Category: Fall 2012 Special 20th Anniversary Issue – The Next 20 Years of Sustainable Business & Investing (Part 2)

A Fossil Fuel Diet – Taking Action to Get from Here to There

By Theo Ferguson, founder of Vital Systems

Recently, radio newscasters have reported that drought has captured 78% of America’s arable land. Resulting from our cultural decisions that have exacerbated climate change, every species’ habitat is impacted, the glaciers are melting, and our global food production systems are stressed. At the current measure of 392 parts per million of CO2 equivalent, we must reduce that down to 350ppm to survive. Whatever combination of strategies we use individually and collectively, each of us must actively create solutions for a more sustainable world.

I put on my “fossil fuel detecting glasses” and realize I’m “wading” through black goo every time I turn on a light, strike a match to light a burner, eat industrially produced food, or drive to do an errand. Most everything that runs our economy is based on fossil fuels. With my glasses, food with high fructose corn syrup created by the industrial food industry, our heating or air-conditioning systems, or a car powered by electricity or gasoline become pools of oil when these turbo boosts of energy are used. Our consumptive lifestyle in the US is equivalent to 4.05 planets[1] – AND we only have one planet!

Throughout centuries, and in many cultures, the observation that everything we do impacts everything else has been deeply held and ingrained in our DNA. But our current path of disconnection to ourselves and each other became culturally ingrained more than three hundred years ago with the onset of the industrial revolution. After World War II, an outcome of the industrialized food system policy “to feed the world” increased our national disparity of income. We now have national food injustice, pandemics of obesity and diabetes, and the dissolution of social and ecological communities. For instance:

•  The $6 Billion Farm Bill that supports mono cropping propped up by fertilizers and pesticides destroys both our rural communities and the innate farm knowledge held in those communities.

•  The industrialized corporate food system is destroying the topsoil — the slender nutrient medium that transfers its nutrients to the foods on which we depend for survival.

•  Lower-income areas have less access to healthy, affordable food and inner-city communities only have access to processed food that indentures them to disease and marginalization.

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As a result, the gaping chasm that must be addressed from “here” to “there” is a very real one. The supposedly endless oil pipeline drives climate change as well as the deep decline of our infrastructures, transportation, and food systems. As Wes Jackson says in his book, Nature as Measure, “After 80 to 100 centuries of a decline in our terrestrial dowry, and at a moment when the decline is at an all time high, it almost appears as though nature has invented humans for two purposes: to return nutrients to the sea to become sedimentary rock again, and to return carbon dioxide to the atmosphere by burning the fossil fuel. It is ironic that our actions in the name of progress are accelerating the return of this planet to conditions similar to a few billion years ago.”[2]

So how do we participate in cleaning up our own contribution to this mess?  How does each of us rediscover our personal and collective power to make a difference?

Deciding to go on a fossil fuel diet to reduce my global footprint, I notice the place where I live – my food and my possessions – and I consider my impacts on all the people and ecosystems that have been so horrifically damaged and marginalized. I have committed to cross a bridge and be one of many who will lead us out of a fossil fuel culture and into a solar society where we can replenish each other, our systems, and the world. And I am committed to wearing my fossil fuel detecting glasses always!

I breathe deeply for a few minutes and consider how my long-term participation can help this transformation. By aligning my values and passion to take back my personal power, I can invest all of my capital that includes intelligence, experience, assets, and the ability to educate and enroll others.

So I make lists, and attempt to read food and product labels (with unreadable multisyllabic words). Because I want to know what I’m eating, I advocate for labeling genetically modified (GMOs) and processed foods. I undertake activities that are more in alignment with my work and am committed to creating sustainable food infrastructures that will grow healthy, local food for all.  We have to get products more specifically labeled, stop buying what we don’t really need, and find a way to responsibly dispose of (or recycle) what we already have. Julia Butterfly Hill once said there is “no away in throw it away!”

Anyone can focus their passion to support “community benefit” by using the power of all of our assets (everything we have that is worth money) to make investments in any arena that nurtures and protects our global commons. Every dollar defines our economy. So whether your passion is to grow fertile arable soil, healthy food and watersheds, climate stability, thriving and habitable ecosystems, vibrant communities, cultural values of creativity – or art, music, empathy, dignity, or practicing democratic values – you are growing vital systems.

Steps to take for powerful and positive impacts through financial actions that support community benefit include:

•  Reassessing your values and drawing out your passion by understanding what motivates you. Capture your values by journaling, exploring your heritage, meditating, or naming what you love. What are your strengths? What patterns of behavior define you and what would you like to change? What brings up strong emotions? What do you fear or love in the world that captures your imagination? Through this reflective process, what areas call to you to make a lifelong commitment? With this inquiry, you can begin the processes of focusing all of your capital to respond to that call to action.

•  Grow your financial management skills and align them with your area of passion so that you are effective in using your financial power to create the change you want. How do you spend your money? Is how you spend your money aligned with your values? How do you overcome personal issues around money? How can you begin apply all of your capital by including your intelligence, experience, assets, and the ability to educate and enroll others? You can start by identifying others who share your concerns and passions and investigate communities of purpose around your commitment. Then, to build your financial capacity, you can learn to budget, look at self-directed IRAs and ensure that your money is held by local banks. You can request from your fund managers the criteria under which your investments are held in your portfolios and align those criteria with your values.

•   Align your impact investing with the infrastructure vulnerabilities in your area of passion.  What and where are the infrastructure vulnerabilities that are connected to your commitment? What are the systems involved in your area of concern? How would you investigate being of service in remediating some of these vulnerabilities? Can you educate, advocate, or become a policy leader in that area? Once you have made a case for a particular investment, then seek other individuals, communities and agencies to participate in your strategy that have the capacity to shift the system or remediate the vulnerability.

On an energetic and spiritual level, we can also learn from the teachings of our indigenous elders. They understand that we are one living system and we must protect all living beings. They give gratitude to the spirits of life, and are thoughtful about all of their relations with each other and the natural world. They consider the impacts of their actions on the next seven generations, as should we.

Although what we think is often what our culture thinks because we are embedded in it, we need to realign our perspectives and behavior to ways that ecosystems work. We have the ability to make individual and collective choices and can participate in active debate, build vital infrastructures for the Commons and appreciate the stewards among us. We can challenge the status quo and provide support for each other to bridge our behaviors to responsible and sustainable ones.

Let’s exchange fossil fuel diet recipes as we grow towards a receptive, focused way of life, crossing over the bridge from a fossil fuel culture to solar systems. This will require investigation, evaluation, education, collaboration, and investing and acting from our own innate personal power. We must educate ourselves to train teachers and trainers, who then teach members of their networks. We can fill in the chasm from here to there by honoring and valuing interconnectedness and our relationship to community as we offer our gratitude to Mother Earth.

This is the work of the rest of our lives.

Article by Theo Ferguson, the founder of Vital Systems (www.vitalsystemsca.com) and the creator of the curriculum, Owning My Money, Saving My World.

Article Notes:

[1]  Footprint Network/Trends/ United States/ accessed August 13, 2012, www.footprintnetwork.org/images/trends/2012/pdf/2012_unitedstates.pdf

[2]  Wes Jackson’s quote from: Nature as Measure book, COUNTERPOINT, Berkeley, p. 29.  http://www.amazon.com/Nature-Measure-Selected-Essays-Jackson/dp/1582437009

The Importance of Community

Article by Bill Summers, CEO of the Permaculture Credit Union

Barclays, Peregrine Financial Group, Madoff Investment Securities and Galleon Group are instantly recognizable organizations whose actions, over the last several years, have significantly affected the confidence the public has in our financial markets and institutions. With Barclay’s it was manipulation of LIBOR rates, Peregrine was a case of embezzlement, Madoff Investment was a long-running ponzi scheme and Galleon Group was a case of insider trading. Every one of those organizations was a for profit, publicly traded company that was supposed to have the best interest of the stockholders at heart. That doesn’t appear to have been the case.

By contrast, credit unions in general, and Permaculture Credit Union (PCU) in particular, operate as non-profit entities with a cooperative ownership structure a democratic decision making process and are designed to serve the needs of their members rather than simply to financially benefit stockholders and investors. Given the performance of the for profit, stockholder owned model, it’s no wonder that in the last couple of years, the profiles of credit unions have increasingly grown in recognition and support as community based, trusted financial institutions.

Permaculture Credit Union Overview
Established in 2000, the Permaculture Credit Union is chartered by the State of New Mexico and members accounts are insured up to $250,000 by the National Credit Union Administration (NCUA). The mission of the organization is to pool the financial resources of people who believe in the ethics of permaculture – care of the earth, care of people and reinvestment of the surplus for the betterment of both – and apply those resources to earth-friendly and socially responsible loans and investments. In addition, the credit union is to promote thrift among its members, to create a source of credit for them at fair and reasonable rates of interest.

While the membership of most credit unions is based on an organizational or geographic relationship, the Permaculture Credit Union is open to any person that is affiliated with a permaculture institute, has completed a permaculture design course or agrees with the previously listed ethics of permaculture. We are, in fact, the first and only permaculture financial institution in the country and because of the way our “field of membership” is defined, any person in the United States, regardless of where they live or work, can become a member of the credit union.

In the original Credit Union development plan submitted to the NCUA in the late 1990’s it states, “The Permaculture Credit Union will provide a meaningful alternative to traditional banks that are not responsive to the consequences of their investment and lending activities upon the Earth and its inhabitants. Our goal is to provide our members the opportunity to use and control their money to improve their personal economic and social conditions as they contribute to a revitalization of local economic well-being.” It’s stunning to think that the founders of the Permaculture Credit Union, over a decade ago, were mindful of the shortcomings of the financial system to the point that they felt it necessary to conceive and develop an alternative to more effectively serve the community.

