Role in Driving Change

Importantly, none of this would have happened had it not been for engaged, sustainability-focused investors making the case that businesses and capital markets must begin accounting for material risks and opportunities associated with the transition. Over the past few decades, we have articulated a compelling investment rationale for more corporate disclosure, improved policies and practices, and a longer-term outlook that is in the best interest of corporate shareholders as well as other stakeholders. Investors have made the business case for corporate responsibility, for environmental stewardship, for gender and racial equality and inclusion; we have made the investment case for capital markets to hasten the transition to a more sustainable economy.

As a result of this work, we have witnessed the decline of the shareholder model of the corporation, famously captured by economist Milton Friedman’s dictum that the only duty of a business is to make a profit. In its place, a more expansive view of the modern corporation has emerged where a company’s duties are not only to its shareholders but to all stakeholders, including employees, customers, the communities where it does business, the natural environment, and indeed, the public interest. The significance of this shift cannot be overstated.

Over the coming decades, businesses and capital markets will be profoundly re-shaped by global sustainability challenges. Some parts of the global economy, including certain sectors and industries, will face headwinds while others will enjoy tailwinds. Some companies will be well-positioned to benefit from the sustainability transition while laggards that fail to adjust will be left behind. There will be clear investment risks but also enormous investment opportunities.

For example, G7 countries and the EU have committed to largely de-carbonize their electricity sectors during the 2030s, while policy commitments to phase out vehicles with internal combustion engines (ICEs) have prompted major carmakers such as Ford, General Motors, Volvo and Mercedes-Benz to sunset the manufacture of ICE vehicles worldwide. The accelerating shift to electric vehicles will create significant opportunities for long-term investors.

G7 countries and the EU have committed to largely de-carbonize their electricity sectors during the 2030s - by Joe Keefe Impax Asset Mgmt

More than 100 countries have pledged to cut methane emissions by 30% by 2030. Another 50+ countries have pledged to phase down coal power generation as we continue the transition to renewables, which are on the verge of surpassing coal as an energy source. A global treaty to curb further biodiversity loss is in the works under the auspices of the UN Biodiversity Conference. For long-term investors, there seems little doubt that investment in renewables, zero-emissions transportation, water stewardship and conservation, resource efficiency and climate and ecosystem resilience will continue to grow. These investment themes and emergent industries will enjoy tailwinds while taking market share from legacy sectors.   

Political Challenges Must Be Overcome

One challenge, clearly, is that public policy advances will be needed to facilitate and enable this transition, and some of the investment opportunities mentioned above are in fact being driven by public policy choices. Just as clearly, in the United States, the largest economy in the world, there is no public policy consensus at the moment. In fact, there are deep political divisions over whether human activity even causes climate change or that it need be addressed. To compound matters, a rear-guard campaign against “woke” corporations endeavoring to align their business strategies with certain sustainability – or ESG-related goals is currently underway and perhaps gathering momentum.

What we might call the politicization of the marketplace is not likely to fade away quickly. Legacy sectors such as the fossil fuel industry will not go gently into the night. Not coincidentally, disruptions associated with globalization have already given rise to various “populist” movements and autocratic impulses around the globe, including in the US. These trends will likely intensify over the near term, posing profound challenges.

My own view is that the transition to a more sustainable economy and a more equitable society will require a renewed commitment to the values of the enlightenment and the liberal idea: individual liberty, democratic self-governance, free markets, the rule of law, equality of opportunity, respect for human rights.

The next three decades will be fraught with risk and instability as these battles play out. But they are also brimming with opportunity and promise. All periods of historic transformation are disruptive. Change never comes in a straight line, nor is it inevitable. We must bring it into being.

But investors have 30 years of experience and accomplishment under our belt. This should give us confidence that we can successfully shape and manage the next 30. I believe we will.

  

Article by Joe Keefe, President of Impax Asset Management LLC, the North American division of Impax Asset Management Group and investment adviser to Pax World Funds. He is responsible for the distribution of Impax’s full capabilities across North America. 

Prior to joining the firm in May 2005, Joe was President of NewCircle Communications, a strategic consulting and communications firm specializing in corporate social responsibility and public policy communications. He served as Senior Advisor for Strategic Social Policy at Calvert Group from 2003-2005 and as Executive Vice President and General Counsel of Citizens Advisers from 1997-2000. He is a former member of the Board of Directors (2000-2006) of US SIF, the trade association representing asset managers and investors engaged in sustainable investing throughout the United States. Before entering the investment management industry, Joe worked in private law practice for 16 years.

