Calls for racial equity in the financial system have rightfully been increasing since the murder of George Floyd last year.  In the past few months, we have seen virtually every major investment bank and many smaller advisors and asset managers decry systemic racism.  This is a welcome advancement. No longer is the industry focusing only on basic questions of diversity, which we regard as table stakes in a movement for social change; instead, the investment industry and society are asking hard questions about the role of financial institutions in perpetuating racial inequality.  In particular we are seeing mainstream industry actors finally examining the roots of economic injustice.

And yet … with all of this talk, we are seeing little movement, especially among consultants and advisors.  Investment consultants and advisors serve as critical intermediaries between asset owners (foundations, high net worth individuals and families, pension funds, etc.) and actual investments, which are largely managed by asset managers.  As an industry, the investment and financial services field must make deliberate efforts to change the practices they use to determine which asset managers have the privilege and responsibility to manage money, deliberately opening opportunities for new and diverse asset managers – especially BIPOC (Black, indigenous and people of color) and women managers.  Just saying it needs to happen won’t make it so. Rather, as a group of asset managers of color and advisors has recently called for, there must be a concerted effort to change the behavior of consultants and advisors to systematically remove the barriers that prevent the flow of capital to BIPOC and women asset managers.

For context: White, male asset managers control 98.7% of the investment industry’s $69 trillion in assets under management. [1,2]

The Due Diligence 2.0 Commitment  makes the case for changing the methods by which asset managers are evaluated and selected. The Commitment is based on a framework developed by Rachel Robasciotti, Brent Kessel, Tracy Gray and Erika Seth Davies, with contributions from over a dozen BIPOC asset managers. It offers a detailed roadmap for inclusive due diligence practices that are rooted in common sense and a commitment to breaking down the barriers facing BIPOC and women asset managers.

At Cornerstone Capital Group, we have been following many of these practices and advocating for investing with a racial equity lens for years:

Despite our long-standing focus on diversity and equity, we know there is more work to be done. We are proud to become one of the first signatories to the Diligence 2.0 Commitment.  We invite our colleagues at other investment firms to join us and the others who have already signed in this important effort. We invite investment consultants and advisors across the industry to help break down the systemic barriers that have prevented BIPOC and women managers from attaining critical positions managing assets and helping to ensure capital is being used more responsibly and equitably.

[1] www.duedilligencecommitment.com

[2] https://knightfoundation.org/reports/diversifying-investments-a-study-of-ownership-diversity-and-performance-in-the-asset-management-industry/

Since we published the first edition of this report in 2018, there has been a widespread increase in the general public’s awareness about structural racism and the many ways people of color have been systematically denied access to social and economic opportunity since the earliest days of European arrival to what is now the United States.

The COVID-19 pandemic has exposed alarming weaknesses in the systems we depend on upon in everyday life in the U.S. – healthcare, education, and economic systems, to name just a few. It has cast a harsh light on the disproportionate impacts of these weaknesses on people of color, whose health and wealth have been decimated at far greater rates than those experienced by whites.

Moreover, there has been a dramatic growth in awareness of how the financial system has functionally been closed off to people of color, starting with the largest companies, most of which pay lip-service (at best) to racial equity and many of which do not address the issue at all.

Investors can contribute to the narrowing of economic disparities by investing in communities of color. In this report, we update the findings of our original work in 2018. We also offer fresh insights into how both the #MeToo and Black Lives Matter movements have galvanized shareholder engagement initiatives, with investors increasingly pressing companies to be more transparent and accountable regarding their policies, practices and cultures. We have added a section as well regarding support for diverse asset managers with strong track records who are often overlooked. Lastly, we are pleased to note that over the past two years there has been growth in the number of investment solutions that seek to address racial and ethnic economic disparities.

Download Investing to Advance Racial Equity.

We are pleased to present this replay of our recent panel discussion with leaders in the LGBTQ movement for equality  — access the event replay above. Our panel addressed:

Here are some links you may find useful in further exploring the issues raised in our discussion:

LPAC

Vaid Group

Relevant Cornerstone Research in chronological order (we are pleased to announce the imminent publication of an update to Investing to Advance Racial Equity.)  

Structural Complicity: Sexual and gender-based violence as an emerging investment risk

Investing to Advance Racial Equity: Practical ways to tackle economic inequality

Two Lenses, One Vision: Investing for LGBTQI and Gender Equity

Advancing “Access” in Gender Lens Investing

Women Entrepreneurs: Foundational to Economic Recovery

 

Our Panelists

Systemic risks to financial institutions can lead to serious negative consequences for the economy. Climate change, like the COVID-19 crisis, is indisputably a systemic risk.

Cornerstone’s CEO, Erika Karp, recently hosted a panel discussion on Ceres‘ new report titled Addressing Climate as a Systemic Risk: A Call to Action for U.S. Financial Regulators. Erika was joined by Steven Rothstein, Managing Director of Ceres’ Accelerator for Sustainable Capital Markets, which issued the report, and Ibrahim al-Husseini, Founder and Managing Partner of FullCycle, an investment firm focused on climate solutions. (Ibrahim is also a member of Cornerstone’s Board of Directors.)

In the report authors’ words:

While policymakers at the federal, state and global levels need to take the lead in tackling the climate crisis, U.S. financial regulators themselves have critical roles to play in keeping a now-weakened economy resilient in the face of ongoing and future climate shocks. Rather than standing back, they should seize the opportunity in this moment of potential economic transformation to join global peers and develop a playbook for climate action. With global emissions and average temperatures still rising, watching and waiting are no longer responsible options, and will in fact guarantee the worst. And, unlike in the possible resolution to the COVID-19 pandemic, there will never be vaccines developed to protect against climate risk. But the good news is: we already have all the tools and knowledge in the financial markets to take sound preventative action. 
Climate change presents risks to both the future and today — unless regulators act boldly, now.

We recently held a video panel discussion with experts in the field of education and educational technology, to further explore the topic we first raised in our report Investing in the Future of Work. The Cornerstone team was joined by:

The discussion centered on the need for ongoing, lifelong learning, and the different forms that may need to take in order to better enable the workforce of tomorrow (and today, in fact) to better adapt as technology changes and new skills become key to success.

Recently, CEO Erika Karp moderated a panel discussion on behalf of the Jewish Federation of North America (JFNA), an organization that brings together Jewish foundations and non-profit organizations in support of shared goals and values. The panel focused on how foundations can incorporate mission-aligned investing in the endowment portfolios as well as through Program Related Investments. Suzanne Barton Grant from JFNA framed the discussion with an audience poll that revealed that a lack of knowledge among investment committees is a key barrier to adopting mission-aligned practices.

