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Social Funds’ SRI Mutual Fund Center (Fund Performance Chart)
Stay up to date with the latest financial returns and other details
Social Funds’ SRI Mutual Fund Center (Fund Performance Chart)
New Article and Data from Mercer
Recent storms, droughts, industrial accidents, and scandals have raised the profile of sustainability and responsibility issues among media, corporations, and a broad range of investors, including pension plans, endowments, and foundations. In response, institutional investors across segments are seeking out new products that take advantage of sustainability themes and are finding ways to integrate sustainability considerations into all of their investment processes.
“Investors are beginning to recognize the risks and opportunities that sustainability issues represent,” says Craig Metrick, Principal and US Head of Responsible Investment at Mercer. “Many corporations have implemented sustainability or corporate social responsibility programs to manage these risks and increase profitability through improved efficiency and new products.”
“In addition, endowments, foundations, high-net-worth investors and defined contribution plan participants are increasingly looking for ways to align their portfolios with their mission and values,” he notes.
By Mark Tercek and Jonathan Adams, authors
The conservation movement has made great strides in recent decades. Governments have improved regulations, consumers love to buy “green,” and the largest corporations in the world have enacted broad sustainability and Corporate Social Responsibility strategies. Yet despite these efforts, nearly every precious bit of nature is in decline, and environmentalists look warily to the future as critical systems creep closer toward their threshold—and threaten to create a world so depleted that it becomes hostile to human wellbeing and economic productivity.
According to Mark Tercek, President and CEO of The Nature Conservancy (and former Managing Director and Partner of Goldman Sachs), there is hope, but only if businesses, governments, and environmental organizations can work together in new, innovative ways. In his new book “NATURE’S FORTUNE: How Business and Society Thrive by Investing in Nature” (Basic Books | April 2013), Tercek, along with conservation biologist Jonathan Adams, argues that economic growth and environmental stewardship are not mutually exclusive, and that in fact, saving nature is the smartest commercial investment any business or government can make.
In NATURE’S FORTUNE, Tercek and Adams demonstrate that, for business and government leaders, conservation is not only the right thing to do—it is now of utmost economic importance as well. Tercek discovered this firsthand when, in 2005, then-Goldman Sachs CEO Henry M. Paulson tapped him to build and lead the firm’s first environmental effort not in the name of Corporate Social Responsibility, but pure business. In the book, he challenges public and private sector leaders to shift their thinking on conservation from a “why?” to a “how?” mindset—specifically, how to account for nature in financial terms, and then incorporate that value into the organization’s decisions and activities, just as habitually as they consider cost, revenue, and ROI.
NATURE’S FORTUNE is grounded in one simple truth: nature is economically valuable. Organizations not only depend on the environment for key resources—water, trees, and land, for example—but they can also reap substantial commercial benefits in the form of risk mitigation, cost reduction, new investment opportunities, and the protection of assets. And this new understanding of “natural capital”—nature as a quantifiable asset—has the potential to motivate entire industries to invest in nature on a new level, which could, in turn, exponentially accelerate the environmental progress of the last several decades. Through case studies ranging from Columbian sugar cane growers and Central California fisheries to Coca-Cola and Dow Chemical, NATURE’S FORTUNE tells the story of how public and private organizations can effectively partner with environmental groups in order to leverage that capital in ways that both impact the bottom line and benefit society. It is a revolutionary guide to the new conservation —innovative, collaborative, financially sophisticated, and relevant from megacities to small towns, from trackless wilderness to the factory floor, from remote countryside to the corner office.
About the Authors
Mark R. Tercek is president and CEO of the Nature Conservancy. Tercek was previously a managing director and Partner at Goldman Sachs, where he led various business units and later was tapped to build and lead the firm’s environmental strategy. He lives in Washington, DC.
Jonathan S. Adams is a science writer and conservation biologist. The author of The Myth of Wild Africa, The Future of the Wild, and co-editor of Precious Heritage, he lives in Rockville, Maryland.
All proceeds from “Nature’s Fortune” benefit The Nature Conservancy.
For more about this book go to- http://www.marktercek.com/natures-fortune/
Parnassus Investments announces the launch of a new international equity strategy focusing on the Pacific-Asia region on May 1, 2013. The Parnassus Asia Fund (PAFSX) aims to provide investors with unique responsible investment options for capital appreciation through stocks of companies located in Asia. This includes Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Taiwan, Thailand and Vietnam. Jerome Dodson, President of Parnassus Investments and Portfolio Manager of the Asia Fund, believes that Asian economies are among the most prosperous and innovative, and the Parnassus Asia Fund will offer its shareholders an opportunity to invest in that part of the world.
The Parnassus Asia Fund is a no-load fund. The fund will be benchmarked versus the MSCI AC Asia Pacific Index. This fund will be the seventh fund in the Parnassus Funds line-up, which includes: Parnassus Equity Income Fund, Parnassus Mid-Cap Fund, Parnassus Small-Cap Fund, Parnassus Fund, Parnassus Workplace Fund and Parnassus Fixed-Income Fund.
Since the firm’s inception, Parnassus Investments has sought to invest in good businesses that have increasingly relevant products or services, sustainable competitive advantages, quality management teams and ethical business practices. The responsible investment component of the strategy, which is applied to all of the Parnassus Funds and includes consideration of a company’s environmental, social and governance (ESG) factors, will make the Parnassus Asia Fund the first U.S.-based Asia fund to apply a responsible investment strategy.
The Fund Strategy
The Parnassus Asia Fund is a diversified, fundamental multi-cap equity fund focusing on Asian companies. The Fund principally invests in stocks of Asian companies of all-capitalizations. The Fund seeks to invest in good businesses with attractive valuations. The Fund also takes environmental, social and governance factors into account in making investment decisions.
The Fund Risks
The Fund’s share price may change daily based on the value of its security holdings. Stock markets can be volatile, and stock values fluctuate in response to the asset levels of individual companies and in response to general U.S. and international market and economic conditions. In addition to large-cap companies, the Fund may invest in small- and/or mid-cap companies, which can be more volatile than large-cap firms. The Fund invests primarily in non-U.S. securities. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market or economic developments and can perform differently from the U.S. market. Security holdings in the fund can vary significantly from broad market indexes.