 Joe holds a Juris Doctor from the University of Virginia School of Law and a Bachelor of Arts in philosophy from the College of the Holy Cross.

Energy & Climate, Featured Articles, Impact Investing, Sustainable Business

The Way You Invest Matters by Amy Domini

The Way You Invest Matters: Setting the Stage for the Next 30 Years

By Amy Domini, Domini Impact Investments

Amy Domini, Domini Impact Investments(Article graphics from the Domini Funds 2021 Impact Report)

The first phase of the responsible investment movement has matured. We find our approach of arguing that scrutiny of the way companies respect their relationships with people and the planet adds value to the investment decision-making process. Our stakeholders include the natural ecology, work forces, suppliers, customers, investors, taxpayers, and communities, both locally and in the global sense. We have demonstrated value and so regulators, large investors, investment banks and partner-nonprofits mobilized to begin the process of standardizing data and providing it to investment decision makers.

Roughly every fifty years a new awareness of a better way for investors to make money emerges. In 1934 Benjamin Graham published Security Analysis which forever shaped the way professionals approached the investment decision making process. He argued that being disciplined, investing in the company—not simply the stock—and staying invested for the long haul allowed one to achieve superior results. His stock-by-stock approach prevailed for roughly fifty years before the next tidal wave of insight appeared: The Modern Portfolio Theory, which argued that a thoughtful diversification would reduce risk and enhance return revolutionized portfolio management. Although Harry Markowitz introduced the concept in 1952, it did not sweep institutional investing until David F. Swensen famously built the highly successful Yale endowment by utilizing the theory in the late 1980s. Today we witness a global rush to investing with values, frequently referred to as Environmental, Social and Governance, or ESG investing, although impact or sustainability investing is favored by many.

Modern Portfolio Theory did not remove security analysis—it is used alongside it. ESG will not cause the demise of security analysis and will not cause the demise of diversifying portfolios. Instead, it sets out to strengthens investors’ capacity to make sound investment decisions that help outcomes for their clients. Many on Wall Street did not expect this outcome, but as the idea spread, these people have become converts. In fact, we are now headed to universal acceptance that there is a value add.

Thirty years ago, socially responsible investing, as it was called, was generally ignored by professional investors as a tool for making investment decisions. When it was discussed, concerns were raised. Was it possible to perform with such constraints? Was it legal? Who decides what is good and how do they weigh its pros and cons? Today we have set aside most of these concerns. There is plenty of academic literature and lived experience to give comfort to those who are hesitant.

I anticipate that the next several years will see an increase in standardized reporting on topics of interest to responsible investors. Many of these data points will result from demands by regulators. We have already seen the Securities and Exchange Commission mandate disclosures relating to executive compensation and board makeup. Some data points will continue to be collected voluntarily.

Carbon Disclosure Project is an example of what can be accomplished without specific regulation when investors voice an interest in a disclosure.

The question of who decides what is good is quickly emerging as a hot topic. Recent news that S&P Global does not consider controversial behavior that happened more than ten years ago drew some criticism. But I thought ten years was more than adequate and as I generally consider four years as adequate for the aging off of a concern. A difference of opinion is a good thing. All investors have identical information of earnings per share and the price of a security, yet some are buyers and some are sellers. It is, as they say, what makes a market.

2021 Domini Funds Impact Report-2

Nonetheless, for the sake of a strong outcome, advocates of the integration of social and ecological considerations into the investment process could benefit from a greater convergence over “what matters,” even if we do not agree on how to interpret it.

In 1989 Peter Kinder, Steven Lydenberg and I created the metrics to identify a company’s impacts on several stakeholders in an even-handed way. With this tool, we could create a splatter of data points. We did not assign values to each data point, arguing that the investor should stand back from the canvas, stare, and see the points form a picture. Certainly, we had to decide which companies to put into the Domini 400 Social Index*, but there was no simple numerical entry point.