Erika spoke with Joel Wittenberg of the W.K. Kellogg Foundation and Ned Rosenman of Blackrock. They explore the variety of forms mission-aligned investments can take, the intersectionality of issues that can multiply impact, and the challenges of measuring impact.

On May 5th, Cornerstone Capital hosted a webinar about Covid-19 and its disproportionate impact on some communities. Race, income, ZIP Code – all are factors that influence one’s chances of making it through the crisis personally and financially. In New York City, black and Hispanic/Latinx residents are twice as likely as white residents to die from the disease caused by the novel coronavirus. This fact is directly related to the lack of economic opportunity in some communities, especially communities of color anywhere in the US, as well as other structural issues including who has access to investment capital.

How can investors address the inequitable impact of COVID-19?

Katherine Pease, Managing Director, Head of Impact Investing at Cornerstone moderated our call with three investors and entrepreneurs with expertise in venture capital and investing for impact for women, communities of color and social justice:

NATHALIE MOLINA NIÑO is an entrepreneur, an investor (at O cubed) and tech globalization veteran focused on high-growth businesses that benefit women and the planet. She is the author of LEAPFROG, The New Revolution for Women Entrepreneurs (Penguin Random House, Tarcher Perigee) and serves as a Venture Partner at Connectivity Capital Partners. Molina Niño launched her first tech startup at the age of twenty and is the co-founder of Entrepreneurs@Athena at the Athena Center for Leadership Studies of Barnard College at Columbia University.

PRIYA PARRISH is the Managing Partner of Private Equity at Impact Engine. Prior to joining Impact Engine, she served as Chief Investment Officer at Schwartz Capital Group, a single-family office investing across global markets. Priya currently serves as Adjunct Assistant Professor of Strategy and Impact Investor in Residence at the University of Chicago Booth School of Business.

MORGAN SIMON is co-founder of Candide Group. She has close to two decades of experience making finance a tool for social justice. Morgan has influenced over $150B in investments and is a regularly sought out expert on impact investing. Her first book, Real Impact: The New Economics of Social Change, has been featured widely.  Prior to Candide Group, Morgan was the founding CEO of Toniic, a global impact investment network.

The link between health and the economy

Nathalie began the webinar by noting that the existential danger facing black and brown businesses is directly correlated to their communities’ economy and health. She noted that banks have a long history of rejecting people of color for loans. They are often asked for more qualifying material compared to white borrowers. If loans are received, they are typically issued at higher interest rates that whites obtain. As a result, Nathalie was not surprised that $559 billion in PPP (paycheck protection program) loan money which was deployed through banks went to borrowers with whom the banks already had existing relationships vs. black and brown business owners. As a further barrier, the program excluded people with prison records, which disproportionately impacts entrepreneurs of color.

Morgan noted that $30 billion of the PPP has been designated to be disseminated through Community Development Financial Institutions (CDFIs) and smaller community banks (under $10 billion in asset size). She is angry that this relatively small amount is dwarfed by the $500 billion-plus being targeted at large companies, including $17 billion to Boeing. She believes that this policy failure should be addressed by investors and noted that her organization, Candide, publicly makes political contributions to advocate for broader access to capital for all. Candide has 75 women-owned companies in its portfolio, of which 18 successfully applied and were approved for PPP, in part because they had investors that advocated for them. Candide leveraged its financial connections to help business owners, including some who are not in their portfolio, to gain access to funds.

Priya voiced a somewhat optimistic outlook on the economy. She noted that PPP is not an economic stimulus plan per se but rather a relief package. She sees a long road ahead with actual fiscal stimulus and investor tax incentives. She expects a larger amount of capital to be deployed going forward.

Access to capital a challenge to black and brown communities

But with regards to access to capital, networks or key.  Those who have access to a managing director at a venture capital (VC) firm are typically people from privilege, not just a particular race or gender. Priya noted that VC is a high risk/reward asset class and most who invest in venture can afford to take those risks. If you do not come from money, you’re an outsider. The VC firms tend to look for larger, high tech firms that can have big returns. Those firms’ founders/owners tend to be white and male (as are most VC partners).

Priya also noted that venture firms with female and diverse partners may be open to a variety of investments, not just the high-risk, high-reward kind. As an example, the firm invests in a telemedicine company that provides mental health services to 50% of the counties in the U.S. that do not have access to a mental facility. That is impact, in Priya’s estimation.

Nathalie said it’s likely that half of businesses owned by people of color will be gone soon. She believes there must be policy solutions at the municipal and state level. She hopes some policies will be initiated quickly by both the public and private sectors to try to save some of these businesses. Nathalie notes that the needs of both black and brown main street and high-growth companies should be addressed. With people of color a growing US demographic, the needs of main street companies need to be addressed to support near term and future economic health of the US. High growth companies with Black and Brown founders also need access to capital. The challenge is that there are few asset managers of color running funds. Nathalie proposed that governments, corporations and limited partnerships should allocate 30% of money to managers who are people of color to address the growing need for capital by companies run by people of color.  Priya agreed but went further by suggesting that managers and investors need to look at who the company is serving and to invest in companies whose products and services support underserved communities.

Finally, during the discussion, both panelists and attendees shared a variety of articles and links to additional resources regarding small business relief, impacts on communities of color, and philanthropic opportunities:

www.BuilderCapitalist.org

https://www.theimpactengine.com/

https://iff.org/nonprofits-the-payroll-protection-program-you-can-now-apply-through-us/

https://movement.vote/

https://act.colorofchange.org/sign/blackbusiness-coronavirus/

https://refugeeinvestments.org

https://www.caminofinancial.com/

https://capitalgoodfund.org/en/

National Federation of Independent Businesses

www.leapfroghacks.com

http://www.ccminvests.com/wp-content/uploads/2020/05/CCM-COVID-19-Relief-Initiative.pdf

https://www.forbes.com/sites/morgansimon/2020/05/05/the-stimulus-bill-didnt-save-us-10-ways-it-actually-hurt-us/#3790989e40c6

https://www.forbes.com/sites/morgansimon/2020/04/22/get-ready-for-round-2-now-new-small-business-relief-is-coming/#7840cf116901

https://www.forbes.com/sites/morgansimon/2020/04/14/covid-19-giving-guide-how-to-donate-to-reach-the-most-marginalized/#75815c5d1a72

https://www.newsweek.com/black-brown-businesses-next-relief-bill-could-lifeline-assault-opinion-1497757

https://www.bostonglobe.com/2020/04/30/opinion/planning-post-coronavirus-economy-must-focus-racial-inequities/

https://youtu.be/Wq0SLwdDkSY

We recently hosted a second discussion on the near-term impact and longer-term implications of the current coronavirus pandemic. Cornerstone Managing Director Alison Smith moderated a Q&A session with CEO Erika Karp and CIO Craig Metrick, based on questions submitted by attendees. The dialogue focused on asset allocation, implications for various sectors and asset classes, and the role of environmental, social and governance analysis in crafting resilient portfolios. We hope you find this replay helpful, and welcome your feedback at info@cornerstonecapinc.com or via our website Contact Form.