Past performance is not a guarantee of future results. Mutual fund investing involves risk, and loss of principal is possible.
The Parnassus Asia Fund invests primarily in non-U.S. securities. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market or economic developments and can perform differently from the U.S. market.
Before investing, an investor should carefully consider the investment objectives, risks, charges and expenses of a fund and should carefully read
the prospectus or summary prospectus, which contain this and other information. The prospectus or summary prospectus can be found at www.parnassus.com or by calling (800) 999-3505. Investment return and principal value will fluctuate so that an investor s shares, when redeemed, may be worth more or less than their original principal cost and you could lose money.
The Parnassus Funds are distributed by Parnassus Funds Distributor, an affiliate of Parnassus Investments and a FINRA member.
For more information contact:
Harnessing our Collective Best Selves: Why Conservatives and Progressives are both right, and how to get us singing off the same song sheet
by Bill Shireman, President and CEO of the Future 500
I am grateful and honored to speak with you at Sustainable Brands 2013 (www.sustainablebrands.com/events/ ). I am also humble and hopeful, because I so want to convey an opportunity that has emerged from, you might say, the fires of conflict between many brands in this room and activist groups fighting to protect global climate.
Future 500 resolves conflicts and builds alliances between two groups that love to hate and demonize each other: the world’s most valuable global brands and its most passionate NGO activist groups.
KoAnn asked me to present these remarks after reading a booklet we produced a few months back, called The Innovation Agenda. It presents a simple five-step agenda that can restore both prosperity and sustainability. But the distinctive characteristic of the five steps is that they can only be taken successfully if advanced by a coalition of traditional adversaries.
The Innovation Agenda can’t be advanced by corporations alone, or by NGOS, even though most support it. It can’t be advanced by conservatives or by liberals, even though leaders on both sides strongly support it.
Advanced by any one of those, it would be corrupted along the way, to satisfy the vested interests they would need to bring aboard to make it pass. Only with a left, right, corporate, and NGO alliance can it be done right.
That presents a challenging and appealing opportunity. To understand it, let’s look at the dynamics that divide these groups.
PURPOSE AND POWER
From one perspective, Future 500’s role is to advance the Purpose of the activists, by harnessing the Power of the companies. But that’s not exactly true, because power doesn’t only exist on the corporate side, and purpose doesn’t only exist on the NGO side. We know it first hand, because right now, we find ourselves enmeshed in battles between NGOs and major brands. The groups are demanding that the companies:
• Compensate workers in Bangladesh for the Rana Plaza factory disaster
• Detox their apparel lines
• Get Oil Sands and Coal out of their energy supply chain
• Get Fracked Gas out – or oppose the Keystone pipeline.
(Details at- http://350.org/en/stop-keystone-xl )
• Eliminate Conflict Minerals, and comply with new Dodd Frank disclosures
• Stop buying Indonesian timber
• Take Extended Producer Responsibility for all their packaging.
(Details at- www.calrecycle.ca.gov/epr )
And the companies are responding, often using their buying power to drive major change. So the NGOs do have power.
GREENPEACE AND WAL-MART EFFECT
The dynamic at play here is the combination of what we call the ‘Greenpeace Effect and the WalMart Effect’ .
The Greenpeace Effect refers to the fact that no global brand can afford to have an activist NGO with a major brand as its enemy. These brands are often worth between $10B and $100B – just the brand reputation, apart from all the other assets of the company. So a 1% cut in brand value equals $100M to $1B in real cost – and can pivot a brand from a positive to a negative direction of change.
The Wal-Mart Effect refers to the fact that no supplier anywhere in the world can afford to say “no” to a strong request by a major brand or retailer. Wal-Mart is the most powerful of these, but there are many who wield major power.
To use the Greenpeace Effect to drive change, groups often demonize the companies. This pattern affects not just corporate and NGO stakeholders. Increasingly it applies to U.S. politics as a whole. Politicians and political strategies from both parties have learned: one way to win is to demonize the other. Progressives demonize conservatives – conservatives demonize progressives.
In reality, neither side is entirely right or wrong. Each side has a valid point. For example:
The Conservatives are right: as a nation, we are out of money and deep in debt.
The Progressives are also right: we cannot pay off our debt by extracting it from the poor, the middle class, or the environment.
But the solution each offers makes both problems worse.
The right’s solution is to drill baby drill – and liquidate our ecological capital. The left’s solution is to spend baby spend – and liquidate our financial capital.
That won’t work. As Bill McKibben or Bill Clinton might say, let’s do the math:
The total federal debt – including unfunded commitments to Social Security, Medicare, Veterans, and Government Employees – is over $51T.
• This equals nearly the entire net worth of all American households combined.
• It is impossible to cut spending enough for a single generation of Americans to pay it off.
• The only way our politicians see to pay it off: increase growth.
So – looking back at the last century, the Left and the Right’s prescriptions are both to do what worked before: the left says spend, the right says drill.
Problem is, thanks to drilling so far, global temperatures are already up 0.8 degrees C.
• A third of summer sea ice in the Arctic is gone, the oceans are 30 percent more acidic, and since our warmer air holds 5% more water vapor than cold, the climate dice are loaded for both devastating floods and drought.
• Scientists say we can burn less than 565 more gigatons of carbon dioxide and stay below 2°C of global warming.
• But we have 5 times that amount in our reserves. How do we avoid burning it all?
So we blame and shame – and demand that companies take action now.
And they try. They are faced with an array of demands – to drive down carbon in supply chain. They have dozens of products and processes to change.
Why? Because the politicians won’t do their job. They won’t make the simple, cheap changes necessary.
In fact, the solutions are cheap and effective – and that’s why politicians can’t make them.