Currently, the largest research vendors have a tendency to use data points to come up with a single score for a company. It is an approach that is, in my opinion, unlikely to continue to be much sought after. As a portfolio manager, I am somewhat interested in buy and sell recommendations, but I certainly don’t take someone else’s opinion blindly. I want to know why and I want to know in detail about the tidbits of information that have helped me in the past, such as qualifications of top management or cash flow trends. The same is true for stakeholder analysis. I want to judge for myself whether the company has taken steps to address their ecological damage, or to attract and retain a diverse and empowered workforce. I have my own prejudices as to what matters with what companies.

Domini Funds 2021 Impact Report-3One of these prejudices is that the treatment of the taxpayer deserves greater scrutiny. If your employment base must rely on public assistance to make ends meet, your company is not, in fact, a functioning capitalist company. It is living on handouts and needs to be priced as such. I raise this only as an example of potential areas to explore for greater understanding of whether a corporation is in fact a good place to invest money.

In addition to how we, who manage impact portfolios, look at companies, a shift has occurred in how investors look at us. The issuer of investment products labeled as responsible or green is being asked to demonstrate consistency. If a mutual fund is green, the fund management is expected to vote green on proxies. This may seem simple and obvious to insiders in the field, but it was in reality not the case and has led to claims of greenwashing, confusing the public. Nonetheless, it is effectively moving mountains. Large asset managers are integrating value across proxy voting, headquarter building, diversity programs and a host of other areas. Consistency will grow.

Intentionality is also under scrutiny. When Morningstar began to rate mutual funds for ESG, shock waves were set off as dozens of funds with a special purpose and no intentionality to be ESG were given good scores. Was a fund that bought only solar panel manufacturers really a “better” ESG investment than a diversified portfolio that intentionally engaged with its portfolio companies and had a prospectus stating that it used environmental standards to make investment decisions?

What do the next thirty years hold? I believe there will be universal acceptance of ESG as a valid and useful tool for investment advisors; a move towards greater disclosure of granular data; a move away from top line scores; and an avalanche of new research on the approach. This is not, however, as important as what the byproduct of our growth will bring. With data comes knowledge and with knowledge comes corrective action. That will be our legacy.

We have always believed that investors matter in assuring that there is a tomorrow, and that tomorrow includes a livable planet and lives worth living. And our field is built on the idea that we are more alike than different from each other, that our combined impact will be an important source of engaging finance in creating a better world. We are on the cusp of seeing our goals met. Our simple concept, the way you invest matters, will have positive real world results.

 

Article by Amy Domini, Founder and Chair of Domini Impact Investments (“Domini”). She has been a leader and innovator in the development of impact investing for over 30 years. Widely regarded as one of the world’s eminent authorities in the field, she was named to Time magazine’s list of the world’s 100 most influential people in 2005.

Ms. Domini began her career as a stockbroker and became especially interested in working with clients that were concerned with ecological sustainability and universal human dignity. She co-founded KLD Research & Analytics and, in 1990, was instrumental in the launch of the Domini 400 Social Index. She later co-created the Domini Impact Equity Fund. Ms. Domini serves as a voting member of Domini’s Impact Review Committee and Standards Committee. She also serves as co-Portfolio Manager for the Domini Impact Equity Fund, Domini International Opportunities Fund, and Domini Sustainable Solutions Fund.

Ms. Domini was acknowledged with the Clinton Global Initiative citation for innovation and finance. She has also received an honorary Doctor of Business Administration degree from Northeastern College of Law, an honorary Doctor of Laws degree from Flagler College, and an honorary Doctor of Humane Letters from Yale University’s Berkeley Divinity School. Ms. Domini was named to Directorship magazine’s Directorship 100, the magazine’s listing of the most influential people on corporate governance and in the boardroom, and Barron’s selected her as one of the 30 most influential people in the mutual business. In 2009, she was named to Time magazine’s list of 25 “Responsibility Pioneers” who are changing the world.

Active in her community, Ms. Domini is a board member for the Center for Responsible Lending. She is also a past board member of the Church Pension Fund of the Episcopal Church in America; the National Association of Community Development Loan Funds, an organization whose members work to create funds for grassroots economic development loans; and the Interfaith Center on Corporate Responsibility, the major sponsor of shareholder actions. A frequent guest commentator, Ms. Domini has appeared on CNBC’s Talking Stocks and various other radio and television shows.

Ms. Domini holds a B.A. in international and comparative studies from Boston University and holds the Chartered Financial Analyst designation.