As a firm dedicated to a vision of a more inclusive and regenerative world, we at Cornerstone wonder, will humanity look back at this season of fear and be proud of how we responded?   Will we appreciate those who gave more than their fair share to fight the pandemic?  Will we recognize the synchronicity in which much of humanity comes together to observe traditions marking rebirth, recommitment to faith, family and community, and humble recognition of our role in healing the world?

As we observe the holidays of Passover, Easter, and Ramadan this month, there is another notable eternal connection between us.  Abraham Lincoln’s death, marked in the Hebrew calendar, coincides with Passover every year.  And Lincoln said, as if to us today, that “My great concern is not whether you have failed, but whether you are content with your failure.”  Have we learned the lessons from past disasters?  Have we mitigated the destruction that this virus without borders has caused? Have we eased the spiritual and financial hardship descending upon so many people around the world? Can we move forward?

I am not content with failure. While we know we are in a global health crisis, and we are certainly in an economic crisis, we are also in a crisis of confidence … confidence in our governmental institutions, confidence in our financial institutions, confidence in our capitalist institutions.  I am not content to stand by in this very special season and allow confidence to be forever lost. So, right now we need to use our traditions to begin to heal ourselves and our institutions, and to move forward.

So much of the symbolism and tradition across the three major religions describes the same events, just from different points of view.  Passover is the story of freedom. It is the story of the liberation of body and spirit. With the storytelling come lessons of humility — the belief in something larger than ourselves. Passover marks our move from slavery to liberation. We commemorate the hardships and the miracles, and we move forward, celebrating our freedom with family and food.

Easter is closely linked to Passover, of course, not just by the (presumed) historical concurrence of the Last Supper with a Passover seder, by also by ancient symbols.  As the Seder plate holds an egg to symbolize the cycle of life, rebirth, and renewal, in Christianity the egg became associated with the resurrection.  And across the centuries, these stories have never lost the power to inspire the imagination of generations of humankind as we move forward.

And with Ramadan, we have another holy time for families. Ramadan is a time of rededication to core values.  It balances the deep introspection of the long day’s fast with gatherings to strengthen the bonds of family and friendship. And what could society need more right now than the pillars of Islam, among them charity and philanthropy, tolerance, justice and honesty?

So, in this very important season, in these very dark days, we move forward.  And to Cornerstone Capital Group, moving forward means maintaining our belief that confidence in the capital markets can be restored.  That good governance is a proxy for quality. That a long-term commitment to sustainable and impact investing can provide positive social impact as well as strong returns over time.  And most importantly, that investments must create solutions to the world’s greatest challenges, must drive innovative, resilient and inclusive growth. And we move forward.

On behalf of the Cornerstone family I wish you peace, health and a renewed sense of hope and determination,

Erika Karp, Founder and CEO, Cornerstone Capital Group

The economic model of our current era is linear. We take resources from nature, make them into a product and then throw the item away when we’re done with it. The result? Overflowing landfills, trash filled waterways and, too often, toxic waste. This rampant waste of resources poses an existential threat to the world as we know it. A circular economy uses as few resources as possible in product creation; keeps resources in circulation for as long as possible, extracting the maximum value from them while in use; then recovers and regenerates products and their components at the end of their service life. Embracing circular economy principles is perhaps the most essential initiative we can undertake as a global society. We believe it is the only way forward if we want to sustain humankind.

–Intentional Design: Embracing the Circular Economy, Cornerstone Capital Group, October 2019

Amidst these difficult times, we are pleased to see that the European Union has moved forward with a bold, comprehensive plan to embrace the circular economy. The new Circular Economy Action Plan, adopted on March 11, 2020, focuses on the design and production of a circular economy. It aims to ensure that the resources used are kept in the EU economy for as long as possible. The introduction of this new framework follows the December 2019 European Green Deal, which set a roadmap towards a climate-neutral circular economy. [1]

We believe this is an important, proactive policy development that could serve as a model for government entities in other regions. The framework offers some specific guidelines for various economic sectors and lays the groundwork for strong rules and restrictions. We are especially encouraged by the proposals for sectors such as electronics, food and packaging—areas of the economy that tend to generate the most waste.

We recognize that these are recommended guidelines.  Actual legislation still needs to be formulated and passed. Given the current coronavirus pandemic, we suspect that implementation of any legislation will likely be delayed due to the pandemic’s negative economic impact globally. Looking out longer term, however, we believe this type of legislation will be beneficial for the economy and the environment.

Executive Vice President for the European Green Deal, Frans Timmermans, said: “To achieve climate neutrality by 2050, to preserve our natural environment, and to strengthen our economic competitiveness, requires a fully circular economy. Today, our economy is still mostly linear, with only 12% of secondary materials and resources being brought back into the economy…With today’s plan we launch action to transform the way products are made and empower consumers to make sustainable choices for their own benefit and that of the environment.”[2]

The EU Circular Economy Action Plan:

1)  Propose legislation on a Sustainable Product Policy, to ensure that products placed on the EU market are designed to last longer, are easier to reuse, repair and recycle, and incorporate as much as possible recycled material instead of primary raw material. Single-use will be restricted, premature obsolescence tackled, and the destruction of unsold durable goods banned.

2) Empower consumers so they have access to reliable information on issues such as the reparability and durability of products to help them make environmentally sustainable choices.