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Community Counts

Since the first credit union models sprang up in Germany in the late 1800’s – to serve poorer urban and rural communities – they have been organized according to cooperative principles and the members had a social connection, or what is referred to as a bond of association. This enhanced relationship among the members was fundamental to the success of the organizations and remains a core principle of credit unions and other community based financial institutions today. Numerous examples exist where loan funds and other types of programs have made considerable impacts in communities that had not been served preciously or had been served by predatory organizations. The organizational connection to the community and a true interest in delivering impactful programs inevitably lead to on-going program success.

One of the programs offered by the Permaculture Credit Union today involves organic farmers throughout the State of New Mexico. The program has been designed to be financially self-sustaining while maximizing the impact it delivers to the participants/borrowers. Every facet of the program has been crafted with the recipients in mind – from the loan application process, to the approval process to the flexibility allowed in the design of the repayment schedules in order to meet the unique needs of the borrowers. Recipients that would have little chance to receive financing through more traditional channels, receive it through our program and the repayment success of the program – less than 1% default rate – far outstrips the performance of other small business loan programs. In addition to program design, it demonstrates that the participants appreciation of their involvement in a community-based program, and that their performance will have a direct impact on the community, positively influences their performance to both their benefit and the benefit to the overall community.

The most exciting aspect of a program like this is that it can be replicated with other types of communities, in other parts of the country, with the same impact and an equal level of financial success. It’s not inconceivable that beneficial partnerships could be established with dozens or possibly hundreds of time nationally.

Changing Revenues & Interests

The Permaculture Credit Union today, acts as a trusted provider of financial services to our members. Members belong to the credit union for a variety of reasons – they simply want to support an organization with our purpose and underlying sustainable philosophy, or they do not want to be affiliated with “big box” financial institutions or because of our menu of sustainably-oriented products and services are attractive.

Over the last 20 years financial institutions have begun to rely more and more on fee income and consumers are becoming more sensitive to that development. In 1991, 7% of organizational income was fee-based and by 2011 that had grown to 24%. At the end of the last month, less than 1% of the income of the PCU was attributable to fees. It’s unlikely we will always be able to maintain that level of fees indefinitely, but our members know we will make every effort to do so.

A significant source of income in the financial services market is overdraft fees. Over $35 Billion in insufficient fund and overdraft fees are paid by consumers every year with roughly half of those fees being charged for debit card and ATM overdraft fees. Beyond that, 10% of banking customers – mostly low income – pay around 90% or overdraft fees.

With a stated goal of promoting thrift among our members, creating a source of credit for them at fair and reasonable rates of interest, and providing them with the opportunity to use and control their money to improve their economic and social condition the approach of the credit union is to assess fees only when it is appropriate and necessary to recover costs.

We will be making our first foray into electronic banking with a Permaculture Credit Union VISA card in the 4th quarter of 2012 with plans to add a debit card in the future and our current and future product design will reflect that 75% of consumers would prefer to have a transaction declined rather than pay a $35 fee and you can be assured that standard “Overdraft Protection” offered by other companies, with an “Overdraft Penalty” – in keeping with our interest of promoting thrift among our members.

Financial Services as a Utility

Much has been said about the existence of single (economic), double (social & economic) and triple (social, economic & environmental) bottom line approaches to business. As evidenced by past behavior, the financial services industry has focused heavily on the single bottom line of economic profitability and return on investment – to the exclusion of everything else and the detriment to many consumers.

Due to our community-oriented roots and philosophical underpinnings, the Permaculture Credit Union has always viewed our operations as well as our member relationships from a triple bottom line perspective and believes it’s important for organizations to build the positive impact on members into the value proposition surrounding every product and service delivered.

In this day and age, given the uncertainty that consumers feel in the financial marketplace, fundamental services should be viewed and delivered much like basic utilities – easy to understand, simple to acquire, reasonably priced and offering no surprises or shocks. The comfort and security provided through this approach would go a long way in restoring the consumer confidence that’s in short supply today.

A Sustainable Future

“If you have a dysfunctional institution, don’t try to change it, that’s like wrestling with a “tar baby”. Rather, determine what that institution was supposed to deliver and design a better system to actually deliver that purpose or service. If you have done the thing correctly, then people will come to you for that. The old institution will eventually whither and die.”
– Bill Mollison

The next 20 years of sustainable businesses and investing will be more evolutionary than the revolutionary period of expansion and contraction we’ve seen recently. The PCU in particular will continue on as our founders originally intended, to be a steward of our members’ assets, a trusted provider of financial advice and services, and an organization that continues to listen to and interact with the community we serve.

Recognizing that a significant portion of the financial services market is, from the consumers perspective currently viewed as dysfunctional, we will continue to grow into a truly viable alternative while focusing on the development and delivery of impactful products and services with a strong orientation towards reinvesting in communities. Reflecting the sentiments of Bill Mollison, a founder of permaculture, we’re going to move down the path set by our founders, continue to lead by what we firmly believe is good example and wait for nature to takes it course.

Article by Bill Sommers, CEO of the Permaculture Credit Union (www.pcuonline.com )

Born and raised in the Midwest, Bill worked with several different financial service companies early in his career, gaining experience in branch operations, mortgage lending, direct and indirect consumer lending and loan servicing. Success in those areas led to a move to the East coast, where he joined a small but growing secondary market and worked in marketing and strategic planning before switching into systems development. On the systems side he managed a group that provided operational support services to commercial banks and credit unions throughout the country.

Those times were enjoyable and offered great challenges, after realizing that they were no longer living in the same city most of the time, Bill and his wife made the decision to leave the corporate life and bought a small business in Virginia. Over the next several years, they returned it to profitability and expanded it to the point that it was attractive to an outside buyer.

Following their arrival in New Mexico, Bill learned of an opportunity where he could put his banking and finance experience to use and address an interest in the non-profit world by joining a Tribal housing organization. While serving as Executive Director, he started a consumer-oriented loan fund – to support the personal and financial sustainability of individuals and families in an underserved area and stimulate economic development through housing development and homeownership – that was ultimately spun off into a free-standing Community Development Financial Institution (CDFI).

The opportunity to join Permaculture Credit Union is extremely attractive to Bill because it offers opportunities on a number of fronts: pursuing his interest in fostering sustainability, bringing community-oriented services to an underserved nationwide market and demonstrating that triple bottom line benefits can be successfully delivered by a mission-driven financial institution.

During a recent conversation Bill said, “The care and effort put into crafting the Credit Union’s mission, as well as the development effort that has occurred over the organization’s first decade in operation, had created a solid foundation for truly exciting and impactful growth over the next 10 years and beyond.”

The Cool of the Day: 3Sisters Sustainable Management…finding, fostering, and funding the Common Good

Article by Ben Bingham, Founder & CEO of 3Sisters Sustainable Management, LLC

Prologue

From Jean Ritchie’s apocalyptic mountain song, The Cool of the Day:

My Lord, he said unto me
Do you like my garden so fair

You may live in this garden if you’ll keep the waters clean [1]
And I’ll return in the cool of the day

Now is the cool of the day
Now is the cool of the day
O, this earth is a garden, the garden of my Lord
And he walks in his garden
In the cool of the day

This song sets the context for the following description of 3Sisters Sustainable Management and a model that has been created to meet the needs of our time and the next 20 years…

No matter what religious belief or non-belief, “my lord” in this song can be universally felt as the voice of conscience. Now is the “cool of the day:” the twilight time to reflect on what we have been doing lately, from industrialization to globalization to the human mechanization of the approaching “singularity,” when, it is reckoned by some, that robotics, bio-genetics, and nanotechnology will reach exponential potential and humans, as we know ourselves, will be considered a thing of the past.[2]

Now is the time of reflection and action, the “Blessed Unrest,” as Paul Hawken aptly put it, when all the NGO’s that have recently emerged around the world to care for the earth and its creatures outnumber government and corporate bureaucracies, but have yet to realize their power. A time that is proving the premise that “evil thrives when good men fail to act” and the positive echo: “never doubt that a few good people can change the world.”  In the words of Martin Luther King:

“True compassion is more than flinging a coin to a beggar; it is not haphazard and superficial. It comes to see that an edifice that produces beggars needs restructuring.”[3]

3Sisters Sustainable Management, LLC

What is it that 3Sisters is doing to begin restructuring the financial edifice? And by the way, who are the 3Sisters?

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Let me use the metaphor from gardening that gave us our name to illustrate the way we work with money: The original ” three sisters” are the three symbiotic plants traditionally grown together by the indigenous people of North America: corn, beans, and squash; only for 3sisters the financial ecosystem is built up of cash, fixed income and equities or gifts, all planted in social enterprises within innovative business models that expect to yield a productive “harvest” of social, environmental and economic benefit to all stakeholders. The investors are like members of a Community Supported Agriculture (CSA) garden, who primarily want to support local, organic farms and gardens, and secondarily enjoy the valuable produce. The investors in 3Sisters’ managed funds primarily are investing in a new sustainable world economy, and secondarily anticipate a long term financial benefit. Our premise is that the two are mutually inclusive.

Let’s describe the actual investments. First, the “corn seed” cash is planted in a private pooled fund: Scarab Enhanced Cash. This fund is almost entirely invested in MicroVest’s institutional short duration fund. This relatively new fund in turn invests in a rolling ladder of short notes to small financial enterprises in the developing world who once more micro-lend to entrepreneurs in need. So this cash is primarily fueling a global system of support. The investment is liquid for the investor as some loans mature monthly and the interest is variable but in this economy it has been points above big bank money markets. MicroVest is known for its thorough due diligence, only lending to small financial firms who are known and liked by the entrepreneurs who borrow from them.

Second, the loan “bean seeds” are planted in the private pooled fund:  Scarab Global Community Impact. This fund lends to non-profit and for profit social enterprises globally with innovative business models that allow them to borrow at 6% or better, and with ability to collateralize their loans. This is a painstaking and creative process, to make sure investors receive the equivalent of a high yield bond fund return and are as protected as possible from defaults, all while meeting critical social and environmental needs. Loans have supported conversion to thousands of acres of organic cotton in Nicaragua, restored wilderness, provided green housing for the homeless, expedited close to a billion dollars in benefits to people in need who were lost to the systems of support in the US. Currently this fund is supporting a program that develops systems to formalize the ownership of land and housing to thousands of families in Eastern Europe…Again prioritizing the common good while secondarily providing a return equivalent or better than most current high yield bonds.