I’m quite serious. Because the two requirements that need to be met for legislation to pass the U.S. Congress are these: first, the legislation must be extremely expensive, so there are enough funds to pay off the interest grouos whose support is needed for passage. Second, the legislation must be mostly ineffective, because it can’t change the fundamental power relationships or marketplace or regulatory advantages held by current interest groups.
For example, on February 2011, I picked up a report by McKinsey Global Institute called ‘Growth and Renewal in the United States’.
McKinsey is a name that always carries weight with corporate leaders, so I was eager to read it the moment it arrived. Their conclusion sounded right on target. If the U.S. cannot boost productivity growth rates by a third, the consequences will be painful and damaging.
“More than ever, the United States needs productivity gains to drive growth and competitiveness,” the McKinsey team wrote.
Labor productivity gains alone are not enough, McKinsey wrote. The US needs higher resource productivity – efficiency gains (reducing inputs for given output) – and value gains (more value from less input).
That “create(s) jobs even as productivity was growing.”
In the next 20 years, today’s 1.8 billion middle class consumers will almost triple, to as many as 4.8 billion. If we fail to increase resource productivity, McKinsey concludes that America might face problems we thought we had overcome in the 20th century: genuine shortages of food to eat, water to drink, and energy to heat our homes and power our machines.
But here was good news from McKinsey. “There is an opportunity to achieve a resource productivity revolution comparable with the progress made on labor productivity during the 20th century,” its team wrote in their November, 2011 study, Resource Revolution.
Creative people, and the ideas and technologies they invent, can birth a second revolution in productivity in which we no longer need to trade ecological assets for economic ones.
The combination of the microchip, computers, the Internet, advanced materials, smarter recycling, renewable energy, clean technologies and other innovations on the horizon can increase the amount of wealth we create per unit of energy by more than tenfold by the end of this century.
How can we do it? That’s not a mystery. What’s a mystery is why we’re not doing it. The keys include:
First, stop taxing jobs and prosperity. Instead, tax pollution. Cut payroll and income taxes, for individuals and business. Make up the difference with a price on carbon.
Second, wind down resource subsidies. Rather than maintaining the illusion of low prices, and paying with waste, pollution, and war, we need to phase out about a trillion in subsidies for energy, water, and food. This won’t increase real prices – it will reduce them.
Third, promote R&D for radical energy efficiency gains. Government may often be wasteful, especially when it tries to choose technology winners or losers. But the basic research it supports through labs and universities has created enormous value.
Fourth, use border adjustments to cut taxes more. Apply the same price on pollution to imported goods – including oil imports – so the price on domestic pollution does not inadvertently subsidize China, Venezuela, or Iran. Use 100% of the proceeds to cut other taxes. As the dominant global buyer, a U.S. carbon tax with border adjustments would effectively establish a carbon tax in China, India, and other nations, delivering the parity that conservatives favor before the U.S. acts on climate.
Fifth, set a national innovation goal, as the framework for the above changes Make the political commitment to increase the productivity of energy and carbon by four per cent, every year, for 50 years, using the tools above and others.
Those five steps reflect the kind of actions McKinsey proposed, as well as steps from three leading multi-company initiatives – Ceres BICEP (www.ceres.org ), Business for Social Responsibility’s Future of Fuels program (https://www.bsr.org/en/collaboration/groups/future-of-fuels ) and Future 500’s U.S. Climate Task Force (www.climatetaskforce.org ).
THE BAD NEWS: COMMON PROBLEM
The bad news is that these ideas, despite broad support, face a common problem. They cost too little. Their chief attribute is that they tend to reduce costs, not increase them. This threatens vested interests, as well as politicians, who rely on legislation that provides dollars or guarantees to powerful groups across the spectrum.
The opposition doesn’t come from a tight-knit set of fossil fuel companies, despite popular assumptions. In fact, some major oil and gas companies support them. Instead, the opposition comes from 1000 narrow interests, often connected to fossil fuels, but in much more complex ways than assumed. They demand that they be allowed to keep the advantages that flow to them, through our current tax and spending priorities. To step aside and let this agenda pass, they want guarantees – in the form of money and regulations that protect or deepen their political or market power.
In other words, the problem isn’t that breaking our addiction to carbon costs too much. Politically, the problem is that it costs too little.
Basically, what it takes is cutting taxes on payroll and profits, replacing those revenues with taxes on carbon, and phasing out subsidies across the economy – not immediately, but gradually, over a generation.
With a $35/ton carbon tax, we can cut payroll taxes about 25%, about $200 million per year, and cut emissions at least 4% a year. In the process, we will increase average household income about $600.
Now – They say this can’t be done. But it can.
The political support is gathering. A strong potential coalition of conservatives, progressives, NGOs, and companies supports an effective price on carbon. But each group alone is unwilling or unable to drive the ideas forward. They need a combination of pressure and opportunity.
The Innovation Agenda provides an opportunity to meet fundamental principles across the political spectrum.
The Conservative Movement was founded on a purpose: to protect people from repression by a too big, too powerful government. The Progressive Movement was founded on as similar purpose: to protect people from repression by too big, too powerful corporations.
Today they are locked in a cycle of mutual demonization. Policy is in gridlock.
In gridlock, we perpetuate and deepen the problems we already have. We drill and we spend – without the discipline we need.
We resist the cheap, effective solutions – and instead battle for years or decades over half-measures that won’t get the job done.
It’s time that the left and the right, that corporate and NGO leaders, united, and approached the politicians together, with solutions that will actually work for us all.
The Innovation Agenda reduces the cost and increases the effectiveness of government. It shifts power from backward-looking companies, to those prepared to excel in a carbon-constrained world.
Speech and article by Bill Shireman, who has called a “master of environmental entrepreneurism,” Bill Shireman has over 20 years of experience developing and implementing programs that align the interests of major corporations and their stakeholders. He develops profitable business strategies that drive pollution down and profits up.
As President and CEO of the Future 500, he helps the world’s largest companies and most impassioned activists – from Coca-Cola, General Motors, Nike, Mitsubishi, and Weyerhaeuser, to Greenpeace, Rainforest Action Network, and the Sierra Club – work together to improve the profits and performance of business.