Select Publications:

Ms. Domini is the author of Thoughts on People Planet, & Profit (2021), Socially Responsible Investing: Making a Difference and Making Money (Dearborn Trade, 2001) and The Challenges of Wealth (Dow Jones Irwin, 1988), and a coauthor of Investing for Good (Harper Collins, 1993), The Social Investment Almanac (Henry Holt, 1992), and Ethical Investing  (Addison-Wesley, 1984). 

Footnote:
* Now known as the MSCI KLD 400 Social Index, owned by MSCI, Inc. MSCI and Domini Impact Investments LLC are not affiliated.

This commentary reflects the views of the author and are subject to change as market and other conditions warrant. No forecasts are guaranteed. This commentary is provided for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index.

Energy & Climate, Featured Articles, Food & Farming, Impact Investing, Sustainable Business

Equal Exchange-A Mission Accomplished by Ted Ketcham GreenMoney

Equal Exchange: A Mission Accomplished

By Ted Ketcham, GreenMoney Journal

Ted Ketcham GreenMoney
Ted Ketcham, GreenMoney editor

It was a fortuitous sharing of vision and willingness to take risks that drove Equal Exchange founders Rink Dickinson, Jonathan Rosenthal, and Michael Rozyne in 1986 to move forward with their vision of Fair Trade and a better world. The three were managers at a food cooperative in New England who dreamed of a large and inclusive economy that lifted up the prosperity of growers in the Third World — growers whose poorly paid labor had long kept the wealthy in comfort and the growers in poverty.

Meeting once a week for three years to discuss how best to change the way food is grown, bought, and sold around the world, they hatched a plan for a new organization to be called Equal Exchange that would be:

  • A social change organization that would help farmers and their families gain more control over their economic futures.
  • A group that would educate consumers about trade issues affecting farmers.
  • A provider of high-quality foods that would nourish the body and the soul.
  • A company that would be controlled by the people who did the actual work.
  • A community of dedicated individuals who believed that honesty, respect, and mutual benefit are integral to any worthwhile endeavor.

They launched an alternative trade model that utilized direct trade, established long term contracts, and offered higher-than-market prices to small coffee farmers. In the traditional trade model, buyers go through a series of middlemen to purchase coffee beans from plantation farmers. Prices are determined by these middlemen.

They left their jobs. They invested their own money, and they turned to their families and friends for start-up funds and let them know there was a good chance they would never see that money again.

Equal Exhange tea workerThe idea of Fair Trade, as practiced by Equal Exchange, was to establish direct relationships between growers and buyers, betting that consumers would support the cooperatives by paying a little extra for higher quality coffee. The profits were shared equally.

Today, while they are a much larger organization with more than 100 worker-owners and a significant national and international scale, they are still breaking conventions when they buy from their trade partners in organic, gourmet coffee, tea, sugar, bananas, avocados, cocoa, and chocolate bars and olive oils produced by farmer cooperatives in Latin America, Africa, and Asia.

Encouraged by Equal Exchange’s Fair Trade success, other producers have succeeded on a similar scale. Fair Trade foods that were once limited to local markets and expensive groceries are now distributed in Walmart, Kroger and Publix, among many other retailers. For many years consumers perceived the fair trade movement as existing primarily for middle or upper-class consumers in large cities, but that image is changing.

This change has not come without obstacles from the beginning. In 1988, for example, the White House objected to Equal Exchange (or anyone else) dealing with the Nicaragua’s Daniel Ortega government. President Reagan’s Office of Foreign Assets Control attempted to place a trade embargo on Nicaraguan coffee, which effectively/blocked their primary distribution. This embargo could have ended their experiment in fairness right away, but the young company found a loop-hole: if the coffee was roasted in another country it became a product of that country, and therefore a legal commodity that could be traded between the U.S. and Nicaragua, via Mexico.

The founders were already in close contact with representatives from a village movement in Sri Lanka, and in 1987, Equal Exchange brought in its first high-quality black tea, bolstered by the knowledge that tea drinkers numbered a close second to coffee consumption on the planet.

In 1991 Equal Exchange became a part of the European Fair Trade network, aligning with groups that were far ahead of U.S. Fair Trade markets. This led to additional contacts in India, and Central and South America. By the end of 1994, what had once been the “pipe dream” of reaching $1 million in sales had become a reality. Equal Exchange was a worker-owned cooperative with 20 members—with departments, managers, and a growing number of outside investors.