And thirdly, the “squash seeds” of investments are planted in three (3) private pooled funds for long term future growth:

•  Scarab All-Cap Global, 50+ public companies from micro-cap to large cap that trade daily for liquidity and are chosen first because they have products and services that meet the needs of our time, with natural life enhancing solutions;

•  Scarab Green Real Assets, which focuses on sustainably managed timber and green real estate, and

• Scarab Fund of Positive Impact Funds (currently launching): a private equity and venture debt fund of up to 20 managers focused on key areas of conscience for this time, the “Cool of the Day.”

Both the Scarab Green Real Assets and the Scarab Fund of Positive Impact Funds are 7 to 10-year fund of funds. Imagine cleaning up the waters of the world, building living environments for the poor and needy with materials and designs that not only save energy but promote community; imagine small farmers and gardeners helped with appropriate technology, local food processing and coordinated distributions, meeting the needs for local organic food globally; imagine women-owned ventures that prioritize the common good and smart technologies that maximize positive impact, and secondarily aim to accomplish this with a private equity-like return factoring in the fact that some initiatives may fail in the next 7-10 years and beyond. These are our equity seeds for the world economic garden.

It can be emotionally helpful to associate equity investing with gifting only because both are future oriented and it is more conscious to acknowledge that investing in a positive future can only be done without knowing exactly what the future holds. This unknown is rarely spoken of except in the fine print of legal disclaimers. We recommend embracing the risk of equity investing with an attitude of generosity. This encourages a possible reduction in short-term public equities, a peaceful mind enjoying long-term thinking and higher values standards. It does not automatically imply a lower financial return. We argue that long term positive returns reflect good management and products and services that are meeting human needs. In the long term this can be expected to be a financial advantage.

In closing I want to bring to mind two examples of individuals in collaboration, changing the world. Van Jones and Julia Butterfly Hill first recognized that the poverty crisis and the environmental crisis are intimately related, as remote as the image of a stranded polar bear on a chunk of ice may be to someone in the heat of the inner city who sees no hope. Green Jobs was their vision, teaching inner city workers to retro-fit buildings and “green” their own communities. In my lifetime, I also saw the unlikely combination of a law professor at Columbia named Robert Kennedy and a folksinger on the Clearwater Sailboat named Pete Seeger, clean up the Hudson River which was close to death and is now one of the most productive fisheries in the world.

Trillions of dollars will not move to the Common Good without unprecedented collaborations like these. It is relationship that changes the world.

Common Ground Epilogue

Without counting carbon emissions or any other metrics we still know the joy of clean air to breathe. Some of us know the taste of clean water from a well.  And all of us know what it feels like to be rejected and to be loved.

It is time to wake up to our inherent common sense for the common good. Money can then become the best metric for this awakened common sense of deep long term human values. Please join us in collaboration to build a new pattern for humankind. Think imaginatively about the cash you spend or lend, give or invest. When you spend cash or offer products for sale, consider past work done and materials used to set or pay a price that is fair; be inspired to borrow or lend for current solutions like infrastructure for equal access and opportunity; and give or invest for future value in today’s most intuitive and innovative thinkers. There is no enemy in this battle for the Common Good. We are allies investing in our common future.

“You may live in this garden if you feed my lambs…if you keep the waters clean…if you keep the people free…and I’ll return in the Cool of the Day.”

Despite global warming, now is the Cool of the Day.

Article Notes:

[1] www.last.fm/music/Jean+Ritchie/_/Now+Is+the+Cool+of+the+Day

[2] note: the projected year according to Ray Kurzweil, the inventor, is 2045.

[3]  Martin Luther King, Jr., civil-rights leader (1929-1968)

Article by Ben Bingham is the Founder & CEO of 3Sisters Sustainable Management, LLC.  (www.3sistersinvest.com )

Mr. Bingham assisted in the formation and founding of the company after several years managing investments for wealth advisors. Starting in 2000, he developed a unique portfolio management strategy for socially conscious investors at Legg Mason and Citigroup/Smith Barney. He began by advising a network of social entrepreneurs and philanthropists who were dissatisfied with the lack of imagination and direct positive impact found in mutual funds or screened portfolios. Changing the emphasis to positive screening, Mr. Bingham has found it beneficial, financially, socially and environmentally to look for companies that, by their numbers seem to be undervalued by the market, not followed by Wall Street, and with positive stories that meet current problems with long term solutions.

Mr. Bingham is a Fellow of Economists for Peace and Security (EPS). He is a member of the Investor’s Circle and the Social Venture Network, and, as a social entrepreneur/investor/money manager, draws on broad experience from hands on management experience at two technology start-ups, one in biological healthcare, and the other a global workflow solution provider.

Mr. Bingham is a Certified Financial Planner, with a background in philanthropy. In the seventies and early eighties he was a founder of a mixed use residential community with special needs students and apprentices, raising approximately $1M to fund a start up furniture production, farm and housing. His understanding for the ecology of how things work was also schooled by 10 years of work as a trained bio-dynamic farmer in the 70’s and 36 years of marriage, with five grown children and four granddaughters. His training in Gestalt Psychology may also help in understanding the psychology of the market! He attended Groton School, Yale University and Emerson College in England. He is working on two books and writes for New View magazine in the UK.

 

Socially Responsible Investing: Whence Did We Come? And Whither Are We Going?

By Robert Zevin, Chairman, Chief Investment Officer & Portfolio Manager at Zevin Asset Management

Shortly after registering my own investment advisor firm in 1967, I found myself offering to apply socially responsible selection criteria to my clients’ portfolios, as well as helping my clients exercise other shareholder powers in order to achieve changes in companies’ behavior. I also helped educate management and other shareholders about issues such as U.S. aggression in Vietnam, Apartheid in South Africa, oppressive, dictatorial regimes in Latin America, environmental impairments caused by intense applications of chemical fertilizers and insecticides, strip mining, the importance of affirmative action programs in hiring and sourcing, all rather distressingly similar to the issues of the present.

This all happened because I was a social activist before as well as while I was an investment management professional. My interest in building an investment business naturally led to most of my earliest clients coming from the ranks of other social activist individuals and organizations. Socially responsible investing was the unsurprising result of this confluence. As far as I know all of the early practitioners of socially responsible investing were themselves front rank social activists in the anti-war, anti-nuclear, civil rights, economic justice and environmental movements, although motivated by diverse ethical, religious, philosophical and political principles.

Bob Schwartz, who started managing socially responsible portfolios for his clients as a broker in Manhattan about ten years before I did, was also a lifetime social activist. He founded what is now known as Economists for Peace and Security which advocates reduction and elimination of nuclear weapons. He was a strong supporter of worker and union rights, and an active protester against the war in Vietnam which led him to conduct an independent campaign for a seat in Congress.  I think anyone who knew Tim Smith in 1971 when, as a young minister, he founded the Interfaith Center for Corporate Responsibility, would describe him as a leading social activist in the causes of civil rights, ending Apartheid, economic justice and opposing unjust wars, among others.

I first met Wayne Silby, co-founder of the business that later created the Calvert Social Investment Fund, when we served together on the very small board of an organization of idealists that tried, without success, to persuade large foundations, churches and schools to invest in a fund that would support co-operative and other communitarian forms of business. So just about every colleague in the SRI movement of the late 1960’s and early 1970’s was a social activist at the time they were bringing the same issues into their work as investment professionals and as investors. And this was still very much the case in the 1980’s when Joan Bavaria and Amy Domini brought their social commitments and multiple talents into the SRI community.

In those formative years for my business, I also was a principal creator of RESIST, founded to advocate and support civil disobedience against the war in Vietnam by citizens, taxpayers, draftees and members of the U.S. military: an organization that is still functioning today. In addition I was a founder and active manager of the United States Servicemen’s Fund, which supported many anti-war coffee houses, newspapers and entertainments done for and often by anti-war servicemen and women; and I served on the founding board of the Haymarket Foundation. My point is not to show you how much younger and more energetic I was then, but rather, to provide what I think is a representative case of the activities and interests of the first people in the SRI movement.

And indeed we called it a movement alongside the Civil Rights, Women’s, Environmental, Organic Farming, Anti-War and Nuclear Disarmament Movements, among many others. Now – after more than forty years of astonishing growth in ethically invested assets, clients and practitioners – we are no longer a movement, although many of us still have strong collegial ties rooted in shared values, we are a niche market. Although new issues have been added to our work, our causes have become “products” or “services”. Instead of calling ourselves Socially Responsible Investors, most now prefer to say that we carefully screen Environmental, Social and Governance attributes. The implication is that investing in companies that do well in these areas is a ticket to financial success, much the same as adherents of Growth or Value investing often argue for their selection criteria.

There is more than a grain of truth in the claims made for the investment virtues of all three approaches; but putting ESG on the same shelf with Growth and Value, seems to have taken it off the shelf that SRI shared with advocacy, demonstrations and political action. And this in turn seems to have been quite deliberate, especially on the part of, and then in response to the gatekeepers and consultants, many of whom had spent decades strongly advising their clients against socially responsible investing. So from my perspective we have been co-opted.  Many of us are now embarrassed to say that our religious or moral or political views should and do affect our investment selections. We know the gatekeepers don’t want to hear it; and they know that many of their institutional clients definitely don’t want to hear it. So, like Adam and Eve, we hide our true selves behind the cloak of ESG. But then, as so often happens, our true selves grow to be more and more like the ESG cloak.