3) Focus on the sectors that use the most resources and where the potential for circularity is high. The Commission will launch concrete actions as shown in the table below:

 

Virginijus Sinkevičius, commissioner for the environment, oceans and fisheries, said. “The new plan will make circularity the mainstream in our lives and speed up the green transition of our economy. We offer decisive action to change the top of the sustaina­bility chain–product design. Future-oriented actions will create business and job opportun­ities, give new rights to European consumers, harness innovation and digitali­zation and, just like nature, make sure that nothing is wasted.”[4]

The full EC report can be found here: https://ec.europa.eu/environment/circular-economy/pdf/new_circular_economy_action_plan.pdf

 

[1] https://ec.europa.eu/commission/presscorner/detail/en/ip_20_420

[2] Ibid.

[3] https://www.gcimagazine.com/marketstrends/regions/easterneurope/Circular-Economy-Action-Plan–568743741.html

[4] https://ec.europa.eu/commission/presscorner/detail/en/ip_20_420

Shortly following trips to Davos during the World Economic Forum in late January, Erika Karp sat down with Juliet Scott-Croxford of Worth Media to compare notes on their experiences and most meaningful takeaways from the week. Below is a transcript of that conversation, which we captured via video.

Erika Karp, CEO Cornerstone Capital Group | Juliet Scott-Croxford, CEO Worth Meeting

 

JSC:  Hi everyone. I’m Juliet Scott-Croxford, CEO of Worth Media. And I’m excited to be joined by Erika Karp, CEO of Cornerstone Capital, to talk about our shared experience at Davos in the end of January.

EK:  I’m Erika Karp, the Founder and CEO of the Cornerstone Capital Group. As we think about investing for impact we’re here to talk about Davos, what happened at the World Economic Forum last week and some of the most interesting takeaways.

JSC:  What was your biggest takeaway from the event on based on what you attended and some of the conversations that you heard?

Systems Thinking

EK:  For me, the biggest takeaway is the extent to which we need more systems thinking if we’re going to meet these huge challenges. Because it seemed like there were a lot of events going on — whether it was about climate, whether it was about health or whether it was about technology and blockchain or women or  LGBTQ events  — each of these events touches on way more than it might seem.

JSC:  And, and how do we take action on creating big systems thinking around those types of challenges?

EK:  Well, it’s really hard. I think that that kind of thinking can’t just happen at the top. That is not just a high-level conversation. That conversation needs to go down to the grassroots level. And so I wonder … if everyone who needs to be in the room sometimes is in the room.

JSC:  Hmm. So just playing on that point a bit, I think there was 24% female attendance at Davos this year. Last year it was 23%. What were your takeaways around the sort of notion around diversity and inclusion?

EK:  By the way, that’s a big jump for Davos, because I know in many past years it’s been stuck at kind of 20% or even below. And that’s challenging. So the idea of women not just having more power but more influence is hugely important. And I think women’s voices, diverse voices are not being heard to the extent to which they need to be.

JSC:  I attended a lot of the sessions that were done at the Equality Lounge [hosted] by the Female Quotient and a big part of their focus was on UN Sustainable Development Goal 5, around closing the gender gap. What conversations did you hear around gender and diversity outside of perhaps one of those areas?

EK:  Unfortunately, very little. And here’s what I think we have to get to… people might talk about SDG 5 and women’s economic empowerment. But when you think of how you actually get there, you have to talk about all the other SDGs. So we think at Cornerstone in terms of the idea of access. Women will not be really empowered until we have access to water, to healthcare, to education, to broadband, to capital. And so that intersectionality, that systems thinking around diversity, I don’t think we’re there yet.

Capitalism and Sustainability

JSC:  The main sort of focal point for the event or the big theme was around better capitalism and sustainability. How encouraged or not were you by that kind of conversation and thinking?

EK: There was a lot of talk about stakeholder capitalism, what we’ve seen the Business Roundtable talking about. And I think that’s great, but it’s so much more than talk that we need to get it done. When we go back to those Sustainable Development Goals, that systems thinking, that’s what you really need to see. So we need data, we need accountability, we need measurability, we need intentionality — all the things that we talk about with impact investing. And if you think about it, any board of directors, you know, yes, they need to serve their shareholders. They need to serve their employees. They need to serve their customers. You can’t optimize profitability without doing all three. But the issue is, it has to be about long-term profitability. We have to stop [the impact of] externalities from not being accepted by the users of capital. We have to think about financial capital, but also human capital, natural capital. We have a long way to go, I think.

JSC:  Well, one of the key takeaways for me was that the business community is awake to the climate crisis. That was encouraging for me, whilst it’s possibly a little too late. I did feel like the conversation around that was baked into every conversation or session that I had. And perhaps more so outside of North America as well. I think there’s an interesting conversation coming out of a lot of the European businesses. I think that the key challenge is how do we take it beyond conversation and into real action. Seeing the letter that Larry Fink put out and, and some of the conversations around the Business Roundtable, what do you think the next steps are? How do we take that and. to your point, build that sort of systems thinking into —

EK:  Action? Well, one of the big next steps is to facilitate tangible information, data, decision-useful information. I think that kind of push for real information, real data accountability is the starting point. And so that’s one of the things that I take away from it. Because when you have real information, real data that data providers and index providers and ETFs and fund managers and ultimately investors can have, not flawed information all through that system, then I think we have a better start.

JSC:  And what about the sense of having a common language around how we’re describing this? So a common way to describe it, a common way to measure it, a common way to hold each other accountable to it. How important do you see that?

EK:  Hugely important and that leads on from what I talked about with regard to data. We don’t have a common language when it comes to the whole idea of sustainable investing. Cornerstone uses a very clear definition. We think sustainable investing is the systematic integration of material, environmental, social and governance factors into the investment process. That is sustainable investing. It’s not ideological, it’s not political, it’s not divisive. It is about pragmatism and enhanced analytics. It is a discipline. And that discipline in finance, I mean ultimately it’s just going to be called investing and investment research, but we’re not there yet. Sometimes you’ll hear people say ESG investing. There is no such thing as ESG investing. There’s ESG analysis. We have to bring this into the realm of finance, not ideology.

JSC:  And how important is partnerships and this notion of stakeholding when it comes to taking this to the next step?

EK:  It’s, it’s just critical. This goes exactly to what we’re talking about, with systems thinking and going from not just the top down but from the bottom up to have this interdisciplinary discussion about getting things done. Partnerships are a must-have if we go back to talking about achieving the Sustainable Development Goals, which, by the way, in and of themselves are not investible. So again, when we frame things at Cornerstone, we think about the idea of access, giving the world access to each of those SDGs, giving investors access to each of those SDGs. And that implies you’ve got to have partnerships.  SDG 17, right?

JSC:  Yeah, absolutely. And people like Greta [Thunberg], who I personally think is so essential to helping hold businesses and key influences accountable to make progress. What what were your thoughts on her speech?