Article Reprinted with Permission from Future 500 (www.Future500.org )
By Brian Kaminer, founder, Talgra LLC
The Directory is a great resource and starting point for anyone interested in aligning their money and core values.
After 17 years in the brokerage business at a boutique trading firm, I got the chance to explore areas that were of greater personal interest to me and felt in alignment with my values. Sustainability quickly got my attention and my role as the father of three boys also furthered my interest on the topic. I initially focused on resource / energy conservation and solar energy for about 2 years. After learning about the concept of Slow Money and attending various conferences in 2010, my awareness about the role of money and investing was elevated to a new level. Since then I have immersed myself in this field while working to commit financial resources to support my core values and understanding of sustainability. This is very much an evolving and rewarding personal process.
While doing so, I have been overwhelmed by the amount of information and resources available on this subject. It seems to be exponentially growing in content and visibility. Organizing and connecting what I have been learning has increased my understanding of the field and presented the opportunity to share this with others by creating a resource document. This process enables me to see the bigger picture.
Towards that, I created the Money and Impact Investing Directory in 2012 and promoted it through Talgra. In May of 2013, the directory was moved to its own website with the support of sponsors (including Talgra, RSF Social Finance, MicroVest and others). There are many people that continue to be generous with me by sharing their time and knowledge. The directory is an opportunity to pay that forward in order to help others. It reflects my journey and expanding awareness of resources.
The Money and Impact Investing Directory (https://investwithvalues.com/ ) is a new resource for people looking to align their money and core values through banking and investing.
The Directory highlights topics, resources and organizations related to creating positive social and environmental impacts by enabling you to utilize your funds in a values-based conscious manner. It encapsulates a growing opportunity to unite money, values and sustainability. The Directory exists to foster learning and engagement.
Here you will find a resource that provides a framework and roadmap for you. It connects the dots between related areas and organizations in the hopes of inspiring a broader audience to join the conversation and cultivate opportunities. It was developed to enhance open source sharing and increase collaboration while helping you achieve values-based positive change on your journey.
I found a growing number of terms to describe and link the resources, including impact investing, responsible business / investing, social finance, SRI, and slow money to name a few. Each is part of a new economy based on long-term values that include knowing where our money goes. While originally focused on private equity and debt investments, “Impact Investing” is evolving as an umbrella term that appears to be more representative of similar intentions to create positive social and environmental benefits along with financial returns, rather than a single style or asset class of investment.
There are people and organizations that have been building this larger field and approach for decades. Their knowledge and perspective is offered through many detailed resources and directories. While there is a plethora of available information, it can be overwhelming. The Money and Impact Investing Directory provides a concise view of this growing field while providing users easy paths to dive deeper and take action. This directory is an invaluable resource for individuals, foundations, endowments, pensions, non-profits, financial advisors, wealth managers and anyone else interested in using money and investments to create prosperity for people and planet.
Find out what it’s all about. The “who, what and how” to aligning money and values for a more sustainable and healthier future, are offered in this resource.
Local Banking, Economies and Business
-Community Banks / Credit Unions
– Guides & Micro Finance
Private Companies & Funds – Impact Investing
-Definitions / Investor networks, platforms and groups
Public Companies – ESG, GRI
Sustainability by the numbers
– Certification, Reporting, Ratings & Analytics
Resources for foundations and endowments
Along with Articles & Papers; Books and Media; Conferences; Examples & Resources.
This is an evolving resource so your input is welcome. You are encouraged to visit the website and share your perspective.
See the full directory at- https://investwithvalues.com/
About Talgra – Cultivating Sustainable Investments
Brian Kaminer, founder of Talgra, is a consultant for people wanting to apply new thinking to create positive social and environmental change with their money. The focus on the whole picture, along with the bottom line. Talgra takes the mystery out of sustainable investments. You are guided to help clarify your values and what is important to you. Then, together, we find opportunities for you to use your money and investments to support that.
Talgra also works with financial advisors and wealth managers to foster their clients’ sustainable investments. Talgra manages its own portfolio of related investments and in addition helps outside organizations identify and cultivate mission-aligned funding and partners.
To learn more about Talgra’s services and Brian Kaminer, please visit www.talgra.com
For more information contact
Brian Kaminer, Founder – Talgra LLC, Money and Impact Investing Directory
By David Reiling, CEO, Sunrise Banks
Compassion is our motivation
Our mission is to Empower
Our spirit is to Achieve
Whether you call it impact investing, community and economic development or values based banking, I believe that Sunrise Banks can open the doors of financial inclusion to help the unbanked and under banked – as well as the unsatisfied – gain access to convenient, transparent and reasonably-priced financial services nationally – globally – at scale. What’s more, I believe it’s our duty. And what I’m learning along the way is that, as a community development bank, you have to have the infrastructure, the talent and the willingness to innovate in the face of economic, regulatory and competitive challenges that tend to thwart even the biggest, most successful regulated financial institutions.
Why Infrastructure Matters
Experimentation is the key to creating products and services that millions of underserved people will trust, let alone use to meet their daily financial needs and help them achieve their goals and dreams. Creating a pioneering product that’s also responsible and upholds the letter and spirit of rigorous and ever-changing state and federal regulations, at a time when any bank’s net interest margins are razor thin, requires dedication to a level of infrastructure that many banks don’t have. Of particular importance is quality control, from approval processes for artwork and marketing tactics to contract reviews, and systems that enable adherence to strict policies and procedures.
Sunrise Banks, which historically operated as University Bank, Park Midway Bank and Franklin Bank in the inner-city neighborhoods of Minneapolis and St. Paul, had the infrastructure to earn its track record of innovation, solid financial performance and empowering underserved consumers and small businesses. While we focus on banking products and services, rather than investments, we have been able to implement scalable initiatives with extensive local community impact, from our Socially Responsible Deposit Fund and our Somali mall micro branch to our New Markets Tax Credit loans that have created jobs and transformed blighted industrial properties into thriving inner city enterprises.