We cling to the idea that ESG investing is a formula for making money. The “doing well” part of the old aphorism about SRI is now the primary justification for what we do, rather than “while doing good”. ESG screening certainly helps to identify companies that are well-managed, attentive to shareholder interests, not in serious violation of laws and regulations and able to sustain their relationships with suppliers, workers, customers, surrounding communities and the natural environment. Owning such companies reduces the likelihood of many investment risks. And we know from numerous studies that portfolios of securities screened for these criteria do not do any worse than broad market indices. But, as far as I know there is no significant evidence that they do any better either. To do better, the SRI or ESG manager must add some additional value to the way a portfolio is constructed. On balance, the average ESG/SRI manager or fund does not appear to have done any better than those using other disciplines.

The extreme example of this confabulation of making money with doing good is evident now in a group of self-described high impact investors who believe that a confirming attribute of a high impact investment is that it provides a high profit.  This is wishful fantasy in the extreme. It is also an unintended attack on the efficacy of capitalism. If the very poor are such big profit opportunities capitalists are either ignoring about two billion splendid opportunities or making enormous profits from the poor without ending their poverty. In the actual world, poverty comes encased in barriers to success including, illiteracy, despair, discrimination, undernourishment, ill health and crime. These problems in turn are due to the lack of a vast and necessary infrastructure of schools, transportation, communications, public health and safety, finance and markets.

These are “public goods” typically provided by governments or with the help of governments. If private investors tried to capture the gains these investments produce in wealth and income, they would have to undertake most of them simultaneously and wait twenty years or more for their profits. Most examples of successful use of investment money to combat poverty (Accion, Boston Community Capital, Grameen Bank, Oikocredit, Shared Interest and Chicago’s Shore Bank [now United Partnership Bank] among others) result in very small returns to investors and sometimes depositors, although no losses. The only way to earn mega profits from aiding the very poor would be to have a subsidy from taxpayers providing all of the necessary infrastructure and social services as in the global investment bank model.

Of course this glorification of money and profits in place of values and community has not happened only because of a desire to please the gatekeepers and appeal to potential clients who are less interested in SRI values. Since the late 1960’s America and most of the world has turned in a different direction. The rich have made themselves even richer and far more powerful, while conditions for the vast majority in the US and other economically advanced countries seem to have deteriorated. Private is good, public is bad. The individual is our new deity.  Community has become a dirty word. We are all, in the words of Robert Putnam’s book title, Bowling Alone.

Occupy Wall Street was a series of protests against these trends. When my firm issued a statement in support of the Occupy movement, there were certainly other social investors who took a similar stand before and after we did. However many did not. Even more distressing to me were the messages I received from SRI friends commending our “courage” in supporting Occupy. Apparently the idea that our core purpose is to make money rather than change society, has caused our former movement to feel in many instances more aligned with Wall Street than its occupiers. This identification is not even good for our clients’ financial interests, which should come as no surprise to anyone. In 2008 there were instances of clients asking SRI managers to reduce equity exposure and the manager refusing to carry out the request because the account belonged to a composite that the consultants insist should always be fully invested.

My vision for the next twenty years of social investing, more hope than forecast, is to go back to the future. The social investment industry will again become a movement for fundamental social change, part of the solution as people used to say in the 1960’s, not the problem. My earnest hope is that as social investors we can be at the forefront of an effort to move reasonable human values of equality, sustainability, peace and love, back closer to the middle of our work, our lives and our society; and that we can whole heartedly declare our independence from the rest of the investment industry, with its sorry record of deception, self-enrichment and ill-served clients. Then we would better serve our clients and our mission at the same time.

Article by Robert Zevin, Chairman, Chief Investment Officer & Portfolio Manager at Zevin Asset Management  ( zevin.com )

Robert has been a leader in socially responsible investing since 1967.  At the same time he also pioneered the use of modern portfolio theory seeking to protect his clients against the losses that are so often the result of conventional investment approaches. Robert has mentored and trained many people in the social investing movement as employees and as friends. He started what is now Walden Asset Management in 1975, making it the first explicit socially responsible unit in any bank. He was also a principal architect of the first Calvert Social Investment Fund in 1982. Robert was a leader in the movement to divest from apartheid South Africa. He gave testimony, performed studies and engaged in debates in numerous cities, states and universities. His 1987 expert testimony in defense of the Baltimore pension funds’ right to divest led to a precedent-setting decision.

His activism and commitment to civil disobedience has led to arrests and beatings as well as boardrooms. He has founded, co-founded and led numerous social change organizations such as Resist (against the war in Vietnam), United States Servicemen’s Fund (anti-war GI coffee houses), Haymarket Foundation (change not charity), Affirmative Investments (direct community investments), and Shared Interest (support for informal economy in South Africa since 1996) as well as the School for Community Economic Development at Southern New Hampshire University. Robert is also a Harvard PhD in economics, who has taught at Berkeley, Columbia, Harvard, Boston University, UMass Amherst, and Simmons College. He has published two books and numerous articles about economic history and social policy.

 

Statement On Transforming Finance Based On Life’s Principles*

By Hazel Henderson, Founder & President, Ethical Markets, ® 2012
Janine Benyus, Co-Founder & President, Biomimicry 3.8

* This is the precursor document to our Principles for Ethical Biomimicry Finance™.

We the signers hold these biological truths to be self-evident that the human species is interdependent with all other life forms on Planet Earth. Therefore, human societies, cultures, values and belief systems that are informed by and modeled on the following Life’s Principles, which are strategies universal to all organisms, should provide the basis for all production and exchange of goods, community structures and services. This includes the design of monetary systems, investments, banking, financing, bartering, reciprocal exchange, payments, crowdfunding, compensation and unpaid gifting, sharing, cooperatives, reproduction of future, generations, provision of public goods, infrastructure, collective health, education and life-supporting services.

1. We affirm that these collective life-supporting activities, conventionally categorized as “economies” and “finance,” are in truth embedded in human societies and cultural values – in turn, embedded in planetary ecosystems and biodiversity of life which are irreducible to symbolic tokens such as money or mathematical abstractions such as compound interest or classification as “resources,” “property,” or even as “global commons.”

2. Money markets and finance are useful human inventions and as such are good servants of evolutionary higher-purposes, but can be bad masters. Trading and exchanging are basic strategies of humans and all living species. Financial and economic systems are not functional analogues of ecosystems. Money and other proxies have no analog in Nature which operates on direct exchange of materials, information and services.

3. Thus our approach to the human activities conventionally categorized under “finance,” “investment,” “savings,” banking and monetary systems is to reframe these under our scientific knowledge of our true condition expressed as Life’s Principles and what is now known about life’s evolution on Planet Earth. Accordingly, we recognize that human societies cannot measure their “progress” as growth of their GNP-measured, money-denominated economic sectors. Growth is not maximized by any species but rather the whole living system is optimized.

4. Therefore, when we assess technological and social innovations, we start our due diligence processes by examining the viability of such innovations and potential success of enterprises and projects by applying Life’s Principles. Only after applying this screen and its implicit design opportunities will we then design appropriate models of finance, organizational forms, stakeholders’ relationships, governance, risk-assessment, compensation and other valuations of ecological sustainability, social equity, health and contributions to peaceful human evolution.

5. We acknowledge that these goals and investing models can transform finance and embody social innovations that will be disruptive to incumbent industries, financial groups and major sectors of our Industrial Era societies which are now widely recognized as unsustainable.

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6. Therefore, we avoid employing many of the conventional tools of financial analysis (e.g., Modern Portfolio Theory, Capital Asset Pricing Models, Black-Scholes Options Pricing, Value-at-Risk and other risk analysis; nor discounting to “present value”, etc.) nor those methods based on conventional economic assumptions: e.g., “efficient markets,” “market completion,” “rational actors,” “bounded rationality,” etc. Rather, we look to the new scientific knowledge of human behavior, endocrinology, brain sciences, genetics, anthropology and other insights into the human condition gained through expanding awareness and consciousness of our true human condition. We commit to learning continually, with the humility engendered by these new understandings, as well as the careful experimentation based on Nature’s 3.8 billion years of successful learning and innovation.

7. We further understand that what is termed as “economies” and “financial systems” are emergent properties: complex adaptive systems generated by actions emanating from collective human consciousness, cultures and belief-systems and that these forms and expressions are downloads from these “cultural DNA codes,” resulting in cultural artifacts and physical forms (such as skyscrapers and computers), as well as similar forms emanating from the world’s spiritual traditions (e.g., cathedrals and books). We acknowledge and affirm the evolution of the technological array of tools created by humans. These expressions of human creativity are a result of our focus on materialism, reductionist rationality and its Cartesian mentalities prevalent since the Industrial Revolution, and we rejoice that these are evolving toward Life’s Principles and are now reintegrating within our higher consciousness. We endeavor to use Life’s Principles to create conditions conducive to life in all human activities and systems.

8. These collective products of our levels of awareness, consciousness and knowledge evolve as individuals learn. Leaders emerge in human societies and become early adopters of new knowledge and scientific observation, as well as ethical principles, such as the “golden rule,” cooperative agreements on sharing Nature’s lessons, co-evolutionary models and altruistic examples.

9. Thus, we acknowledge that our commitment to transforming finance, its models and selection processes can lead to re-design of money, banking, finance, investments, patents, legal and governance systems. This will require reintegration of human knowledge, mentoring by Nature’s genius, and whole systems-thinking, operationalized through whole human beings integrating mind, heart, body and wisdom based on evolving higher levels of consciousness.

Therefore we approach our task and wider goals with deep humility and know we represent one species among 30 million, all essential for thriving and survival of all. We are a small human strand of ever-evolving human societies and their cultural DNA. We invite all others who

resonate with this declaration of intent to transform finance to join in signing this statement and contributing to its evolution.

For more information visit – www.ethicalmarkets.com

SIGNATORIES

Co-Organizers:

Janine Benyus, Co-Founder, Biomimicry 3.8, Missoula, MT, USA

Hazel Henderson, Founder, President, Editor-in-chief, Ethical Markets Media, USA and Brazil

Chris Allen, CEO, Biomimicry 3.8

Dayna Baumeister, PhD, Co-Founder, Biomimicry 3.8

Dr. Mariana Bozesan, President & Founder, AQAL Investing, Munich

Fritjof Capra, author The Tao of Physics, The Web of Life and The Hidden Connections, etc.