EK:  Oh my God. The idea of, you know, this young person talking about what is blindingly obvious to almost the whole world, except certain administrations. I think it’s tremendous. I think she represents, you know, basically the whole world that’s not at Davos.

JSC:  Playing that forward to the point around inclusivity … she has such a loud voice, a voice that is so important to people that aren’t able to be at something like [Davos]. I just think her presence is so poignant.

The Davos Experience

JSC: So this was your first and my first Davos. I’m still processing it a bit ’cause there’s so many different layers and elements to it. It’s a place of many contradictions, and it has been and is under scrutiny. Having been there and come away, what are your sort of overall thoughts on the importance of it? The challenges with it?

EK:  You know, the biggest challenge is clearly the perception of eliteism, the few, the very few making decisions for everyone else. And so that’s a huge challenge now with regard to how Davos comes together.

For a number of years I worked on the Global Agenda Council which leads up to Davos — what should be included, what are the pivotal questions that we’re going to address at Davos? The question I have is whether the hard work done on the agenda councils and the work that becomes you know, very specific, [does that] get right into the Davos conversations? I’m not sure of that. So that’s something I think we have to be very thoughtful about, because I think that innovation and ideas come from everywhere. Are those [ideas] making their way into any decisions or actions that might be taken over that one week? I’m not sure.

JSC:  What were some of the most interesting sessions you attended?

EK:  Obviously the ones that I worked on! The Green Debate was about action. What I felt that was so interesting was the extent of the earnestness of that group, which really wants to get something done. The other [event] that I was involved with, which I’m really excited about is called the World Benchmarking Alliance, the WBA. And the reason I love this initiative is because it is really about a systems-based approach: Let’s look at the keystone companies in the global economy, those that potentially can have more impact than other companies by virtue of where they’re situated in the system. And let’s keep raising the bar for the industries.

JSC:  Fantastic. So you thought the WBA offers a solution to integrate this systems-based analysis?

EK:  From what I can see. It’s relatively new initiative. But yes, it is showing us which companies can be most powerful in driving everything forward. And I should say there is no perfect company. You know, every company has challenges, whether it’s upstream or downstream, whether it’s a technology company, consumer company — every company has challenges. But if the WBA can really identify what exactly those keystone companies are doing, what do they touch and how can they be most powerful, I think that’s terrific.

JSC:  What do you think the best way of integrating that into future Davos events, to your point and taking it to the grassroots? So it can’t just sit with this sort of small group of incredibly influential people. How much does the World Economic Forum take a lead in ensuring that happens?

EK:  I think the WEF really could take the lead. I’ll give you an example as it relates to these keystone companies, or companies that are not keystone companies but sit in industries that have an outsized impact on what’s going on. One of the things that I observed — or didn’t observe — was the extent to which there’s real entrepreneurship, real disruption inside the companies that are part of the WEF. I think a lot of companies have forgotten how to take risk. They have forgotten how to innovate. And I think that’s unfortunate, especially, I would argue, since some of the agenda councils, which over the past decade have come up with interesting solutions, innovative, entrepreneurial solutions. I don’t know that we’re seeing [such solutions] to the extent that we should.

JSC:  I think that’s an interesting point. I was surprised that there were quite a lot of young people at the event, more so than I expected, but also more representation from tech companies and data companies and software companies. And I’m surprised that they haven’t taken more of a lead on [creating] more of a systems-based universal way of an analyzing and assessing progress in some of these areas.

EK:  Did you feel, ’cause I did a little bit, did you feel that there was more a sense of fear of new technologies, the negative impact of new technologies by one generation than there was by the other? It felt to me like there was a little bit of a focus on the scary stuff.

JSC:  Yeah. I think you’re right. And I think, you know, Facebook’s been in the headlines a lot, so I think that there definitely is this sense of, yeah, how much do we embrace these platforms for good? I think that is a challenge both for those companies and for people, but there is this wealth of knowledge and expertise. Let’s apply it in these areas that we need to apply it.

JSC: Are there other conversations or interesting people that you met that have kind of stuck with you a few days later?

EK:  There was one particularly interesting woman I spoke to from a health research organization. One of the things she said that just really struck me is that, you know, we can talk about systemic change as much as we want. But when it comes to healthcare and the intersection of healthcare and the technologies we need, she said the funding picture is so off, you know, without government funding of basic research. She says we can talk all we want, but it’s not enough.

JSC:  Why do you think that is? Why, what is driving that lack of investment or capital in the area?

EK:  I think it does have to do with the short-termism, broadly, whether it’s in the private sector or the public sector. Some in the foundation world are doing wonderful work, but it’s a drop in the bucket compared to what we need. If the foundations are giving a kind of first loss capital [to attract the] private sector that’s great. But again, when it comes to basic research, it’s a drop in the bucket. And then our conversation went on to infrastructure spending and education spending and you know, the things that so need to come first. But it was that healthcare discussion that reminded me this is going to take everyone.

The Role of the Sustainable Development Goals

JSC:  Yeah. And, and how integral do you think the Sustainable Development Goals [SDGs] were to the entire conversation? Cause that, that was the other thing I noticed. They were very prominent in certain places, but in other places actually weren’t the lead focus. What can we do to use them as a way to align all of these stakeholders and companies around a way forward?

EK:  I was actually surprised that they were included in lots of places because I was expecting nothing. So I was pleased to see the SDGs around and in their own little building that was [colorful]. You know, the fact that the SDGs have branded themselves as eye candy is beautiful — whatever it takes. I wouldn’t call it prominence, but it was clearly there.

I think one of the problems we have, actually, is if companies kind of hang their hats on achieving SDG 5 or whatever. I think that’s really problematic because if you really try to go after one (and we talked about this before), you’re not going to get really much done. Yeah. So I think this was the WEF kind of tiptoeing into the SDGs.

JSC:  Yeah, I agree. I’d really love this sense of having a shared set of goals and I do think that’s a really powerful way of bringing different stakeholders together around a common issue and some of the biggest issues that we’re faced with. I think you just, you kind of want to see more of it. And I sense there have been quite a lot of laggards when it comes to adopting these or taking them seriously or thinking actually this is a good way to do it.

EK:  I mean with all due respect to the WEF, it’s astonishing that this is the first time that they’ve really tackled climate.