These success stories spurred the notion that by uniting our three banks, we could strengthen internal processes and technology to amplify what each bank was accomplishing individually. After months of strategizing, preparing internal systems and communicating carefully with our key stakeholders, last April, University, Park Midway and Franklin banks opened for business under one charter as Sunrise Banks. The combined bank, with assets in excess of $750 million, has eight branch locations in low and moderate income neighborhoods throughout the Twin Cities and a national products production office in Sioux Falls, S.D. Uniting the three community banks under a single brand creates a solid social enterprise platform; and while our lending may still be local, our community development scope is now national.
To further strengthen our long-term ability to carry out our mission, Sunrise continues to be owned by the St. Paul-based Reiling family; and I have been blessed with a father, Bill, who has passed ownership of the organization to me through a long-established succession plan that maintains a constant focus on doing well by doing good. The succession, combined with the bank consolidation, has enabled Sunrise Banks to evolve our brand to “The Most Innovative Bank Empowering the Underserved to Achieve.”
Talent and Willingness – The Other Key Ingredients
Vision and leadership are required attributes for any banker or banking institution that seeks to effect positive social change while, at the same time, creating products and services that enable the bank to grow. Nowhere is this mixture of talent more evident than in the members of the Global Alliance for Banking on Values, a network of 20 of the world’s leading sustainable banks from Asia, Africa, Latin America, Europe and North America. From providing finance facilities and skill development workshops to a small business owner in Bangladesh to securing housing for vulnerable adults in Minneapolis, the Alliance showcases what can be achieved for society when the creativity of entrepreneurs — business owners and bankers alike – is unleashed.
As one of the Alliance’s newest members, Sunrise Banks possesses an overt desire to incubate and test programs that serve the needs of unbanked and underbanked families, no matter where they live. We have, therefore embarked on an Underserved Empowerment Journey that aims to provide responsible and affordable financial products to one million traditionally underserved consumers.
For example, Sunrise Banks is testing a nationally scaled, domestic microloan product to combat payday lending. In this particular model, an employee can access a loan of up to $2,000 through his or her employer’s benefits intranet site. So, in addition to logging on to the employer site to access information for more traditional benefits such as healthcare and retirement accounts, an employee can apply for a microloan. If approved, loan repayment spans a 12-month period, is payroll deducted and has an interest rate that is far, far below the 400- to 1,000-percent charged by payday lenders. While in test stage right now, this microloan product has the potential to be a significant game changer for consumers.
In another nationally-scaled initiative, Sunrise Banks, working with business partners, has created a portfolio of more than 100 prepaid products that promote financial services to individuals throughout the country who are looking for an alternative to traditional bank accounts and to businesses looking for ways to reduce costs related to payroll, commissions or incentive programs.
Closer to home, the New Market Tax Credit (NMTC) program is launching projects and jobs that would have never left the ground otherwise. The program, established by Congress in 2000, aims to revitalize low-income communities by providing investors a federal income tax credit in exchange for equity investments in specialized financial institutions called Community Development Entities. As a U.S. Treasury certified Community Development Financial Institution, Sunrise Banks is authorized to administer NMTC loans.
Without the NMTC program at Sunrise Banks, the nonprofit Habitat for Humanity would have been challenged to build its new 27,000 square foot headquarters in St. Paul, Minn. Instead, it would have had to take on more debt or assume the burden and expense of an additional capital fundraising campaign, which would have substantially delayed the organization’s ability to build its urgently needed new head office.
Another example of the NMTC positively impacting the community comes in the form of ice cream. With an NMTC loan, Izzy’s, owned by the husband and wife team of Jeff Sommers and Lara Hammel, is transforming a vacant lot in a distressed section of Minneapolis into a vibrant 5,000 square foot ice cream making plant. When pursuing financing for the project, Sommers faced numerous refusals from banks, who said it was too filled with risk. However, the NMTC program allowed Sunrise to create a seven-year interest only loan package at a below market rate. While this description of New Market Tax Credits loans sounds simple, they are complicated to understand and administer. However, they facilitate community transformation where none may otherwise be possible.
Actively managing a successful bank system in the wake of the nation’s economic woes, increased regulatory challenges and new wave of non-bank competitors is enough to keep any traditional banker working 36-hour days. Where can one find the will to innovate for positive community, much less global, impact? Measurement is the key.
As one of approximately 700 certified B Corp organizations, Sunrise is able to access the Global Impact Investing Rating System (GIIRS), a comprehensive and transparent system for assessing social and environmental impact. Using key performance indicators to benchmark data in areas such as governance, civic engagement, employee work environment, and socially- and environmentally-focused business models, GIIRS is similar to Morningstar investment ratings. Based on our evaluation, Sunrise Banks was named last April to B Corp’s global list of 67 “Best For The World” companies for creating the most overall social and environmental impact.
Call it impact investing or banking with values; it’s my hope that the Sunrise story of realizing national and global social change from America’s Heartland inspires other financial services organizations to move beyond mere profit making. It is not easy. But it is necessary and worthwhile. And, at least for me, it’s fun.
Article by David Reiling, CEO of Sunrise Banks based in St. Paul, Minnesota. Sunrise Banks is certified by the US Treasury as a Community Development Financial Institution, a designation given to only 90 banks nationwide. Sunrise also is a member of the Global Alliance for Banking on Values and is a certified B Corp for its demonstrated commitment to transparent corporate governance and positive community impact.
For more information go to- www.sunrisebanks.com
By Ryan Gerlach, Paul Herman, Samuel Hecker and Eddie Bernhardt
Investors seeking impact apply their entire portfolio to build a better world while seeking a stronger and more resilient portfolio. With $24 trillion of corporate bonds and $3.7 trillion of municipal bonds, investors have many choices for integrating sustainability into their fixed-income.
Muni bonds are issued by governments (cities, counties, states, as well as regional water, wastewater and transportation systems) and non-profits (universities, hospitals and energy firms). More than half of muni bonds are held by individual investors  who seek lower risk and can benefit from no federal income tax on muni interest (several states offer tax-free muni bonds for in-state citizens). The tax-free status of muni bonds is associated with providing a public benefit to society.