Brendan Cassidy, student, University of Northern Arizona

Jacques Chirazi, Biomimicry CH and swisscleantech association, Zurich

Katherine Collins, Honeybee Capital, Boston

Lina Constantinovici, MBA, GrowVC US; Startup Nectar the Biomimicry Incubator

Leslie Danziger, Co-founder, former Chair, Solaria Corp and Lightpath Technologies, Austin, TX

David Fox, Co-founder, Biomimicry 3.8 Institute, Sydney

Susan Davis Moora, President, CapitalMissions.com; Author, The Trojan Horse of Love

Christian Haeuselmann, swisscleantech, San Diego

Marilyn Hamilton, PhD CGA CSP, Founder, Integral City Meshworks Inc.;

                author, producer, eLaboratory: Co-Creating the Future of the Human Hive

Alan F. Kay, PhD, Co-Founder, Ethical Markets Media; Founder, Autex (Thomson-Reuters)

Satish Kumar, Editor-in-Chief, Resurgence & Ecologist, Bideford, UK

Timothy Jack Nash, President, Strategic Sustainable Investments, Toronto

Jonathon Porritt, Founder Director, Forum for the Future, Cheltenham, UK

Paul H. Ray, PhD, Co-author of The Cultural Creatives with Sherry Anderson, PhD

Elisabet Sahtouris, PhD, Evolution Biologist, Futurist, Speaker, Consultant, Mallorca, Spain

Julie Sammons, MBA, Bay Area Biomimicry Network, San Francisco

Allan Savory, Co-founder of the Savory Institute, Albuquerque, NM, and Zimbabwe

Dr. Vandana Shiva, Navdanya/Research Foundation for Science Technology & Ecology, Delhi

Rosalinda Sanquiche, Executive Director, Ethical Markets Media

Jet Thurmann, Quantum Care Center, Copenhagen Page 5 of 7

John Todd, Ph.D., President, Ocean Arks International, University of Vermont

Stuart Valentine, CenterPoint Investment Management, Fairfield, Iowa

Eva Willmann de Donlea, Sustainability Intelligence Pty Ltd and US LLC, Sydney

We invite you to sign our statement agreeing that Life’s Principles guide finance and business.

Destination Freedom: The Way to True Affluence

By Timothy David Karsten, founder of TDKA Group
Excerpt © 2012  All Rights Reserved

Freedom may be elusive, but it has inspired a passion in people so intense that peaceful men have revolted and gone to war in order to obtain or protect it, rightfully measuring a government’s greatness by the freedoms it allows its people. The yearning for political freedom is deeply connected to the age-old yearning for spiritual freedom that religion has traditionally attempted to midwife, as well as to the more recent striving to safeguard individual freedom and right to personal love. Great novels, poems, and symphonies stand as testimonies to the manifold ways in which we have pursued our age-old love affair with freedom.

Translating freedom into the present tense of our day-to-day lives is a challenge we all share, whatever our era or circumstances. Our present tense happens to be caught up in a global economic revolution, with vast corporations, consortiums, and transfers of wealth on the move. Whether we are the ones making the corporate decisions that impact the ebb and flow of money or the ones who are forced to look for work in a shifting labor market, the movement of money in and out of nations and economic sectors has taken center stage in both national and individual lives. How can we possibly seek freedom at the same time we seek Mammon? What have they to do with each other?

It is tempting to view our fate as awash in forces beyond our control and freedom as a pipe dream. The headlines alone make thoughts of human freedom sound like childish wishful thinking. Slowly, disdain for the human condition of unchanging war, famine, greed, etc. creeps in and we begin to distance ourselves from our fellow creatures. But the bars of our prison are not complete until we relegate everything and everyone to the status of “things” that are either of use or must be gotten around, and allow our hectic, money-driven era to suck out the marrow of our time, time that could have gone toward living freedom’s fullness.

To this self-imposed prison, the financially affluent add a few bars of their own. Take, for example, the protectionism that wealthy families impose upon themselves. Wariness of public scrutiny and becoming the unwitting victims of papparatzi feeding frenzies cause the financially affluent to withdraw from the flow of public life and move in protected exclusive circles, to the extent of deciding where their children will go to school, what careers they will be allowed to go into, and even what families they will be allowed to marry into. Discretion is understandable, but fear of being hurt either by censure from their own privileged circle or by a public whose knowledge of “the rich and famous” is gained from tabloids and television shows like Who Wants to be A Millionaire? will not be resolved by isolation. In fact, isolating may let in far worse vermin than papparatzi ­– namely, the misconceptions, secrets, and lies that breed inauthentic lives for generations. Better by far to set out on the uncertain byroads of life in quest of freedom than to look outwardly happy and “privileged” while inwardly dictated to by our silken surroundings.

Fortunately, it is not circumstances per se that constrain anyone’s quest for freedom, including that of those who inherit or acquire wealth. What constrains our quest is not being able to imagine how easily true affluence will come to us if we but practice our freedom day by day. Once freedom is our destination of choice, our entire rendering of affluence undergoes a gradual shift and begins to grow larger and bolder. We let go of the old affluence of obligatory privilege and choose instead the new affluence as the opportunity for privilege to make a difference to those causes that we espouse out of our own freedom. We examine goals, objectives, and ends in terms of the means it will take to achieve them, and if the means lack the openness and candor of freedom, we choose other ends or revise our means. We turn from wondering what others will think and choose instead to live for what we will think. We continue to love our family but realize that it is our birthright to find within ourselves something new to contribute to what has been. We tend our family assets as we would a mighty tree whose fruit can feed many endeavors if we but cut out dead wood and keep the roots healthy. With such a tree, an economy of profit transforms into an economy of care [1], and leadership by domination and superiority transmutes into a leadership based on benevolence and service.

Old Affluence
Privilege as obligation
End justifies the means
Submission to family
What will others think?
Economy of profit
Leadership: domination and superiority
True Affluence
Privilege as opportunity
Means justify the end
Submission to self
What do I think?
Economy of care
Leadership: benevolence and service

Freedom has been explored for thousands of years by intrepid trailblazers who have left behind stories of their adventures. The myths and legends of these brave people afford inspiration for our own travels on the freedom road. In the Old Testament, we hear of Joseph who suffered disdain and displacement because of his brothers’ greed and fear, then freed himself from prison and helped his family survive famine. Four hundred years later, Moses liberated himself and his people from slavery. Still later in India, Siddhartha Gautama — later called the Buddha or “Awakened One” — left his family’s wealthy, pleasure-filled palace to live the life of an ascetic and seek the inner liberation that would put an end to humanity’s suffering.

Not every journey to freedom involves liberating millions of other people through endurance of extreme danger and adversity (Nelson Mandela of South Africa and Suu Kyi of Myanmar), but every journey does entail risk and therefore begins with casting a level eye over the terrain ahead. Perhaps examining topographical maps that others through history have left behind in their biographies will offer clues to what lies ahead, or perhaps you have learned about pitfalls from acquaintances who set off on their own paths? Embarking on the path of freedom involves accepting challenges and facing tough tests to discover answers to questions such as, How much am I willing to sacrifice to gain freedom? How courageous am I? and Do I have the strength to withstand peer pressure while pursuing my liberation?

For financially affluent adventurers in search of freedom, getting a feel for the terrain ahead may include examining personal freedom and individualism as they contrast to the ethos of noblesse oblige [2] and obligation to family that they inherited; or it may mean looking more closely at the Art of War [3] ethos of management and leadership as it impacts investments and political strategies or conflicts with non-profit philosophies. Both “new money” and “old money” will find that they are challenged in different ways by the thorny and tantalizing possibilities of personal freedom, and that the use of wealth itself is challenged when each freedom warrior insists on making decisions about their wealth out of their own freedom. Both Mandela and Suu Kyi are excellent examples of strong individualists whose noblesse oblige serves others not out of tradition or consensus, but out of the freedom they themselves have discovered. The essential distinction between the traditional practices of philanthropy and noblesse oblige, and the unstinting work of freedom warriors like Mandela and Suu Kyi, is the difference between doing good out of obligation and doing good out of the deep love that is benevolence for those whose names we will never know. Freedom is the midwife of the anonymous love that guides true affluence. For the new noblesse oblige, it is the freedom of the giver that is truly noble. By making freedom our destination, we walk the high way to loving and serving others.

The route to freedom will cross new emotional terrain, as well. Impressions will arise and remain or fall away. Some terrain will be smooth and make you feel all’s well with the world; other terrain will be rocky and seem to stretch on forever. Some feelings will come to light all on their own from your shifting interior, while others will approach you from the daily life you thought you knew but which only now begins to reveal its deeper essence because you are paying closer attention to it. As your sensibilities deepen and new emotions leap to the surface like fish, old emotions that you thought you were done with will come up for a breath of fresh air and new insight. At first, the intensity of so much feeling may be frightening because it is foreign to the kind of living you have grown accustomed to. Self-doubt may rise up like Marley’s ghost to ask, Do I know who I am anymore? Authoritative voices will whisper that you must abandon this adolescent foolishness about freedom and return to your senses by accepting life on its own terms, etc. If you manage to identify whose ghostly voice you internalized so long ago, you may experience a sudden surge of energy as a few more bars of the prison others unwittingly built for you melt away.

But the greatest miracle that follows from forging new emotional terrain and letting feelings be without directing or shoving them aside is how your relationships with others will reflect like a mirror the changes going on inside of you. A vitality will begin to surface everywhere your foot falls on the freedom road. Suddenly, people you thought you had pegged speak and act in ways that utterly surprise you: the crotchety banker shares a moving incident from his boyhood; the unapproachable great aunt reveals her secret hothouse of exotic orchids; your wife tells you something she has been afraid to tell you for years and your relationship springs to life again; you look at your son and suddenly see the man he longs to be, and wonder that you did not see it before. New friends and connections crop up in the context of odd and pleasing synchronicities. As the new wind of freedom wafts over your life, a gust will blow in from the past to warn you of how dangerous change is: old friends fall away, family members voice their displeasure that you are “different,” the hierarchy at work rattles its saber because your style of work is changing. All of this is to be expected when your destination is freedom.