In 2004 Equal Exchange could not ignore the excesses of the chocolate trade. Most of the world’s chocolate comes from West Africa, where child labor is a part of the process, tantamount to slavery. Children who had never tasted chocolate were sent up trees to retrieve the cacao used in our chocolate bars.

In 2001 a partnership between cocoa, sugar, and dairy cooperatives led to Fair Trade hot cocao mix; the success of cocao led, in 2004, to the introduction of three chocolate bars, which today number 11 choices on their website.

Equal Exchange products are available online, in stores, and in many churches and Saturday markets. Covenant Community United Methodist in Spokane WA for example, raises candy-sale profits to help village children attend school in a small church in El Paisnal, El Salvador. It appears that church attendance may spike a bit on those Sundays.
Equal Exhange products

Help Support Authentic Fair Trade

To support authentic Fair Trade, purchase fairly-traded products from small farmers. Your shopping choices support or discourage actions by businesses. By supporting Equal Exchange, you help reclaim the food system – to make it better for farmers, consumers, and the planet. Equal Exchange suggests:

  • Ask for Equal Exchange products at markets, food co-ops or cafés.
  • Serve Equal Exchange coffee, tea or hot cocoa at your place of worship.
  • Raise money for your organization by fund raising with Equal Exchange products.

Equal Exchange hopes consumers will join with them to deepen their understanding of these issues and take actions. They cannot transform the food system without the active, deep and committed participation of citizen-consumers. An authentic Fair Trade system, according to Equal Exchange, requires democratic organizing of producers in the South, worker democracy for businesses in the North, and active citizen involvement in the North.

The future is clear for Equal Exchange, stating, “Our vision includes breaking new ground by bringing Fair Trade home—by fostering direct relationships with family farmers here in the United States. Our collective achievements of the past 30 years prove that we can create change beyond our wildest dreams.”

  

Article by Ted Ketcham  Since the early days of the GreenMoney Journal, writer and now retired teacher, Ted Ketcham, has worked with publisher Cliff Feigenbaum as copy-editor and sometimes writer, happy to help in the cause of social and environmental justice.

Equal Exchange products are a special calling for Ted, and he has written about them and other Fair Trade causes in past issues. He has visited Central America, and participated in scholarship drives in El Salvador. Ted serves on the Board of Shalom Ministries, an organization that feeds the homeless and hungry in Spokane, WA.

Featured Articles, Food & Farming, Sustainable Business

Setting the Benchmark for Sustainable Agriculture

By Craig Wichner, Farmland LP

Craig Wichner of Farmland LPLike many Americans, I’ve started travelling again. Flying over the Midwest recently on my way to a conference in New York, it was hard not to be awed by the sight of mile after mile of cropland – around 180 million acres – growing just two crops, corn and soy.

What’s less visible from 30,000 feet but very evident on the ground, however, is the immense cost of growing these two crops year after year – topsoil loss, chemical residue in the soil from pesticides like 2-4-D and atrazine, a loss of pollinators, and vast water pollution. This type of agriculture is also at the center of a system responsible for about a third of the planet’s greenhouse gas emissions.

U.S. agriculture has a concentration problem. It started 50 years ago, when the head of the USDA told farmers to plant for maximum production – from “fence row to fence row” and “get big or get out.” It worked. Today, 56 percent of American cropland acres are growing just corn and soy.

 

Lack of Crop Rotation in US Corn Acres - Farmland LP

Crop diversity and crop rotation, once the hallmarks of land stewardship and productivity, are vanishing. Only one-third of America’s corn acres are planted sustainably, defined as planted once out of four years. Roughly 62.5 percent of corn acreage rotates only minimally, alternating between soy and corn. And of these, about 10 million acres have practically no crop rotation at all, planting corn in ten or more years of a 12-year period, according to USDA data. That’s a large-scale problem, as those continuous-corn acres comprise three times more than all the organic cropland in the U.S. combined.

What’s even more troubling is that some industry players now want to classify their damaging practices as “sustainable” agriculture. They’re seeking to paper over destructive practices to make their products more appealing to consumers and meet investor demand for ESG accountability. Sadly, greenwashing has come to agriculture, with some trying to put green lipstick on their pig.