But how effective and efficient are these government and non-profit issuers at delivering the outcomes that investors finance? Are less effective governments at higher risk of default? Does higher impact mean lower financial risk? Can low-income cities deliver as much benefit for citizens as high-income communities? How can investors benefit society by investing in the highest-impact bonds?
Investors can more easily “vote with their portfolio” by seeking out bonds issued by corporations, governments, sovereigns and agencies. By identifying known but ignored risks, impact ratings (developed by co-author HIP Investor) enhance fundamental credit analysis, which is performed by bond managers (such as co-author SNW Asset Management). The result is impact-rated bond portfolios for self-directed and advisor managed portfolios. An impact-rated bond portfolio can lower credit risk at similar yield – and spur more action by muni issuers towards delivering more benefit for society.
Issuers are graded on impact across five general categories inspired by Maslow’s hierarchy of needs – Health, Wealth, Earth, Equality, and Trust. Within these categories, the impact ratings encompass analysis of the intended societal outcomes and actual results, depending upon the type of the bond. Examples include personal safety and crime rates, the level of education in a community, ownership of assets and housing, and the representation of the community’s ethnic and gender profile as reflected in business ownership or government leadership, energy sources used for power generation. These quantitative results can be translated into a zero to 100 rating system, which we call a HIP Score. HIP represents the “human impact” and its connection to financial risk and return, or potential “profit”. These ratings avoid conflict of interest as they are paid for by the investor, not the issuer (as S&P, Moody’s and Fitch ratings are). Also, the ratings look at the current and possible environmental, social and governance risks over a 30-year period, not just the 5-year financials where the Big Three focus their assessments.
In concert with rigorous credit analysis, by firms like SNW, these impact-rated bonds could be more predictive of a community’s long-term health, stability and ability to repay debt outstanding. Every community possesses a range of knowable but typically ignored assets and liabilities. Kiki Tidwell, a trustee of the Tidwell Idaho Foundation, seeks to avoid the risks associated with fossil-fuel energy like coal. Bonds issued by electricity-generator InterMountain Power, which burns coal in Utah and ships power to California, do not price in the risks to the environment, such as the results of increased pollution – which could lead to financial risks from a future carbon tax.
Can these impact ratings correlate with defaults of muni bond issuers? There have been four relatively noteworthy municipal defaults in recent years – Jefferson County, AL; Harrisburg, PA; Stockton, CA; and San Bernardino, CA – and another issuer, Philadelphia, PA, which has not defaulted but has recently entered into serious discussions with creditors regarding its financial future. By using historical data, we can see how these issuers would have been rated for impact in advance of their default, thereby giving some indication as to whether the factors HIP measures could be predictive.
The defaulting or at-risk issuers were scored for the year 2000, eight to twelve years before any of them defaulted. After adjusting for inflation and other relevant benchmarks – for example, unemployment comparisons were made versus the year 2000 national average – the issuers were contrasted to the full universe of impact rated issuers. All defaulting municipalities, plus Philadelphia, score below average in their overall score compared to other impact-rated bonds. HIP Scores show that none of the defaulting issuers are rated above the 30th percentile in more than one sub-category of impact.
HIP’s Health category is highly correlated with the overall rating for bonds issued by cities, counties, and states. Tellingly, rated defaulting issuers score especially low on these factors with Wealth indicators also showing poorly.
• Compared to the national average, all five of the defaulting or at-risk municipalities had murder rates close to or greater than double the national average.
• Only Jefferson County’s high school and college attainment rates approached national norms, the rest fell well below.
• All five were in the top third in terms of obesity rates.
• Again with the exception of Jefferson County, all had poverty and unemployment rates roughly double the national figures.
The primary tool available to investors is credit ratings from the “Big Three” of Moody’s, S&P, and Fitch. Ratings agencies have been the subject of ample criticism in recent years, due demonstrated conflict of interest in their rating process as well as their role in the financial crisis . But other questions arise around what these ratings actually tell investors. Credit ratings are failing to represent the meaningful future risk over the full life of an investment. Municipal financial information has long been noted to be “generally less reliable, less comparable and less timely than information about corporations.” This fact, when combined with the size and high-profile nature of some recent defaults, has given cause to take another look at how debt is analyzed.
The success or failure of governments and non-profits can be measured in societal outcomes as well as the resilience of the bonds they issue. Many of the metrics that demonstrate the security of an investment are the same as those that indicate societal success.
A 2011 academic study analyzing municipal bond issuances throughout the country found that borrowing costs for more religiously and ethnically fractionalized communities are substantially higher. The cost of capital paid by communities – essentially citizen-taxpayers paying more interest on the bonds issues by their government – with significantly higher rates of this social-fractionalization is associated with a difference equivalent to that between issuers with the highest credit ratings and those rated three to five notches lower, which connote higher risk and interest payments.
This means that, on the whole, taxpayers in more ethnically-fractionalized communities pay more to finance community projects. More fractionalized communities can be more divided in how to prioritize salient issues and allocate resources accordingly. This would seem to indicate a quantifiable financial cost resulting from societal unrest and the inability to address the needs of all citizens.
Meanwhile, the role health plays in economic productivity is becoming more widely understood all the time. One study estimated the US’s health care expenditure on obesity-related costs was $190 billion in 2005.  Over time, these costs are incurred by society as a whole and individuals alike. Of the 10 states with the highest rates of obesity, nine of them impose a greater tax burden on the federal government than they contribute.[7 & 8] Furthermore, West Virginia and Mississippi, which rank one and two in obesity rates, respectively, both rank in the top three (excluding Puerto Rico) for federal spending over contribution. Conversely, seven of the ten states with the lowest rates of obesity contributed more in taxes than they received in government benefit.
It is no secret that successfully providing for the public good benefits from greater availability of resources. Consequently, it might be expected that wealthier communities can better provide for their citizens. HIP’s ratings do, in fact, bear this out: wealthier communities realize more benefit for their citizens. However, a low-income community does not imply a lower HIP Score. The large cluster of issuers whose median income fell near or below the national average – between $40,000 and $56,000 – can deliver just as much societal benefit as higher-income issuers. Income establishes a floor for a community’s attributes but has little bearing on the ceiling.