Having looked down the trail as far as you can without venturing onto it, it is time to commit to the journey. If you’ve gotten this far, it means you are no longer content to live a life dictated to by family concerns, political persuasions, or religious dogma. Being able to affirm just this much means there’s no going back, and yet at the same time it’s not enough to just plunge ahead without some idea of what you want for yourself. Destination Freedom is yours and awaits you.

In closing, a big thank you to David Rose of the Unified Field Corporation (UFC) and Cliff Feigenbaum of the GreenMoney Journal for giving me the opportunity to share this excerpt from my soon to be released book.

I suggest that anyone who is truly interested in sustainable change take a good look at what David and UFC (www.unifiedfieldcorporation.com ) are doing.  Cliff is a passionate leader and catalyst and is greatly deserving of our gratitude and support for his commitment and service over the last 20 years.

Article Notes:

[1]  Hermann Hesse, Siddhartha. Penguin Books, 1999. Translated by Joachim Neugroschel.

[2]  Noblesse oblige: benevolent, honorable behavior considered to be the responsibility of persons of high birth or rank.The American Heritage Dictionary of the English Language, Fourth Ed. Houghton Mifflin Company, 2000.

[3]  Sun Tzu and the Art of Business: Six Strategic Principles for Managers (Oxford University Press, 1996).

Article by Timothy David Karsten, founder of TDKA Group

Timothy works with business and non-profit leaders, wealthy individuals, and wealthy families who are curious about possibilities they hadn’t previously imagined for themselves. Timothy guides his clients to challenge inhibiting beliefs in their roles as cultural and civic leaders and stewards of wealth, especially related to business, philanthropy, economic and environmental health. Timothy has pursued diverse paths of formal and informal study and exploration. Beyond graduating from UC Berkeley with a degree in Political Economics and International Relations and earning a law degree from USC Law Center, Timothy’s travels and interest in diversity of culture and customs have taken him around the world. He has immersed himself in the study of philosophy as well as the most recent advances in physics, brain science and health to better understand the complex interaction of human potential.

Timothy’s greatest strength is his ability to balance analytic skill with creative and intuitive understanding. His clients remark upon his unique ability to arrive at the heart of the matter and gain actionable insights with both laser-like speed and impressive depth. For over 20 years, Timothy has overseen family trusts, investment strategies, and asset managers. Since 2000, he has managed the investment portfolio of the Karsten Family Foundation and driven its mission through grant making focused on the environment, education, housing, and empowering girls and women.

He happily shares his home in Pacific Palisades, California with his wife, Karinna, and their Jack Russell Terrier, Sparky. When Timothy is not busy raising the bar of expectation and performance for his clients, you can find him entertaining friends and family, playing music, discovering unknown roads and mountain trails around the world, and bringing magic to his organic gardens.

Rio+20 and the Future of Clean Energy

By Doug Arent, Ph.D., Executive Director of the Joint Institute for Strategic Energy Analysis at the National Renewable Energy Laboratory

In late June, the United Nations Conference on Sustainable Development was held in Rio de Janeiro, Brazil, two decades after its predecessor, the 1992 Earth Summit, was held to advance sustainable development through international cooperation. The “Rio+20” event drew the attendance of more than 100 Heads of State, and the top-level negotiated result from the conference was captured in a 53-page document called “The Future We Want.” As widely expected, the document reaffirmed prior commitments and articulated a common ground for continued negotiations, it was without a major breakthrough, but did capture the importance of Energy in Sustainable Development. Additionally, a great many informal (e.g. non government to government) commitments were made at Rio+20, many of which reflect the global trends that are shaping the clean energy and clean tech industries today, trends that SRI and impact investors should keep a close eye on.

A Maturing Clean Energy Industry

The bottom line is that the clean energy industry has grown up. Back in 2004, for instance, global investment in clean energy totaled $53 billion, but that figure ballooned to $280 billion in 2011, according to Bloomberg New Energy Finance. Clean energy investment has set new records every year since 2004, showing growth even through the recession.

Renewable energy is becoming a significant part of the energy mix in many countries. As an example, on one sunny Friday in May, solar power provided 22 gigawatts of electrical power into Germany’s power grid, meeting about half of the country’s peak power load. Wind power provides significant shares in Denmark, Spain, Portugal and many parts of the United States. In Iowa and South Dakota, wind power now provides more than 20 percent of the state’s electricity demand. And on one windy day in October 2011, Colorado’s biggest utility, Xcel Energy, used wind power to supply more than 50 percent of its power load. As a result of success stories like these, renewable energy’s role in state and national energy mixes, and in the global energy mix, has never been more strongly recognized.

Rio+20 marked a major milestone for energy—particularly clean, efficient, and accessible energy. Never before has energy been a core priority of the global development discussion. This year, United Nations Secretary-General Ban Ki-moon launched and strongly promoted his Sustainable Energy for All initiative. As a result, energy services are now recognized as a critical element for sustainable development, a creator of jobs and economic development, and a source of energy security.

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Achievements at Rio+20: The Major Players

In Ban Ki-moon’s vision statement for Sustainable Energy for All, he declares that, “to defeat poverty and save the planet, we can and must achieve sustainable energy for all by the year 2030,” and he further identifies three goals: ensuring universal access to modern energy services, doubling the rate of improvement in energy efficiency, and doubling the share of renewable energy in the global energy mix.

At Rio+20, Secretary-General Ban Ki-moon announced that more than 50 governments engaged with the Initiative and are developing energy plans and programs. That includes the U.S. government, which plans to provide $2 billion in grants, loans, and loan guarantees. As part of that, Secretary of State Hilary Clinton announced an effort in which the State Department, the Overseas Private Investment Corp., and the U.S. Trade and Development Agency will provide $20 million in grants to business owners in Africa to help leverage hundreds of millions of dollars in private financing. “This new initiative is part of an across-the-board push by the United States to make clean energy and energy security cornerstones of our foreign policy,” said Secretary Clinton at the launch of the initiative.

In addition, businesses and investors committed more than $50 billion to achieve the initiative’s three objectives; by one tally, more than 156 voluntary commitments were made in support of Sustainable Energy for All. Microsoft is one of those businesses, having pledged to become carbon neutral by the end of 2013. Microsoft will also institute an internal fee on carbon emissions, with the aim of driving greater advances in energy efficiency in its data centers and buildings, increasing its procurement of renewable energy, and reducing its travel-related emissions.

Banks are also playing an important role in the initiative, as multilateral development banks have committed more than $30 billion towards achieving the three objectives. The European Bank for Reconstruction and Development, for example, has committed $8 billion in energy efficiency projects in Eastern Europe and Central Asia over the next three years. Private banks are also involved, as the Bank of America has set a ten-year, $50 billion environmental business goal, much of which is expected to support clean energy projects. Based on historical performance, BofA conservatively estimates that this should equate to approximately $35 billion in Sustainable Energy for All‘s focus areas.

What can green investors conclude from these commitments? First, the idea of clean and sustainable energy is gaining in political prominence. Second, a great many businesses and investors are determined to invest large sums of money in clean energy. Some companies, like Microsoft, are even internalizing this investment strategy to make sure that their business operations take advantage of the available opportunities. And governments have realized that their investments can serve as magnets to help attract the private investment dollars that gain more momentum with each passing day.

Outside the Big Tent: Rio+20 Side Events

While the major announcements at Rio+20 took the headlines, a number of so-called “side events” at the conference represented trends in thinking that will have an impact on the future growth of clean energy. For instance, the Global Green Growth Institute (GGGI) was converted into an international organization during Rio+20. The GGGI is dedicated to pioneering and spreading a new model of economic growth that simultaneously targets key aspects of economic performance and environmental sustainability. A related effort is the Low Emissions Development Strategies (LEDS) Global Partnership, a network of more than 50 countries, international agencies, and technical institutes working together to advance low-emissions development, including comprehensive approaches that highlight the key role of energy.

Other efforts seek to change how the global economic system handles environmental challenges; these changes could provide some support for clean energy. For instance, the Natural Capital Declaration, launched at Rio+20, aspires to properly value the environment in financial transactions. In addition, the United Kingdom announced at Rio+20 that all 1,800 companies on the London Stock Exchange’s Main Market will be required to report their greenhouse gas emissions. Some groups are even calling for a replacement for the Gross Domestic Product, such as the Inclusive Wealth Index, which would provide a definition of wealth that encourages sustainable economic and social development.

These actions all represent an attempt to change the rules of the economic game: to place a dollar value on natural capital, to redefine what we mean by growth and prosperity, and to link economic performance with environmental sustainability. To the extent that these actions succeed, they will open more doors to clean energy investment and growth.

Assessing the Present and the Future of Energy

Rio+20 demonstrated one fact that energy experts have long known: energy is at the root of many sustainable development goals. Energy is also intertwined with land and water and comes into play when considering food production, conservation, purification, and distribution of water, and land use issues.

But as we try to look toward the future of global energy systems, we first need a clear assessment of where we are now and where we’re going. That’s the thinking behind the Global Energy Assessment (GEA), the result of a significant scientific effort over the course of four years. Released at Rio+20 by the International Institute for Applied Systems Analysis (IIASA), with significant contributions from authors at the National Renewable Energy Laboratory (NREL) and the Joint Institute for Strategic Energy Analysis (JISEA) authors, the GEA finds that shifting the global energy economy to one based on clean energy is economically viable, and the co-benefits to human health and the environment more than balance the up-front investments needed to bring about this transformation.