JSC:  Yes. And it is sort of slightly contradictory in the fact that the backdrop is the, you know, the mountains and the temperature was quite warm. Yes, there’s snow on the ground, but it, I sort of felt like it was almost quite stark in that the conversation was around climate crisis finally, and we were in the backdrop that we were in.

EK:  I put that aside to some degree because had it been snowing and freezing, then somebody would say, ‘Oh look, no climate change.’ I mean, you know this is about volatility, not about any particular day. So it didn’t bother me that much. It was convenient. Walking around was a little easier than it would have been. But you know, getting between all those black cars…

JSC:  I was going to say, it takes 20 minutes to walk end to end on the promenade and I would far rather walk. I was surprised at how much traffic there was and they weren’t, I don’t think they were electric.

EK:  Well, actually I have a picture of Prince Charles arriving in a fully electric vehicle. Yes. I think, I don’t know where that was published, but we’ve got that right.

JSC:  There’s definitely more that they could do there, I think.

EK:  I think there’s a little more they can do. Yeah.

JSC:  So you saw Prince Charles, who else did he see that kind of made you [perk up].

EK:  You know, no one, not really. Maybe I was looking down or doing my work. But I did see some of my favorite people. Nigel Topping, you know, I don’t know if everyone knows Nigel, but he’s amazing. A few other people that I’ve known for a long time that in my view are really the leaders, like Steve Waygood from Aviva. I don’t know if people know Steve, but yeah, he’s one of the leaders. So it was really nice to see those serious people.

Next Year at Davos?

JSC:  What would you, a year from now, thinking about Davos next year, what change would you like to see?

EK:  I would love for Davos to just take up the issue of entrepreneurship. You know, we know that in a global economy, impact comes from entrepreneurship, new companies revitalizing economic growth. You know, the fact that we have the world’s monetary authorities driving the stock market is not okay, right? Real economic growth comes from entrepreneurship. And I don’t know that there’s been a Davos that’s really taken that up.

JSC: And so how would you, how would you do that?

EK: I’d like to see the conversation truly be a catalyst for growth. Focus on the idea of entrepreneurship, in fact, impact entrepreneurship. That’s where growth comes. That’s where new companies come from. Why don’t we have, you know, a discussion about great companies that know how to disrupt themselves and innovate from inside. And then of course, the outside companies, the innovators, the disruptors that are outside. I think it has to be about entrepreneurship because ultimately that’s how we’re going to face the big challenges of the world.

JSC: So watch this space and we’ll work on impact entrepreneurship as a topic between now and next year. Thank you.

EK: Thank you.

 

Cornerstone Capital Group Founder and CEO Erika Karp addresses the state of impact investing, offering a clear distinction between impact investing, ESG analysis, and sustainability. No matter what labels are used, someday this will all simply be called “investing.” Note: This video originally appeared on cornerstonecapitalfunds.com

There’s a quote I love from the famed Jewish philosopher Martin Buber: “All journeys have secret destinations of which the traveler is unaware.”

Twenty-five years ago when I started working on Wall Street, I had no idea that my journey would find me running a firm that’s about impact investing, social justice, environmental impact and governance. I also had no idea that my Jewish heritage and its focus on “Tikkun Olam” — repairing the world — would become so intertwined with my professional mission.

There’s another quote that I find so relevant to my work, from an ancient rabbi, Rabbi Tarfon. He said, “It is not incumbent upon us to complete the task, but neither are we at liberty to desist from it.” In other words, we can all do our share. For my share, I think about capitalism and economics and finance every day, and I think they happen to be really powerful tools. I also believe that impact investing, sustainable investing, is entirely consistent — in fact, it’s the same — as practicing Jewish values.

Tools to Righteousness

For example, consider Noah. I think we all know there was an ark and lots of animals and Noah did something good because God asked him to. But was Noah a righteous man? He was certainly blameless; he didn’t partake in the evil that caused God to plan the flood. But was he righteous? According to Rabbi Tarfon’s teaching, if Noah had no power or resources to do fight evil, well then, he was blameless. If he had the tools and the power, and still stood by, he might be blameless but he would not be righteous. That’s the lesson I take from Judaism and apply to my work. We have the tools. Money is a tool. Investing is a tool. We use those tools to bring about as much good as we can, to be as righteous as we can.

The Social Impact of the Private Sector

We’re in a time of unprecedented challenges. Human trafficking, slavery, suffering persists. California is burning, the Arctic is melting, and a number of keystone species such as bees are at risk of extinction. We know that in the next couple of decades there’s going to be more plastic in the ocean than there are fish right now. Income inequality is creating social stress in many areas of the world.

There’s also some unprecedented good, and here’s where the capital markets come in. We’re seeing asset owners, asset managers, investment banks, accounting firms, regulators, exchanges, ratings agencies — all these pieces of the capital markets — start to move in the same direction at the same time, in the direction of seeking sustainability.

When it comes to investing, we need to move not millions, not billions, but trillions of investment dollars towards environmental and social impact. And you cannot move trillions until you engage the whole private sector, the entirety of the capital markets, the private sector. We need collaboration. We need understanding, we need transparency. And the good part is they’re coming. It’s happening.

Words of Economic Wisdom

Here’s another quote worth citing: “To feel much for others and little for ourselves; to restrain our selfishness and exercise our benevolent affections constitute the perfection of human nature.” Another rabbi?

Actually, that’s an economist: Adam Smith. (I think Adam Smith is poetry.) People typically associate Adam Smith with The Wealth of Nations and the concept of “the invisible hand,” which says that markets will work it out themselves. The only thing Adam Smith forgot with regard to the invisible hand is that there are externalities, negative externalities that companies produce when they do their thing.

Milton Friedman is another economist who forgot something. When a board of directors thinks that their job is to solely to maximize shareholder value, they cite his work. They say, that’s all we can do, that’s what we have to do, it’s a fiduciary obligation. Well, two words that Milton Friedman left out were “long term.” We need to maximize shareholder value over the long term. Friedman also said, “Most economic fallacies come from a tendency to assume that there’s a fixed pie, that one party can gain only at the expense of another.” And so Milton Friedman knew what it could, what it should be like when it comes to capitalism and the capitalist system.

Judaism and Capitalism: The Perfect Pair

When it comes to negative externalities created by business activity, and when it comes to creating value over the long term, Jewish values provide a roadmap. In fact, the best quote of all about capitalism actually does come from a rabbi. The great Hillel said, “If I am not for me, then who will be? But if I am only for me, then what am I? And if not now, then when.” To me, this is the essence of Jewish values, and the essence of how capitalism can grow the pie for all. Now is the time.

