Conscious Capitalism In The News is a weekly curation of articles from around the web about conscious capitalism, socially responsible investing, impact investing, and how consumers and investors are changing the world.
ESG is ever evolving. What we are looking at now is the result of a decades-long evolution, offering investors and advisors more choices than ever for building socially responsible portfolios. Numerous schools of thought relative to ESG investing exist today. Here is a brief overview of differing strategies.
Companies or sectors that fall outside of defined-ESG criteria are excluded. Excluded companies might trade or manufacture weapons, alcohol, tobacco products, hazardous substances, or pornography, and/or engage in unethical or illegal practices, such as animal testing or the use of child labor.
- Positive Selection
Instead of excluding companies with negative practices, companies are selected based upon positive ESG performance.
Impact investing targets investments designed to generate a financial return, as well as create a positive social or environmental impact.
A sustainability investment strategy generally involves selecting companies that emphasize sustainability through green initiatives.
- Shareholder/Investor Influence
The focus here is to encourage company shareholders to play a more active role in influencing corporate accountability and responsibility. The idea is to create an ongoing dialogue between a company’s shareholders and its management team about environmental, social, and governance issues.
- Norms based
Companies are evaluated based on how well they fit in with international standards and norms. For instance, the United Nations Global Compact may serve as a guiding light for investors and advisors when choosing investments.
An integrated strategy involves merging traditional financial analysis with analysis of ESG factors to identify the best opportunities for responsible investment, within a framework of manageable risk.
Companies that practice sound ESG standards have better overall operational standards and governance at both working and executive level and therefore will outperform companies that do not. They are safer picks. People are starting to see value in including these factors in your research of a company whether or not you are specifically interested in investing in the “ESG platform.” If you are not incorporating these factors in your research, then you are willfully ignoring information.
ESG performance analytics can help you make a more informed decision regarding investments. While younger investors are going to be more inclined to invest in sustainability, at the end of the day, capital investment is about making money. Companies with high ESG standards are simply better-run companies, which gives all investors, socially conscious or not, insights into their growth potential.
Unbanked entrepreneurs, seeking to fulfill their basic banking needs, often have no choice but to turn to services such as check cashing, money orders, wire transfers and prepaid cards for which they pay high fees. This significantly impacts their ability to build creditworthiness, which in turn blocks their access to the financial services they need in order to scale their businesses.
Moeda is the first blockchain-based cooperative banking system that may give entrepreneurs the ability to build sustainable futures for themselves and their families. Launching in Brazil, Moeda is a simple, peer-to-peer payments and remittance platform that leverages a fiat-pegged Moeda digital token which can travel farther and faster than physical cash through blockchain-based Android and iOS applications. It provides entrepreneurs, institutions, and investors with full transparency to keep projects on track and growing.
One of the world’s top 20 insurance companies is offering its customers the opportunity for their premium payments to do some good. QBE offers a wide spectrum of insurance for all kinds of businesses from small firms to multinationals. QBE’s Premiums4Good allows any customer with any type of policy to opt to have 25% of their premiums be invested in social infrastructure, environmental initiatives and social impact bonds, globally.
Grant Clemence, director of underwriting at QBE, feels that impact investing “is exactly where business as a whole is going,” and QBE wants to be a part of it. Clemence also says: “We would anticipate, in time, customers starting to take a great interest in where that money is invested and we want to be proactive in how we do that.” Thus far £70m of the £20bn under investment has gone into Premiums4Good in the UK to date.
EmpRes, based in Vancouver, Washington, and focused on home health, hospice and personal care in seven states, switched to its Employee Stock Ownership Plan, or ESOP, model in 2008. The prior owner, who was an entrepreneur, decided to sell the company to employees instead of simply cashing out because he thought it was the best way to keep the company thriving. When employees own the company, it tends to create a bonding experience, improving morale and encouraging workers to provide services and protect the company’s reputation as their own.
ESOP plans first took off back in the 1970s, part of a law enacted by Congress called ERISA, or the Employee Retirement Income Security Act. That act is best known for the creation of the 401K, but it also somewhat quietly established ESOP plans. As retirement plans, ESOP programs actually tend to outperform the more traditional 401k.
EmpRes has also had a lot of success with its model. The company was ranked 21st in a listing of the top employee-owned businesses in the United States in 2016 by the National Center for Employee Ownership, which is still working on its 2017 list. There are about 1,100 ESOPs overall in the country right now.
In 2014, following a three-day educational workshop with five international aid NGOs to learn more about how they operated in the field, Mastercard came out with Aid Network (MAN), its first product in the shape of a digital voucher platform. The NGOs were CARE, Grameen Foundation, Mercy Corps, the World Food Programme and World Vision.
As Mastercard had no previous experience of working with low-income consumers in frontier markets, the idea was to become a services provider and “deliver shared value” by responding to requests for proposals from NGOs or agencies such as the United Nations.
If the company wins a tender in the space, it supplies the bidder with an aid toolkit, comprising of an Android device, a Bluetooth-based card reader and EMV chip-based smartcards, which are distributed to the target population. The Android device and card reader are provided to local merchants and the agency or NGO involved configures the back end application to authorize which goods are to be made available to those in need.
While the shop requires an internet connection to log onto the NGO’s host in order to sync its data, if no internet is available, an NGO worker can physically go to the shop and download the data onto a USB to be synced back at the NGO office.
Now, based on feedback from the field, a new iteration of the platform, which is due early next year, is in the process of being developed. This new release will include a dual-purpose card which will enable people to access cash as well as track the distribution of goods.