Within the deep analysis, the GEA provides a roadmap for realizing the Sustainable Energy for All goals and beyond. Strategically placed investments would enable the delivery of clean, sustainable energy to the 1.4 billion people living without electricity and to the 3 billion without access to modern cooking fuels or devices. This could be achieved without additional increases in greenhouse gas emissions.

The GEA analysis indicates that a rapid transformation to clean energy technologies would require an increase in annual investments from present levels of about $1.3 trillion per year to $1.7 trillion, which would be about two percent of current world gross domestic product. The difference corresponds roughly to the current energy subsidies that are often impeding the needed transformational change.

The GEA is indicative of the evolving framework needed to understand the future role of energy. With energy issues intertwined in issues of land use, water use, and food production, any analysis of energy requires a holistic approach. That’s also the thinking behind JISEA, of which I’m the executive director.

Operated by the Alliance for Sustainable Energy on behalf of NREL, the University of Colorado-Boulder, the Colorado School of Mines, Colorado State University, the Massachusetts Institute of Technology, and Stanford University, JISEA elucidates key insights in realizing a sustainable energy system and charting viable pathways across the value chains.

Seeing the future is never easy for investors or analysts. But a holistic approach to energy, environment and economics gives us the best chance of seeing our energy future clearly, which is essential to understanding the future of this planet.

Article by Douglas Jay Arent, Ph.D., MBA, Executive Director of the Joint Institute for Strategic Energy Analysis at the National Renewable Energy Laboratory (NREL). He specializes in strategic planning and financial analysis competencies; clean energy technologies and energy and water issues; and international and governmental policies. In addition to his NREL responsibilities, Arent is Senior Visiting Fellow at the Center for Strategic and International Studies. Arent was recently appointed as a Coordinating Lead Author for the 5th Assessment Report of the Nobel Prize Winning Intergovernmental Panel on Climate Change (IPCC). He is a member of the Policy Subcommittee of the National Petroleum Council Study on Prudent Development of North America Natural Gas and Oil Resources, and the American Academy of Arts and Sciences Steering Committee on Social Science and the Alternative Energy Future. Arent is, a Member of the Keystone Energy Board and serves on the Advisory Council of the Smart Cities Council.

Arent served from 2008 to 2010 on the National Academy of Sciences Panel on Limiting the Magnitude of Future Climate Change, and also served on the Executive Council of the U.S. Association of Energy Economists.

Prior to coming to his current position, Mr. Arent was Director of the Strategic Energy Analysis Center at NREL from 2006-1010. Prior to joining NREL, he was a management consultant to clean energy companies, providing strategy, development and market counsel. Previous positions held include: Director of strategic marketing and business development at Network Photonics; Director of Media Gateway Products and strategic planning manager at Lucent Technologies (now Avaya); and Vice president of business development for Amonix Inc.

Dr. Arent has a Ph.D. from Princeton University, and an MBA from Regis University.

The Next 20 Years of Impact Investing: Investing for a financial and social return while delivering well-being for 100% of the economy

By Lisa Hall, President and CEO of Calvert Foundation

Throughout the course of this year, I have found myself attending numerous conferences and participating in panel discussions where attention has been focused on impact investing. I believe that in 20 years we will look back and consider these past few years as the turning point in an economic movement. Looking forward to the next 20 years, there are many, myself included, who are convinced that we are experiencing a paradigm shift. A change in cultural norms and expectations that will result in all investors — individual and institutional — committing at least some portion of their investable assets to social impact and making investments that are in harmony with their values.

A True Investment

When I joined Calvert Foundation in 2005, impact investing – investing for a financial and social return – was still a very new concept but was steadily gaining popularity. Back then we called it “community investing.” Call it what you will, this type of investing remains a core part of socially responsible or sustainable investing. What makes impact investing different is that we are not investing in publicly traded companies, but instead in organizations which help people to improve their lives through affordable housing, jobs, community services such as daycare and healthcare, and more.

When I say investment, I mean it in the truest sense. Calvert Foundation makes it possible for everyone – from individual investors in increments of $20 to large corporations in amounts as high as $20 million – to invest in low-income communities and provide capital where there is none. We enable Impact Investing through our Community Investment Note, which then directs capital to help finance affordable housing, charter schools, health centers, Fair Trade coffee co-ops, and job creation. These investments in the future of our country and our world are helping to transform the lives of individuals and families. At the same time, investors receive a return on their investment of up to 2 percent. This blended value investment generates both a social and financial return.

Thankfully, we are not alone in our efforts today. The idea that you can invest in socially responsible endeavors and get a return on that investment was radical when we initially conceived of it. Now it is a concept at the very forefront, influencing how investors think about risk, return and rewards. Calvert Foundation recently commissioned a study involving 1,065 financial advisors; 72 percent said they had interest in offering products that provide sustainable investment to their clients, while 38 percent expressed strong interest in being able to offer those products now. The advisers surveyed indicated that they were willing to recommend impact investments to one-third of their clients, dedicating 10 to 20 percent of their portfolios to this type of investing. Based on these numbers, the study estimates a sustainable investment market of about 2.5 percent of advisers’ assets under management, or $650 billion. The change that these dollars can make is both monumental and within the scope of our imagination, our expectations and our ability.

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A Role for Everyone

Those of us working for this change are inspired and encouraged by the growing interest in sustainable investing within the business community. Large corporations are beginning to understand the power of uniting investment and social conscience. A great example is Starbucks. Earlier this year, Starbucks teamed up with the Opportunity Finance Network (OFN) to help create and sustain jobs. The Create Jobs for USA program provides capital grants to select Community Development Financial Institutions (CDFIs). These CDFIs, which include Calvert Foundation, provide loans to underserved community businesses. The goal of Create Jobs for USA is to bring people and communities together to create and sustain jobs throughout America. Not only did they initially seed the program with a $5 million contribution by Starbucks Foundation, they also made an important public statement about the potential of corporations – and each of us – to make a difference and be part of the solution to our current social and economic challenges.

Real-Life Examples

What does impact investing look like? For an investor, it looks much like the rest of his or her portfolio – until that investor understands the social impact they are making. “Calvert Foundation offered me a great opportunity to give food to my soul when it came to switching from Wall Street to an organization that is entirely devoted to helping the community, especially the needy, in a varied, fruitful, and meaningful manner,” said Marta Santiago, a New Mexico resident and Community Investment Note holder since 2005.

Over the years we have enjoyed great success in bringing new investors to the table by making multiple channels available to them. By working with financial advisors and transacting through multiple brokerage firms, we have enabled investors to hold the Community Investment Note in their investment portfolios. Through our partnership with Microplace, an eBay company started in 2007, we have made it possible for investors to purchase Notes online, starting as low as $20. Investors can also come to us directly, opening a Note through an application and simply writing a check. We know that we have to do more to engage and educate investors in order to grow our investor base beyond 10,000 people. In the years to come, we will continue to increase the distribution of our Note – and additional investment products as we develop them – through more and more mainstream brokerage firms. We are also developing strategies to bring new investors into the fold. For example, we want to engage the millennial generation through partnerships with colleges and universities, social media outlets and networking events. We are also embarking on efforts to connect diaspora communities and enable individuals to invest in their countries of origin. Other special initiatives that we envision for the future include regional initiatives. Imagine a program that allows anyone to invest in community projects that help to rebuild America, create jobs and improve critical services in distressed areas like Detroit.

For people in need of help and opportunity, it looks like hope and a way to serve needs across all different types of communities. Take, for example, children in Minnesota. When the state experienced the longest state government shutdown in our nation’s history last year, the hardest hit were non-profit organizations that depend on funding from state grants. Where did Minnesota-based non-profits turn when they could no longer count on their primary source of funding to continue providing critical services? The Nonprofits Assistance Fund (NAF), a Calvert Foundation borrower, stepped in to offer emergency bridge loans, providing credit to cover cash flow delays for groups like Northern Lights Community School of Warba, MN. A well-managed and incredibly successful school catering to students who have faced difficulties in traditional public school settings, Northern Lights got a loan from NAF to fill the school’s financing gap. Since 1980, Nonprofits Assistance Fund has provided over $75 million in loans to more than 1,700 non-profits. Impact investors working through products like Calvert Foundation’s Community Investment Note are a key part of this process. “Years ago, we came across an opportunity to fund a project and were unable to get the financing we needed from anyone but Calvert Foundation,” said Kate Barr, NAF’s Executive Director. “NAF is now serving this role for the communities of Minnesota when it’s needed most.”

Calvert Foundation’s work and Impact Investing as a sector has a global reach. Consider Lucy, who lives in a small village in Northern Kenya. Lucy wakes up bright and early, nudges her kids out of bed, and prepares a meal to start their school day. While it sounds like a scene played out in homes across America, it bears no resemblance at all. Lucy’s day begins at 4:30 am. That’s when women in the drought-ravaged region of Meru begin an hour-long trek to collect water from a stream. On this day Lucy feels lucky since back at home she finds enough wood to start a fire. It also means a five-kilometer walk to collect wood can be put off until tomorrow. Thanks to our partner The Paradigm Project, which we provide an opportunity for investors to invest in through our Community Investment Note, Lucy and others like her are receiving relief through clean-burning stoves that reduce wood consumption and toxic smoke, saving women long and often treacherous journeys to collect wood. Although the stove is a solution to just one problem, Lucy views it as a way to restore dignity to women for whom mercy has been in short supply.

Aligning Our Money with Our Values

Taking part in this movement is not simply our individual and collective responsibility; it also creates mutual benefit for investors and the recipients of these investments. It’s time to align our money with our values – to have our money working in harmony with what we believe and not against what we believe.

Anyone can do so by investing as little as $20 in women’s economic empowerment on Microplace. You can serve as a mentor to an entrepreneur just starting out. You can give to a community organization providing job training. At Calvert Foundation we believe that Impact Investing represents the best of what we can be as a society — not for the 99 percent or for the 1 percent, but for the 100 percent. Economic recovery rests on ensuring sustainable access to capital, both to grow existing businesses and to finance new ventures and innovation. Through groundbreaking mechanisms, promising models are actively supplying much-needed capital to small businesses and economic development projects. In some cases, these models are also demonstrating new and sustainable ways to grow wealth and to help communities adapt to a changing economy.