Misleading people about “sustainable” agriculture is possible because there are neither legal nor science-based standards for it. The Certified Organic standard, on the other hand, is grounded in Federal Law, managed by the National Organic Standards Board, which is an independent body appointed by the US Department of Agriculture.

Yet even without a formal standard, nearly everyone agrees that certain farming practices are harmful, and clearly not sustainable, such as growing corn year-after-year on the same farmland. This practice is entirely dependent on genetically modified crops and requires increasing amounts of toxic herbicides, pesticides and fertilizers to try to overcome the damage it causes to the soil and ecosystem.

 

Certified Organic is the Benchmark Standard from Farmland LP

In our view, any self-proclaimed standard for sustainable agriculture should meet a three-part test:

1) Independence. It should have an independent board with full transparency of membership, affiliations and decisions.

2) Materials and Practices. It should identify specific materials and practices that are prohibited, as well as those that are required. For example it would bar the use of chemicals like 2-4-d (Agent Orange) or soil fumigants (nerve gas) and prohibit practices such as continuous corn, or even a corn-soy rotation, which is a below-average practice in the U.S. It should require crop rotation of 3 or 4 crops, or set aside 1-5 percent of land as pollinator habitat or ecosystem reserve, or mandate use of cover crops.

3) Impact and Outcomes. It should produce specific, measurable on-farm changes and outcomes, ideally affecting regional or global goals. Examples might include clean water, improved ecosystem function or habitat improvement, carbon sequestration, or food production (vs producing ethanol as a fuel additive).

The USDA Certified Organic standard meets these criteria today. Its 15-member National Organic Standards Board includes: organic farmers; environmental conservationists; organic processors; a retailer; a consumer representative; a USDA accredited certifying agent; and a scientist with relevant background. Authorized certifiers review documents and inspect fields to ensure farmers and products meet these rigorous standards. And 40 years of published scientific research supports the many benefits of organic agriculture on human health, soil health, and the ecosystem.

Investors and consumers are waking up and beginning to ask tough questions of farm managers. But rather than make changes, some organizations try to claim they have “sustainability standards,” with pretty logos and appealing marketing language, although they permit the worst agricultural practices that we’re all trying to change.

One misleading standard that’s popular with large institutional managers was organized by the firms themselves, including support from giant industrial agriculture companies. There is no independent standards body, there are no restrictions on ag practices, and they don’t change outcomes. It’s like having tobacco companies set health standards. But strong investor demand for (real) sustainable agriculture, combined with no legal restrictions on what they can represent and clever marketing, has grown them to over 2 million acres in about two years – a level it took certified organic land 25 years to reach.

It takes three years for a farm to become Certified Organic. It’s not designed to be an easy, check-the-box process. But the benefits to organic certification are clear and tangible to farmers, in terms of higher crop prices and acreage rents, and to the environment.

 

Crops Increase Income from Farmland LP

Our own experience bears this out. We’ve shown that organic farming is both good for the environment and can generate attractive returns. Our first fund had a 69 percent financial gain in net asset value over seven years. As importantly, a two-year USDA-sponsored study on our 4,200 acre California farm shows we also generated a 46 percent net gain for the ecosystem, measured by data-driven metrics including: carbon sequestered in the soil, harmful conventional ag practices avoided, enhanced biodiversity, establishment of healthy pollinator habitats, and improved quality and reduced use of water for crops.

Helping agriculture become more sustainable is a daunting but important challenge, and some aspects are not always clear-cut.  But some assessments are easy to make. Any purported standard that allows the worst-of-the-worst agricultural practices, such as monocropping continuous corn, to certify as sustainable is not legitimate.

We all should support sustainability initiatives that promote independent standards with science-based criteria and verifiable environmental and health benefits. And we all should stand up to greenwashing and self-declared standards. Investors and consumers are demanding real change, and those who mislead should not harvest their support.

 

Article by Craig Wichner, CEO of Farmland LP, the largest fund manager of organic farmland in the US, with 15,000 acres in Washington, Oregon and Northern California valued at over $200 million.

Read Craig’s June 2021 GM article: Roots & Returns: Craig Wichner Explains Regenerative Agriculture

Featured Articles, Food & Farming, Impact Investing, Sustainable Business

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