Now that ESG (environment, social, governance) criteria are uncovering sound, long-term investments, private equity, family offices and pension funds are looking even farther afield for more such opportunities. Conventional public markets are volatile, dominated by high-frequency trading and still beset with regulatory issues and negative publicity. Many private investors simply bypass Wall Street and other mainstream markets, now also challenged by crowdfunding and private electronic platforms such as Zanbato, MaxImpact and others.
So-called “impact investing” has become popular, promoted by foundations including Rockefeller, as well as philanthropists interested in this new venture-philanthropy hybrid proclaimed a new asset class. This approach still needs more definition and clarity. Of course, all investments create impacts, many negative or even destructive. Meanwhile, seeking financial returns from such well-motivated funds may raise unrealistic expectations.
More robust new investing models are those well-grounded in science: emerging research in renewable energy, efficiency, and innovative materials that are more easily recycled and biodegradable. Over $5.2 trillion of private capital has already been invested in such “green” companies since 2007 as tracked in our Green Transition Scoreboard®. Our criteria are strict: no biofuels grown from food or on agricultural lands, no “clean coal” with carbon sequestration or nuclear energy. The only biofuels that meet our criteria are from sea-based algae or grown along with other food and fiber crops on desert lands and irrigated with seawater. These cyanobacteria and plants employ abundant, unused resources: sunlight, land and seawater while mimicking Life’s Principles.
This new biomimicry asset class is the focus of Ethical Markets research in our Principles of Ethical Biomimicry Finance™, jointly developed with our partner company Biomimicry 3.8 and its founder Janine Benyus. We license this turnkey knowledge system to private investors, pension fund and family office asset managers. Many are challenged by enquiries from their trustees about such ethical biomimicry companies and questioned about shifting from fossilized assets to greener, more ecologically sustainable companies.
Traditional asset managers still grounded in traditional economics and its financial models are on a steep learning curve. These models, particularly on risk-assessment, such as VAR, focus on financial risk – ignoring systemic risk and the new science on looming social and geopolitical tail risks such as water shortages, collapsing fish stocks, rising food prices leading to hunger and social unrest. We study broader risks, including those analyzed by the New England Complex Systems Institute (NECSI) in Cambridge, MA, whose leading scientist is Prof. Yaneer Bar-Yam, a member of Ethical MarketsAdvisory Board, together with leading biomimicry scientists Janine Benyus, Biomimicry 3.8; Dr. Mae-Wan Ho, ISIS; Dr. Allan Savory, the Savory Institute; Dr. Wes Jackson, the Land Institute; Gunter Pauli, ZERI (Tokyo); and Fritjof Capra with whom I co-authored Qualitative Growth (2009).
Our Principles of Ethical Biomimicry Finance™ access due diligence experts and our ever-expanding group of example companies, including Biomimicry 3.8, Pantheon Chemical, Envision Solar, Natcore, GrainPro and some which are successful cooperatives, including Equal Exchange, Hawthorne Valley Farms, Organic Valley, Green Garmento and others. These kinds of uncorrelated investments are of interest to innovative hedge fund and family office asset managers and may become a recognized asset class in the future.
Life’s Principles govern the 3.8 billion years of successful evolution of all species, including humans on our planet. Expanding this context must include the daily symbiosis between planet Earth and our Sun which powers life and all processes with its abundant daily shower of free photons. If we humans simply learn to harvest these photons as well as green plants’ photosynthesis which creates all of our food, we can create abundant societies! These daily interactions between the Sun’s incoming photons and how our Earth’s oceans and atmosphere process them along with geothermal energy to create the phytoplankton blooms that undergird the food chain are now visible! Human populations now consume 40% of total biomass, driving extinctions of other species. Computer models show that if cheap solar lighting, such as that from Philips and other companies, along with access to microfinance were widely available to women, 3 billion avoided births could result (Ashok Khosla, 2009, on ethicalmarkets.tv).
Our “eyes in the sky” are those 120 satellites orbiting our planet, providing real-time data on these Earth-Sun processes and how our 7 plus billion human family is affecting them in this new Anthropocene Age! Just as asset managers had to learn the basics of geology and physics to invest in fossil fuels and nuclear energy, so today they must become familiar with complexity models and NASA’s earth systems science. This broader, longer-term framework will payoff in such areas as renewable energy, sustainable infrastructure, efficiency, desert greening and all the new materials recyclable in circular economies as discussed at Davos in the World Economic Forum and now incorporated into China’s new 5-year plan.
All this new science providing cutting-edge opportunities for investors will be discussed at Ethical Markets research conferences co-sponsored with Endobility, the first “Finding Ethical Alpha”, May 12-13, followed by People-Planet-Prosperity in October. The lowest hanging fruit: energy efficiency, sustainable infrastructure and desert greening are the subject of our May event. While fresh water is in crisis, 97% of the planet’s water is saline, in our oceans, lakes and brackish areas. Overlooked research on the 10,000 salt-loving halophyte plants that provided food, fiber and edible oils can be grown on desert lands and irrigated with seawater.1 This research is now driving business plans, e.g. DesertCorp from Amsterdam-based Planck Foundation, as well as restoring desertified rangelands as in the Grasslands Project in South Dakota of the Savory Institute and the Capital Institute.
All this new science must now be cranked into financial models along with the new accounting standards of IRRC and SASB which analyze companies performance based on their use or misuse of the six basic forms of capital: finance, intellectual, built, human, social and natural assets – all now essential for our future prosperity as I cover in Mapping the Global Transition to the Solar Age (2014), co-published by London-based Institute of Chartered Accountants of England and Wales and Tomorrow’s Company, with Foreword by NASA Chief Scientist Dr. Dennis Bushnell. A new era in finance is at hand.
Hazel Henderson is President of Ethical Markets Media® (USA and Brazil), a Certified B Corporation, author of many books and a former science-policy advisor to the US National Science Foundation, National Academy of Engineering and the Office of Technology Assessment. She has many honorary degrees and created the Green Transition Scoreboard® and co-created with Calvert Group the now rebranded Ethical Markets Quality of Life Indicators. She was inducted into the International Society of Sustainability Professionals Hall of Fame in 2013.
1 Glenn, Edward P., et al. “Irrigating Crops with Seawater,” Scientific American, August 1998.