Erika Karp is the Founder and Chief Executive Officer of Cornerstone Capital Group. This piece was adapted from a speech delivered at a gathering of Cornerstone clients and friends. You can view the video here.

Cornerstone Capital Group recently had the honor of hosting a special evening at Congregation Beit Simchat Torah synagogue. CEO Erika Karp was joined by Robert Bank of the American Jewish World Service, who spoke of the close relationship between impact investing and Jewish values. We are pleased to share this replay for those who could not join us for the event.

The economic model of our current era is linear. We take resources from nature, make them into a product and then throw the item away when we’re done with it. The result? Overflowing landfills, trash-filled waterways and, too often, toxic waste. This rampant waste of resources poses an existential threat to the world as we know it.

What is the way forward? The circular economy. A circular economy uses as few resources as possible in product creation; keeps resources in circulation for as long as possible, extracting the maximum value from them while in use; then recovers and regenerates products and their components at the end of their service life. Embracing circular economy principles is perhaps the most essential initiative we can undertake as a global society.

In our report Intentional Design: Embracing the Circular Economy, we look across a range of sectors to identify critical resource issues and identify examples of companies that are adopting circular economy practices into their supply chain management. In many cases, companies are increasing their efficiency, reducing waste, and saving money through their investments in the relevant processes and technologies. The transition to a circular economy is also spurring new business models and collaboration across supply chains.

For investors, forward-thinking asset managers are increasingly incorporating circular economy considerations into their investment processes; “pure play” circular economy investment vehicles, though rare, do exist. The report highlights several existing investments that we consider under the circular economy umbrella. In our view, investing in the circular economy is poised to become a central theme in sustainable and impact investing.

Download Intentional Design.

SDG 17: Partnerships for the Goals recognizes the need to implement and revitalize global partnerships to support sustainable development. Robust partnerships between regulators, policymakers and the private sector are necessary to achieve each of the SDGs. Regulators, who operate under a legal mandate to set and enforce rules for market compliance, must balance such priorities as market growth, transparency, competition, stability, and safety to minimize turbulence and risk, while enabling needed advancements.1 Policymakers must coordinate efforts to create logical and coherent frameworks for macroeconomic stability, and to mobilize and share knowledge, expertise, technology and financial resources to support the achievement of the Sustainable Development Goals in all countries, in particular developing countries. Examples of synergies between SDG 17 and other goals are highlighted below.

Learn More About Investing in Partnerships for the Goals

Invest in Access to Financial Services

Widespread access to financing options is dependent on active coordination and partnership between local financial services institutions, financial technologies, and/or national and global economic entities. Indeed, the health and future of the entire financial services system is dependent on transparent, accountable, and collaborative institutions working together on behalf of the world’s poorest and most vulnerable people. Without the kind of robust partnerships imagined in SDG 17: Partnerships for the Goals, there will be little hope of achieving any of the other SDGs and or of making low-cost, quality financial services accessible.2

Innovation can spur growth and competition in financial markets and provide new and better options for customers.3 But without careful, balanced regulation, it can also present serious risks to consumers. Examples from around the world show that regulators can encourage
innovation in a manner that promotes a safe and efficient marketplace. The partnership between regulators, policymakers and the private sector is necessary to achieve access to financial services for all individuals. Such partnerships are especially important for rural and low-income populations to gain access to financial and other vital services via mobile and other technologies.4

Invest in Access to Telecommunication Systems

The rapid development of information and communication technology (ICT) based services and systems offers the possibility for the needed
transformation of the world economy and illustrates the truly interconnected nature of global development. ICT will play a special role in today’s low-income and lower-middle-income countries, and with poor and moderate-income families everywhere. Mobile phones have already allowed for dramatic breakthroughs in e-finance, such as mobile payments and credit, along with e-health, overcoming long-standing gaps in access to facilities such as bank branches and clinics. However, while private sector applications of ICT have soared, the need for regulation and crossborder rulemaking has also soared. Robust partnerships among global and regional institutions are imperative to ensure equal access to the essential technology and communications systems across the globe.5

Learn More About Investing in Partnerships for the Goals

SDG 17: References

1 https://www.pewtrusts.org/research-and-analysis/reports/2018/08/02/how-can-regulators-promote-financial-innovation-while-also-protecting-consumers
2 http://siteresources.worldbank.org/INTFINFORALL/Resources/4099583-1194373512632/FFA_ch04.pdf pages 143-144
3 https://www.brookings.edu/wp-content/uploads/2016/07/noslack_chapter.pdf
4 https://www.pewtrusts.org/research-and-analysis/reports/2018/08/02/how-can-regulators-promote-financial-innovation-while-also-protecting-consumers
5 http://unsdsn.org/wp-content/uploads/2015/09/ICTSDG_InterimReport_Web.pdf pages 3-5

One thing I’ve noticed about critics of sustainable investing is that they often seem to have no idea what they’re talking about. They concoct a caricature of ESG based on common misconceptions and use it to convince their audience how ridiculous the whole enterprise is.

At least that seems to be what is coming out of right-wing circles in Washington these days — the latest from SEC commissioner Hester Peirce, who, in a speech that hardly seemed appropriate given the office she holds, spoke to the choir at the American Enterprise Institute this week, delivering a over-the-top broadside against ESG.

Just so you know where she’s coming from, Peirce has spent her entire career inside Washington right-wing policy circles: George Mason Law School, Republican staffer on the Hill, the Federalist Society. She has written a book published by the Mercatus Center, a think tank financed in part by the Koch Brothers.

Reading through the transcript of the speech, I’d describe it as an ominous, massively exaggerated screed describing “ESG activists” as hellbent on bringing down defenseless corporations and perhaps shareholder capitalism itself.

Peirce argues that ESG activists are affixing a “scarlet letter” (her first name being Hester led her to that clever metaphor) on companies, shaming them based on incomplete information without taking into account their full character:

“We pin scarlet letters on allegedly offending corporations without bothering much about facts and circumstances and seemingly without caring about the unwarranted harm such labeling can engender. After all, naming and shaming corporate villains is fun, trendy, and profitable.”

Nothing in that statement is accurate.

First of all, ESG evaluations are all about trying to gather facts and understanding their context. ESG ratings are based on systematic frameworks and a plethora of indicators. They are focused on financial materiality and peer-group comparisons. The whole enterprise is about bothering a lot about facts and circumstances. The goal is to produce actionable information for investors. No one would take ESG ratings seriously if they didn’t “bother much” about facts and circumstances.

