Entry Points for Equity: Risk Criteria and Partnership in Indigenous-aligned Portfolios

Above: Kevin O’Neal-Smith (center), Impact Strategist for Adasina Social Capital, presents at the 2024 First Nations Major Projects Coalition conference – Our Collective Advantage: Indigenous Consent. Photo courtesy of First Nations Major Projects Coalition

The push and pull of corporate and social priorities puts socially responsible investment in constant flux. This requires the strategic and intentional integration of social justice and right-based perspectives in environmental, social and governance (ESG) metrics and approaches.

Through collaboration and partnership with shareholders and all stakeholders in our financial system, opportunities abound to embed issues and voices that are often excluded – including Indigenous Peoples, women, people of color, those living below the poverty line, regenerative agriculture practices, etc. – as a central component of overall strategy and portfolio design. Investors can embed these insights into real-world investment decision-making, working directly with grassroots movements, social justice organizations and value-aligned investors to gain insights into material business risks not yet understood by the market.

This is the approach taken by Adasina Social Capital for 5 years. Together with communities most impacted by racial, gender, economic and climate inequities, Adasina designs impact solutions for investors and financial advisors through our social justice values. We serve as a bridge between social movements and financial markets, and work to ensure our investment and screening approaches are more inclusive and accessible.

We understand that an investor’s impact can go well beyond their investment portfolio and contribute to broader investor mobilization. By articulating and integrating risk factors that have been long ignored by mainstream investment industries, we can use our role to prioritize intersectional approaches to racial, gender, economic and climate justice. We can also show that understanding the convergence of these issues allow investors to achieve financially sustainable portfolios and create an avenue for real systems change.

One clear example of this work has been Adasina’s efforts to protect Indigenous Peoples in portfolio design. Indigenous Peoples’ rights span not only racial, gender, economic and climate justice considerations, but also environmental, social and governance criteria, providing a key measure of material business risk. 

Through collaboration with community partners, we identified key areas of risk related to Indigenous Peoples’ rights and activated due diligence through Adasina’s portfolio. These risks include demonstrated patterns of violating Indigenous Peoples’ rights, instances of cultural appropriation and discretion of sacred spaces, among others.

Using this criteria, we developed an exclusion list of publicly traded companies, which is now available for all investors to use, then embedded these perspectives into real-world investment decisions. By incorporating a comprehensive framework around Indigenous Peoples’ rights into portfolios, investors can effectively mitigate risk from destructive development projects and initiatives that negatively impact Indigenous communities and harm people and planet. 

While defining risk and exclusion criteria are critical first steps, there are other ways investors can develop more comprehensive frameworks. There is a pressing need to conduct more research and develop more tools that transmit the materiality of Indigenous Peoples’ rights and other intersectional issues to companies and clients. This is especially important to address major gaps where the financial industry does not yet fully understand potential or ongoing harm.

Screening to Prioritize Indigenous Peoples’ Rights

First and foremost, from a risk standpoint, infringing on Indigenous Peoples’ rights is bad business. Involvement in any of the previously noted areas exposes businesses to legal and regulatory risks through lawsuits and fines, permitting delays, or even sanctions. Businesses are also more likely to incur financial and operational risks as a result of their disregard of these rights, potentially resulting in project disruptions by way of community resistance as seen with the Dakota Access Pipeline protests and blockades in 2016. 

Secondly, integrating Indigenous Peoples’ perspectives into decision-making not only avoids risks but also creates opportunities for sustainable growth, innovation and strengthened stakeholder relationships. Working directly with Indigenous communities to gain input and feedback on projects that impact those same communities can identify risks and opportunities that industry standard metrics or measurements often overlook. This then inspires innovative approaches to environmental challenges, product and service development, and long-term viability of the project. 

Lastly, protecting and centering Indigenous values and perspectives is the right thing to do. If an investment firm is truly committed to ESG initiatives, there is a clear through line of Indigenous Peoples’ rights in ESG and rights-based considerations. Through land stewardship, unwavering commitment to future generations, and systems of accountability in service of community and balance, Indigenous values and perspectives have protected environmental and human wellbeing since time immemorial – long before ESG and socially responsible investment became financial industry practices.

In conclusion, incorporating Indigenous Peoples’ rights as a framework in investments mitigates material ESG risk. As demand for sustainable and right-centered business increases, Indigenous Peoples’ rights need to be integrated and amplified throughout project design to create a more just and equitable society. Indigenous or otherwise, working with and in service to the communities most impacted by our decisions is not only good business, but the right thing to do.

Woosh een yéi jinaxtoonei! (Let’s work together!)

 

Article by Kevin O’Neal-Smith, as a lifelong Alaskan, he has pursued a career that supports and celebrates community, business, and the environment. Joining Adasina Social Capital in early 2021, Kevin serves as Impact Strategist and as a member of the Portfolio Management Team, helping coordinate the integration of social justice considerations into real-world investment strategies. Kevin has experience managing data and systems required for portfolio screening and construction aligned with social justice values, as well as developing and contributing to investor mobilization campaigns focused on addressing racial, gender, economic, and climate justice within public markets. Kevin holds a bachelor’s degree in both economics and business administration from Fort Lewis College, as well as a certificate in ESG investing from the CFA Institute.

Through service as Vice Chair of the Seacoast Trust and as Board Member of the Katlian Collective, Kevin is committed to supporting new economic models in which access to capital and a strong foundation of Indigenous values is the basis for healthy communities and the conservation of natural resources that benefit future generations. Kevinis Tlingit, Yéil (Raven), Gaanaxteidí (Frog clan), Kutis’ Hít (Looking Out to Sea House). His Tlingit name is Yaa sh kanda. éts’.