This finding makes an argument for the importance of measuring outcomes, especially for cities with limited resources. We advocate for citizens and investors to demand an account of the outcomes that are generated with public expenditures; taxpayers should know what they get for their tax dollars. By the same token, bond investors ought to know whether their investments are building value and resiliency versus providing Band-Aids to poor management.
We envision that impacted-rated municipal bonds can help bridge this gap. Impact-rated bonds offer community-focused investors a tool that leverages currently available investment vehicles. Municipal bonds are, by definition, investments in the public good and ideally achieve some measure of positive social outcome. We see thoughtful, forward-looking investors using ratings to further direct their money towards investments that can maximize societal return in addition to seeking a more secure financial return. We envision their investors constructing portfolios that are focused on “local investing” in specific regions of the country as well as issues of concern, such as education or water resources. Conversely, investors may choose an “impact allocation,” to weight their bond portfolios across issue areas – like Health, Wealth, Earth, Equality and Trust, similar to Maslow’s hierarchy of needs.
Impact ratings of government and nonprofits can drive a push for positive outcomes. Analogous to the U.S. Department of Education’s competition for federal funding to improve student performance, the “Race to the Top“, we see potential for ratings to spur healthy, investor-driven competition among municipalities towards improved physical and mental health and safety, more eco-efficient transportation, enhanced income and financial wealth, a more equal society, and overall transparency of results.
Investors of all types can channel their resources across their entire portfolio towards communities generating the best outcomes. In turn, communities would be incentivized to create meaningful results. Whether a national competition or one centered within a region, we envision data-driven metrics inspiring communities to compete not just on reading levels or test scores, but on a range of community indicators, striving to create the healthiest, most vibrant, and most livable places to live.
Impact-rated bonds issued by governments and non-profits offer individuals another channel for civic engagement and an opportunity by which to affect societal outcomes; investors may “vote with their dollars” by supporting the communities that build the outcomes they value. Following the axiom, “what gets measured gets managed,” impact-ratings can help guide our collective strength as investors towards building long-term value in our communities – and the foundation of resilience in our financial portfolios.
Article by Ryan Gerlach, a recent graduate the Presidio Graduate School, MBA (2013) who co-authored this research with Paul Herman is CEO of HIP Investor Inc., an investment adviser registered in California, Washington and Illinois, along with analyst Samuel Hecker and CEO Eddie Bernhardt of SNW Asset Management ( www.snwam.com ), an SEC-registered investment adviser. This is not an offer of securities.
 Appleson, J., Patterson, E., & Haughwout, A. (2012, August 15) The untold story of municipal bond defaults. Federal Reserve Bank of New York.
 Dayen, D. (2012, December 19) SEC report on credit ratings highlight conflict of interest inherent in issuer-pays model. FDL.
 Ingram, R., Brooks, L., & Copeland, R. (1983, June) The information content of municipal bond rating changes: a note. The Journal of Finance. Volume 38, Issue 3.
 Bergstresser, D., Cohen, R., & Shenai, S. (2011, May 17) Fractionalization and the municipal bond market. Harvard Business School Finance Working Paper No. 1844685.
 Harvard School of Public Health (2013) Economic costs. Obesity Prevention Source. Retrieved from: http://hvrd.me/14Rg5uH
 National Conference of State Legislatures (2012, August) State-Level Estimated Annual Obesity Attributable Expenditures, by State (2009). NCSL.org.
 Bass, K. (2013, March 6) Coloradans least obese, West Virginians most for third year. Gallup. Retrieved from: Gallup Poll
 The Economist Online. (2011, August 1) America’s fiscal union: the red and the black. The Economist. Retrieved from: http://econ.st/qlmhHP
 United States Census Bureau (2012, September 12) Income, poverty and health insurance coverage in the United States: 2011. Retrieved from: http://1.usa.gov/RLLeVz
 The White House (2013) Education: knowledge and skills for the jobs of the future: race to the top. Whitehouse.gov.
By David Wolf, Chief Investment Officer & Managing Principal, BSW Wealth Partners
“Good is the enemy of great. We don’t have great schools, principally because we have good schools. We don’t have great government, principally because we have good government. Few people attain great lives, in large part because it is so easy to settle for a good life. Good is the enemy of great.” – Jim Collins, Good to Great
As it stands today in 2013, our industry has yet to achieve greatness. Yes, it has made (monumental and historic) strides. Yes, it is collegial, cozy, and well-intentioned. But it is decisively and merely . . . good – or, worse yet, “good enough.” The ongoing balkanization of terminology (Is it Green? Socially responsible? Sustainable? Impact?) is indicative of a systemic failure to maintain intellectual consistency and clarity in addressing the (often hazy) objectives of investors and their advisors; and akin to the dilution (and pollution?) of the natural foods channel (Organic Oreos anyone?).
I recently met with a client family on the East Coast whose impact objectives are as impressive as their professional credentials: published author, Harvard MBA, entrepreneurial wealth, etc. However, squaring their desires for “total portfolio activation” with advisory considerations of financial security, income production, liquidity, and accessible allocation vehicles left both of us feeling rather uninspired and nonplussed. Are screened equities, even with advocacy, “good enough?” What is “good enough” and isn’t that itself a cop out? Can secondary market transactions actually cause primary market behavioral changes or is it simply correlation without causation? Can we really expect to “consume our way out” of our problems? Aren’t any investments premised on perpetual global growth simply palliative? Is total portfolio activation actually attainable? If so, is it actually advisable?
