We were very pleased to read Al Gore and David Blood’s “Manifesto for Sustainable Capitalism” in the WSJ last week. It called for “a framework that seeks to maximize long-term economic value by reforming markets to address real needs while integrating environmental, social and governance (ESG) metrics throughout the decision-making process.” Companies that integrate sustainability into their business models and investors who evaluate them on that basis, the manifesto claims, are finding their profitability enhanced over the longer term.
In “Reclaiming Fiduciary Duty Balance,” James Hawley, Keith Johnson, and Ed Waitzer maintain that narrow interpretations of fiduciary duty have "generated myopic investment herding behaviors" and caused fiduciaries to focus increasingly on their short-term liabilities at the expense of longer-term ones. Institutional fund trustees, the paper argues, cannot meet those longer-term obligations unless they have access to information on the full range of ESG risks for the companies in which they invest. The sorry state of ESG corporate reporting suggests that they do not have such access now. If fund trustees begin to exercise this fiduciary responsibility in earnest, the impact on public company reporting will be immense. Institutional funds collectively own 73% of the stocks issued by Fortune 1000 companies.
Capital Institute is proud to report that Peter Kinder, co-founder of KLD Research & Analytics and Capital Institute board member, is this year's winner of the Joan Bavaria Impact Award. He was honored along with William Foote, founder and CEO of Root Capital, as this year’s winners of the fourth annual Joan Bavaria Awards for Building Sustainability into the Capital Markets at the opening reception of the Ceres annual conference, held in May in Oakland, CA.
The Bavaria Awards are given annually to two leaders working to move the capital markets toward a system that balances economic prosperity with social and environmental concerns. Separate awards are given for recent innovation and long-term impact. Bavaria, a pioneer of social investing, founded Ceres and Trillium Asset Management before her death in 2008.
Kinder received the Bavaria Impact Award. In 1988, Kinder co-founded KLD Research & Analytics, the world’s first for-profit investment research firm dedicated to the evaluation of corporate environmental, social and governance (ESG) performance and practices. KLD established the intellectual framework and metrics eventually used throughout the world to measure sustainability performance for publicly-traded companies.
August 2012 Update—Since we published our profile of Mark Pinsky and the Opportunity Finance Network, Pinsky has continued on at the organization's helm, deepening OFN’s commitment to supporting a stronger CDFI industry. OFN recently kicked off the “Create Jobs USA” program in partnership with Starbucks Coffee. Since its inception the Create Jobs USA fund has provided approximately $80 million to the nations’ CDFIs. The fund is managed by OFN and is comprised of donations made by Starbucks and CitiGroup. The OFN has also launched a Financing Healthy Foods project that focuses on educating CDFIs on how to finance and establish access to healthy, fresh foods in low-income communities. OFN has also started the Green Finance Program, which prioritizes financing energy efficiency renovations or retrofits projects. OFN has also begun offering CDFIs education on capacity-building including technical training, such as education on LEEDS certification standards and peer learning opportunities. A number of member CDFIs now specialize in green investment, and OFN hopes that these organizations will begin to provide insight and support to other network members who wish to develop expertise in financing in this sector.
"It has always been so obvious to me that if you change the scorecard you change the game," says Hazel Henderson.
Capital Institute owes much to the thought leaders who have helped frame our perspective on “the purpose of capital," and Hazel Henderson is among those to whom we are most indebted. Hazel never ceases to amaze me. Susan Witt, Executive Director of the E. F. Schumacher Society, once described Hazel as a "national treasure." It's true. Never formally trained in economics, Hazel's grasp of the subject, particularly its shortcomings, is remarkable. Hazel is a systems thinker, with a unique grasp of the multiple disciplines necessary to be able to see, holistically, the systemic challenges we face. Yet it's Hazel's intellect, energy, passion, generosity, and drive, often against the grain where it can be lonely, year after year, "self inflicted" I might add, that is so special. I owe a great personal debt to my teacher, advisory board member, and inspirational friend, Hazel Henderson. —John Fullerton, Founder, Capital Institute
A space in the capital markets where the world of investing for profit and the world of investing for desired social and environmental outcomes meet and merge is attracting a growing and diverse group of investors. They are funding sustainable specialty coffee farms in Tanzania, affordable housing projects in New York City, and post-consumer recycled paper manufacturers in San Francisco.
The chair of the board of this innovative holding company talks about Upstream 21's alternative transition strategies for small companies, as well as the challenges of channeling growth and profits in directions that have the most benefits for the most people and the environment.
"Investing for Impact: Case Studies Across Asset Classes" report sheds a light on impact investing asset allocation
Among the formidable challenges facing the further development of the impact investing market is the lack of an accepted framework for assessing deal structures that can be utilized as an asset allocation tool by the full spectrum of impact investors. “Investing for Impact: Case Studies Across Asset Classes,” begins to fill this breach. A joint project of London-based social investment firm Bridges Ventures, strategic advisors The Parthenon Group (with offices in Boston, London, Mumbai and San Francisco), and the New York-based Global Impact Investing Network, “Investing for Impact” follows on the earlier comprehensive studies of the sector published in 2009 by the Monitor Institute (“Investing for Social and Environmental Impact”) and Rockefeller Philanthropy Advisors (“Solutions for Impact Investors”).
The Center for Sustainable Global Enterprise at Cornell University’s Johnson Graduate School of Management recently announced the winners of the second annual SustaInvest Competition. SustaInvest invites undergraduate and graduate students to submit a $10 million “mock” portfolio in the Cornell Endowment, challenging them to maximize both financial profitability and sustainability. The quality of this year’s entrees indicates that good progress is being made in integrating the study of sustainable investing and finance into the business school curriculum.