At Calvert Foundation we spend a lot of time explaining what we do – I hope in this article we have been clear about what we believe. We believe in economic justice. Impact Investing in economic justice means that families in Cambodia and other emerging economies can send their children to school – providing an education that prior generations didn’t receive. It means being able to stay in your home after being a victim of predatory lending. The numbers of people left behind by traditional financial systems is growing – but over the next 20 years we can reverse this trend. Our current financial systems are just not enough to meet the challenges and needs of these turbulent times. Calvert Foundation offers a solution through our Community Investment Note. We encourage everyone to take part and participate in this simple solution that creates economic opportunity for all.

Article by Lisa Hall, President and CEO of Calvert Foundation ( www.calvertfoundation.org), a nonprofit that has pioneered impact investing, a type of investing that delivers social and financial returns. When Lisa joined Calvert Foundation in 2005, she took on management of a $76 million loan portfolio as Chief Lending Officer. Over the years, Lisa more than doubled that portfolio to nearly $190 million, while keeping losses under 1.2 percent during one of the most economically challenging periods in recent history. Follow Lisa on Twitter @LisaGreenHall

Photo courtesy of Rodney Rascona for Paradigm Project

 

The Next 20 Years of Sustainable Business

The Next 20 Years of Sustainable Business

by Aron Cramer, President and CEO, BSR (Business for Social Responsibility)

Twenty years after the Earth Summit in Rio, and in this BSR’s 20th anniversary year, we are both looking back and looking ahead. And as we reflect on the past 20 years, it seems that everything has changed…and nothing has changed. There are reasons to celebrate great achievements, but even more reasons to redouble efforts to achieve the tangible successes that are necessary to put the world on a genuinely sustainable path. Just recently there has been an unprecedented turnout by business and civil society at Rio+20, while at the same time the American Meteorological Society reports that freak heat waves in the US and fatal floods in Russia were likely caused by climate change.

Most businesses, and many other institutions, now recognize that we have in our hands the ability to create an economy that delivers dignified lives of comfort and opportunity for the 9 billion people we expect in 2050; an energy system that enables economic growth without irreversible climate change; and access to food, energy, water, and technology. Whether or not we turn this vision into reality is not just of interest to sustainability professionals, it is nothing less than the central challenge of the 21st century.

There are indeed many great accomplishments that have been achieved since 1992. As sustainability enters the mainstream, we see that hundreds of millions of people have escaped poverty in the past generation, something never before achieved in human history. Most large multinational companies and countless small and medium enterprises (SMEs) all across the world have embraced sustainability. Consumers, investors, and governments have vastly more information than ever before to enable them to assess how business is performing on sustainability, allowing rewards for the best performers. Collaboration and dialogue between business, NGOs, and community organizations, once taboo, is now considered basic. Technology’s ability to connect us has created a global community unprecedented in human history. And where companies once saw corporate social responsibility (CSR) as a risk mitigation exercise, more and more understand sustainability to be the mother of all innovation opportunities. All this is great cause for optimism.

And yet, there are many, many areas in which, twenty years after the initial Earth Summit, progress is insufficient. Our planet continues to warm, with carbon levels nearing 400 parts per million, dangerously close to the point at which irredeemable changes will occur. We need only consider the thousands of record high temperatures in the early summer of 2012 in North America, capping the hottest year on record in the United States, to make the point. The International Energy Agency, hardly an alarmist organization, now sees serious risk of catastrophic climate change. Deforestation proceeds. Progress towards the Millennium Development Goals is inconsistent. The number of water-stressed regions in the world grows annually. And our measures of economic vitality remain tied to unsustainable levels of natural resource consumption. Governments have largely abdicated responsibility to take concerted action to promote low-carbon economic growth, wilting in the face of the global financial crisis. This litany makes clear that, by many objective measures, progress is far too slow – at best.

Without a change in course, the remarkable rise in living standards that have enabled countless people to live lives of dignity will either be halted or reversed.

But with new thinking, innovation, and collaborative action, we can transform our world, and turn the vision of sustainable, prosperous lives for nine billion people into a reality.

Where We Need To Go

If we are to build on the successes of the last twenty years, we need to change course. The task ahead is no longer about defining the challenge; it is about meeting the challenge. We don’t need more roadmaps; we need to move faster towards the destination.

The path forward is fundamentally different than the one we have traveled over the past two decades. In the first decade after the original Earth Summit, the time when BSR was founded, the primary challenge was to raise awareness in the business community about why sustainability was a crucial and legitimate topic for the private sector. In the subsequent decade, energies were directed less to awareness raising, and more to the integration of social and environmental strategies into business strategy and operations. For the decade ahead, integration remains crucial. Companies have made great progress in the past two decades, and we have been proud to play a role in that. There is considerable room to go further, and we write about that elsewhere in this article.

But a new decade brings a new approach. More substantial progress, however, depends on change not only inside individual companies, but also within entire systems. The era of the hermetically sealed, vertically integrated company is long gone. Every business, in every part of the world, operates within a web of systems: economic, cultural, political, and natural. Every business in every part of the world relies on networks of suppliers, customers, and investors. Even the most innovative companies won’t capture the potential of their efforts if these systems disregard sustainability. And as much as we value best practices, we also know from the past two decades that even the most creative experiments and demonstration projects are not going to meet the scale of the challenge.

So the solutions we need to achieve our goals must also be systemic. A genuinely sustainable economy depends on four inter-related elements: (1) the operational systems in which companies act; (2) the markets that shape the way investments are made and value is defined; (3) the stakeholder world that holds great promise, and (4) the world of ever more empowered individuals and connected communities.

    •       Truly Integrated Business Models: Business decision-making does not currently integrate environmental, social, and governance (ESG) factors into investment calculations. Fifteen years after John Elkington popularized the triple bottom line, very few companies have actually integrated this model into their economic valuations. Whether or not financial markets change the game, there is an opportunity for companies to get smarter about the intangible assets that increasingly make or break their success. While some companies are experimenting with economic valuations that include elements like carbon, we have not yet seen widespread adoption of economic models that place a value on ecosystem services, community goodwill, or the risk of stranded assets. It is now widely agreed that these things have value; our task for the next decade is to get more precise about what the value is, and how to measure it. The Natural Capital Declaration that 57 companies signed at Rio+20 is a good start down this path.

    •       Financial Markets That Promote Long-Term Value: Despite the Great Recession, public markets focus as intensely as ever on short-term returns. Shares in publicly traded companies in the United States are held for an average of seven months, down from seven years two generations ago. Markets allocate capital with great effect, and the challenge ahead is to maintain the best aspects of market flexibility while reducing the relentless pressure of short-termism. Financial innovation, which was blamed for the crash in 2008, can also be parlayed into new mechanisms that help create long-term value. Integrated reporting, integration of non-financial risks and opportunities into definitions of fiduciary duty, the creation of “L shares” as proposed by Al Gore and David Blood, as well as other mechanisms will create a virtuous circle in which companies are rewarded for taking the long view, and investors are cushioned from the risks of excessive short-term thinking. And there is little doubt that there is also the need to restore trust in our financial system if the “real economy” is going to thrive.

    •       New Frontiers of Collaboration: The past 20 years introduced the concept of collaboration among companies and an increasingly powerful network of NGOs around the world. The next 20 years will see the lines between for-profit and not-for-profit organizations blur substantially. A world of dialogue between organizations defined by whether they are for-profit or non-profit may be drawing to a close. Can we imagine a world in which every enterprise is a social enterprise? A world in which every NGO thinks about market solutions to the world’s most pressing challenges? How will companies collaborate when every individual has a megaphone bigger than those available to the world’s biggest NGOs 20 years ago?

    •       The Empowered Individual: The next ten years will continue to put more and more information and autonomy into the hands of individuals and self-forming groups. The demise of business models relying on big businesses selling to passive mass audiences will accelerate. More and more information will be available to individuals. The “internet of things” and widespread sensors will make the invisible visible. Advances in biotechnology will provide quantum leaps in our understanding of how the world around us, and our choices as consumers and citizens, affects our health. These changes can – under the right circumstances – be a net positive for sustainability. And it is undeniably the case that companies will need to adapt to a world of truly radical transparency.

At BSR, we want to see a world with a truly inclusive economy that enables all people to meet their needs, shape their futures, and achieve their potential. We want to see a world that values and preserves natural resources so that future generations have the same – or better – opportunity to thrive. We see a world where economic health – for individuals and for nations and enterprises – is measured not by the quantity of consumption, but by the quality of life that economic activity delivers. And we want to see a world in which public policy and markets create the incentives and rules that make it possible for businesses that point in this direction to thrive. Companies that embrace this challenge will be the ones to achieve the greatest success…and the ones who create a world of which we can be proud.

The road ahead needs greater emphasis on systemic solutions like those I describe here. If real progress is made in these areas over the next twenty years, we will have done a great deal to accelerate… and will have more reasons to celebrate.

Article by Aron Cramer, President and CEO, Business for Social Responsibility (BSR) (www.bsr.org ). Mr. Cramer is recognized globally as an authority on corporate responsibility by leaders in business and NGOs as well as by his peers in the field. He advises senior executives at BSR’s nearly 300 member companies and other global businesses, and is regularly featured as a speaker at major events and in a range of media outlets. Under his leadership, BSR has doubled its staff and significantly expanded its global presence. Mr. Cramer is co-author of the book Sustainable Excellence: The Future of Business in a Fast-changing World, about the corporate responsibility strategies that drive business success. He joined BSR in 1995 as the founding director of its Business and Human Rights Program, and opened BSR’s Paris office in 2002, where he worked until assuming his current roles in 2004.

Previously he practiced law in San Francisco and worked as a journalist at ABC News in New York. He has expertise in integrating sustainability into business strategy, human rights policies and practices, and stakeholder engagement.

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