One of the many compelling elements of Collins’ Good To Great framework is the Stockdale Paradox, named for the heroic tragedy of Admiral Jim Stockdale’s experience as a POW during the Vietnam War (recounted in Stockdale’s wrenching memoir, In Love and War). The Stockdale Paradox holds that in order overcome huge challenges one must retain faith that you will ultimately prevail regardless of the difficulties, and at the same time confront the brutal facts of your current reality, whatever they might be. If we aspire to realize the full potential of this industry and achieve greatness – in terms of reach, impact, lasting change, and both client and advisor satisfaction – perhaps we can begin by stirring the pot a bit, challenging the status quo, and confronting the brutal facts, asset class by asset class, to identify opportunities for collaboration, innovation, and breakthrough thinking – all while maintaining an unwavering faith that change is not only possible but also achievable.
At an elite gathering of advisory firms (at which our firm of $750 million of assets under management was a runt of the litter), my partner was challenged by a peer advisor with the novel question of, “Don’t talk to me about custodian, who is your banking partner?” Although advisors will evaluate and make recommendations to clients on important financial decisions, most act as if their responsibilities or purview end at their custodian’s border. Are we actively educating and steering clients out of “too big to fail” behemoths that pervert the political process, distort markets, and pursue reckless prop trading with depositor funds – privatizing profits while socializing losses? Or are we helping to facilitate and manage the transition of their banking to community banks and CDFIs? Are we helping them source and refinance their home mortgages into local banks that continue to hold or service these loans, recycling that capital directly into their communities? Are we cultivating direct engagement with our local community banking colleagues, or is simply holding a syndicated community investment note or CRA-qualified mutual fund here or there “good enough?” Clients are looking for integrated and holistic management of all of their financial matters, and this area is low hanging fruit for both deepening client and community relationships while also mobilizing meaningful amounts of capital to better ends.
Although I strongly advocate individually laddered bond portfolios to mitigate these risks (Full disclosure: I am the founder of an impact municipal bond separately managed account strategy.), deeper philosophical issues remain unresolved with regard to fixed income as an impact asset class. For instance, the vast majority of bond positions (whether an SMA or mutual fund) are purchased on the secondary market. As such, is it too far a stretch to assert that these investment dollars actually precipitated the underlying project? Similarly, on the corporate bond side, bondholders don’t vote. So an important (perhaps the most important) element of social investing is often glaringly absent from corporate bond holdings: corporate engagement. Clearly, if we are going to move impact fixed income from good to great, we need an honest and robust industry debate about metrics and strategies for engagement at the issuer level.
No asset class demonstrates the dangerously widening philosophical rift between impact and SRI more than publicly traded stocks. As many advisors will attest, more and more clients are forsaking stocks entirely due to a general distrust of corporations, the markets, and the financial system, along with a sense that screened equities and engagement are not “impact enough.” With meager market-rate returns on bonds and the deterrent complexities of scale and lock-ups on private offerings, that leaves advisors in a very difficult pickle in terms of generating investment gains while also preserving liquidity. Meanwhile, although making an angel investment in a pre-revenue start-up company hoping to create an “online mobile platform for teenage girl entrepreneurs in rural Kenya” (actual business plan I’ve reviewed) may seem off the charts in terms of impact, how does it really compare on an absolute basis to, say, getting Coca-Cola to cut its emissions footprint?
Quite frankly, there is a rising generational tide of investors with whom the corporate engagement story no longer resonates – or, more likely, it is simply not being told effectively to Millennials acculturated to Facebook, memes, and Twitter feeds. Indeed, when some of the most progressive groups in social finance divest themselves of public equities altogether, it should serve as a shot across the bow that something is amiss and needs to be righted, immediately. How are we evaluating industry corporate engagement efforts in terms of efficacy? How are we communicating those efforts, successes, and failures to clients and investors? How do we make sense of public equities for skeptical clients? Or can we? Have our efforts here settled into a comfortable and “good enough” détente with corporate power or can we rekindle the spirit of urgency and outrage that birthed an entire industry?
This catch-all category captures private equity, venture capital, direct real estate, private loan funds, natural resources, most microfinance, angel investing, etc. It presents great promise and great(er) peril for investors and their advisors. For better or worse, private investing is a darling of both the media and investors, while often creating inordinate burdens for advisors in terms of time and energy expended. Except for the ultra-wealthy, most investors lack the asset base needed to participate in private investments at the scale advisory prudence would require for adequate diversification across vintage, manager, and sector – even if the opportunity set would allow for such, which it doesn’t. Further, most private impact investment vehicles may be long on impact story but are often woefully short on proven investment track record. This may be perfectly reasonable for the ultra-wealthy who want to push the impact envelope, but how about the equally-impassioned widow who needs to survive on her $2 million nest egg – but also wants total portfolio activation? Here, there may be an opportunity for an innovative foundation or philanthropic organization to, say, absorb the start-up and operating expenses of a professionally managed and broadly diversified fund that could mobilize more modest and palatable chunks of investor capital into high-impact private strategies and lower the “freight costs” of such a vehicle –somewhat akin to the model Vanguard has used to fundamentally disrupt the mutual fund industry. Without breakthrough thinking here, we risk squandering the current wave of energy and enthusiasm as investors find themselves continually shut out of opportunities – either via entry price, or complexity, or both.
Upon reviewing the countless examples of companies, teams, non-profits, and individuals who have successfully transitioned from good to great, there are remarkable, and yet unlikely, conclusions that can readily be drawn. First, it is not harder to make something great rather than good. It does not need to take longer; or be less fun. In fact, the rationale to strive for greatness need not even be precisely articulated. If the company, team, non-profit, individual – or even an industry – is pursuing work they love, that inspires them, and that matters deeply, then the question of why needs no answer. The important question is not why, but how, as confronting the brutal facts, is only half of the equation. The other half is the unwavering confidence that you will prevail. Yes, there are messy, sticky, and complex philosophical issues that must be addressed. And yes, there are concomitant operational, regulatory, and scale challenges that will require innovation across all asset classes. So what? Greatness is a choice. Let’s get to work.
Article by David Wolf, managing principal and Chief Investment Officer of BSW Wealth Partners ( www.bsw.com ), a Boulder, Colorado-based multi-family office and wealth advisory firm; and also the founder and Chief Investment Officer of R3 Returns, a tax-exempt impact bond strategy with $50 million of investor capital.
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