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.
Socially responsible investing is currently red hot, and new ETF’s make SRI more available than ever before. Each ETF has a different focus. Some simply avoid the “sin label,” which means not investing in alcohol, tobacco, gambling, civilian firearms, nuclear power, military weapons, adult entertainment and genetically modified organisms. Others avoid companies with substantial carbon emissions and fossil fuel reserves.
Rules based ETF’s might focus on companies that have more social equality, such as those with the most representation of females among its executive and director ranks. While SRI ETF’s offer the ability to participate in the upsides of capitalism while knowing that returns are coming from businesses that share your values, investors should consider very carefully how socially responsible funds differ from traditional funds. The outperformance of some SRI’s can be wiped away by higher index charges.
When money is earning zero interest in a bank, impact investing offers an attractive alternative for people wanting profit with purpose. As impact investing becomes more and more popular, the need for universal criteria with which to measure performance increases.
Currently, funds are using different criteria to measure their impact which can make checking performance very complicated. The Global Investing Impact Network (GIIN) thinks it has a solution. The non-profit network of funds and charities has created a set of metrics to help track the performance of impact investments. But it too acknowledges that measuring how much impact a company or fund has is still in its infancy.
Companies looking to attract socially conscious investors will need to include impact assessments in their annual reports moving forward. But right now it is really up to investors to do their research to confirm whether or not a company or fund is living up to its stated intentions.
Research has shown how ESG integration has affected the renewable sector, the development of sustainable real estate, and the diversification of emerging economies through microfinance. These trends are also revealing how regulation is driving ESG investing. It will not be long before ESG integration is made a global standard through government regulations.
In the renewable sector, as efforts are increased to measure and report the carbon footprint, asset valuation relating to carbon will be impacted by regulation focused on climate change.
Amidst the positive relationship between real estate and financial performance, efforts to reduce emissions could be achieved by investors working with governments to improve urban infrastructure.
The microfinance sector began as a way to confront poverty via non-government organization and cooperatives. It has since grown to become an important piece of good corporate citizenship. The microfinance sector is also benefiting from a more transparent regulatory environment that may facilitate greater private sector involvement.
While outperforming the market may currently not be a valid reason to take up ESG investing, ESG investing nevertheless makes up a huge chunk of the money that’s at work today. 26% of all professionally managed assets globally now focus on ESG or similar factors, and this is growing at an astounding rate.
That being said, if ESG were a sure fire way to make money in the market, stock prices would have quickly adjusted to take ESG factors into account. ESG hasn’t always, and won’t always, lag the market, but ESG investors today must have patience if they truly hope to change the world. There are other forces at play here.
While “it sucks” that investors have to accept a lower expected return to do good, and perhaps sucks even more that they have to accept the “sinful” getting a higher return, Cliff Asness, founder of AQR Capital Management, concludes that investors who want to change the world must “embrace the suck, as without it there is no effect on the world.”
Will Putting a Price Tag on Nature Lead to The Deprecation of Environmental Issues in Favor of Business? – Edie
The World Business Council for Sustainable Development has stated that companies have taken a “huge step in the right direction” over the past 12 months when it comes to measuring business impacts on nature.
But is money the correct unit of measurement?
While it is a given that we need some metric by which to measure business impacts on nature, along with a prescriptive methodology so that everybody is playing by the same rules, the question of whether monetary units can fairly assess environmental risks versus social and financial risks is currently being debated.
Businesses need a standardized framework to measure impacts on natural assets, raw materials and natural infrastructure. However, if we put a price tag on an old growth forest that is “worth” considerably less than the land it sits on, for example, we will inevitably run into problems.
Philadelphia’s ImpactPHL Brings in $15 million for Startups Promising Social, Environmental and Health Returns – Ben Franklin Technology Partners
ImpactPHL, a one-year-old impact investing advocacy collective headquartered at Ben Franklin, supports and encourages entrepreneurs, companies, investors, intermediaries, and the marketplace to address social needs in the community through the products and services they produce, and the processes and strategies they employ.
Made up of local venture capitalists, business leaders, nonprofits and others, including Ben Franklin, ImpactPHL has been working to enhance impact investing in Philadelphia. ImpactPHL Ventures is injecting $15 million into the local impact investing ecosystem for startups that promise social, environmental and health returns, in addition to financial ones.
Ben Franklin, which is overseeing the funding initiative, expects the average to be roughly $300,000 with more than 5 investors committed. Funders benefit from connecting with Ben Franklin’s network of startups, and startups don’t need to knock on several doors to try to solicit funding, they only need to knock on one.
How To Avoid Being Amazoned: Lessons Learned From Amazon’s Acquisition of Whole Foods – Investment News
Lesson 1: Continue to disrupt or you will be disrupted. Whole foods was a historic disruptor until competitors like Trader Joe’s entered the market, offering healthy choices at lower prices. Because Whole Foods was no longer pushing the envelope of innovation that had led it to defend its prices for years, Whole Foods was disrupted.
Lesson 2: Use scale to drive down costs. The bigger you are, the better the terms you can negotiate. Businesses must continue to find innovative ways to adapt products and services, or they will be offered at lower prices by competitors. We should see the cost benefit of Amazon’s negotiating skills with vendors passed on to the Whole Foods consumer.
Lesson 3: Use technology to elevate the work your staff is doing. In order to remain competitive, firms have to invest in digitizing and modernizing their infrastructure. Whole Foods will benefit from the logistics infrastructure and technological advantage Amazon brings.
Lesson 4: Deepen your relationships with clients. Amazon can use its internal analytics and data of individual consumers to deepen the relationship with existing Whole Foods clients and capture more wallet share.