And one thing we know for sure, and this is really at the root of Peirce’s issue with it: ESG is being taken very seriously by more and more investors, including virtually every asset manager of any size and import on the planet.

Furthermore, the idea that an underperformer in an ESG ratings framework somehow gets publicly shamed is absurd. Specific company ratings are typically not well known, even within the investment industry.

Take a look at this list of companies and guess which one wears the “scarlet letter” of being an underperformer (gasp!) relative to its industry peers:

If you guessed ExxonMobil or Walmart, you would be…wrong. Amazon is the only company on this list that is an underperformer relative to its peers, based on Sustainalytics ESG Rating. And just for kicks, which one wears the “gold star” of being an outperformer? It’s Microsoft. All the others have average ratings relative to their industry peers.

Investors use this data in a variety of ways, also nuanced, whether they are managing active strategies or designing ESG-based passive approaches or using it to inform their stewardship activities. No one is shaming companies or “inflicting unwarranted harm.” Amazon, by the way, is up more than 25% for the first half of the year.

Perhaps most important, companies themselves have become highly interested in their ESG evaluations, but not for the reasons Peirce claims, which is that they are treated so unfairly by ESG ratings.

Companies today face sustainability challenges ranging from how their business is being affected by climate change and the transition away from fossil fuels to how they treat their workers (on safety, pay, supply-chain oversight, and diversity), to the quality and safety of the products they produce. This is happening against a backdrop of heightened expectations for corporate behavior and purpose, driven by consumers and clients, by employees, both current and prospective, and by the public at-large.

More and more, investors are recognizing that ESG evaluations give them insight into a company’s sustainability challenges and how well it is addressing them. Companies themselves recognize that ESG evaluations can not only help them address investor concerns but also help them embed sustainability into their long-term strategy.

But Peirce was just getting started:

“As Hester Prynne can attest, the affliction of shame is a group effort. It takes a village. Just as in Hester’s day, in our modern corporate ESG world, there is a group of people who take the lead in instigating their fellow citizens into a frenzy of moral rectitude. Once worked up, however, the crowd takes matters into its own brutish hands and finds many ways to exact penalties from the identified wrongdoers. The motives are often noble, but the methods are not.”

What in the world is she talking about here? Some kind of witch hunt? If I had to guess, considering the source, she’s talking about the growing number of stakeholders, which she refers to as “so-called stakeholders” elsewhere in the transcript to signify their illegitimacy, who are demanding stronger standards of corporate behavior and better performance on sustainability issues.

There is indeed growing support for the idea that capitalism needs to be made to work for more people. Pricing externalities used to be a regulatory issue. (You can guess where Peirce stands on regulation. She argued against regulation after the financial crisis.) But today, rising expectations for corporate behavior extend to overall impact and to how companies can proactively mitigate negative externalities. That demand is coming from many fronts, not just ESG investors. And far from regarding addressing such costs as “penalties,” more companies today recognize that at a time when much of their value lies in intangible assets, it pays to build and maintain the trust of customers, workers and the public by being a good corporate citizen that addresses its overall impact rather than foist off the negative costs it produces onto the rest of society.

Even though federal law regards corporations as persons, which means among other things that they can spend unlimited amounts on political issues and candidates, Peirce seems to be suggesting that it is unreasonable to urge corporations to make moral decisions for the greater good.

But she, and we, are getting further afield from the real point here, which Peirce herself uncovers in her speech, when she says:

“It is true that ESG issues may well be relevant to a company’s long-term financial value.”

That is, of course, the entire point of ESG investing.

“If ESG disclosures mean disclosing what is financially material, there is little controversy…”

Exactly!

“…but the ESG tent seems to house a shifting set of trendy issues of the day, many of which are not material to investors, even if they are the subject of popular discourse.”

Wait, what? Now she’s back to just making stuff up. No one who does ESG investing, and I mean no one, is asking companies to disclose information that is not material. Apparently she is unfamiliar with the work of SASB, which is unconscionable for an SEC commissioner opining on materiality and ESG. Materiality has been the watchword for ESG disclosure for years now and SASB has developed industry specific recommendations for what should be disclosed.

While it is true that new ESG issues may emerge and become material, what exactly does she mean by “a shifting set of trendy issues”? The rise of customer data privacy and security as an issue for social media and on-line retailers? Or climate change, which has moved from a theoretical concern with impacts years into the future to an issue that is becoming more material and to more companies, it seems, by the day? Maybe she’s talking about gender-diversity issues like equal pay and putting more women in corporate leadership. By calling these issues “trendy” she’s trivializing them and arguing that they shouldn’t be material to investors. But, alas, these issues do exist and therefore investors can’t ignore them.

No right-wing bromide against ESG would be complete without an attack on proxy advisors and shareholder resolutions. Peirce rehearses the argument that proxy advisors have inordinate power by helping asset managers fulfill their stewardship responsibilities. This was never a big concern until proxy advisors started recommending occasional positive votes on matters related to ESG.

Of course they have. As an ESG issue becomes material, it would be irresponsible for proxy advisors to issue blanket recommendations of opposition. Anyway, my observation is that asset managers are spending more time focusing on stewardship because of the growing relevance of ESG issues to company management. And in cases where a significant shareholder vote arises around an ESG issue, asset managers are making their own call, not relying on their proxy advisor. Proxy advisors help with the process and mechanics of proxy voting. They are not a set-it-and-forget-it mechanism for asset managers. At least not today and that’s largely because of the rise of ESG issues.

And finally, Peirce thinks it’s a bad thing that a small investor can file a shareholder resolution. But who’s to say when a part-owner, no matter how small, of a company might have a constructive point to make with management? Besides, the little guy’s or gal’s resolution still has to pass a materiality standard to make it onto the proxy ballot. And if it doesn’t garner any support, that’s the end of it. Even if it does, shareholder resolutions that attract a majority shareholder vote aren’t binding on management.

At a time when there is growing support for corporations to focus on the big picture — long-term sustainable growth and accentuating their positive impact on society — it would be exactly the wrong thing to limit the voice of shareholders who want to encourage them to do so.

In sum, Peirce’s speech casts corporations as helpless victims of ESG activists. Nothing could be further from the truth. For one thing, corporations can take care of themselves. But beyond that, more and more, corporations today want to align themselves with ESG, sustainability, and public purpose. We’re entering a new era where corporations can and should be a force for good beyond the important basics of job and wealth creation. When you can do good and do well, what’s the big issue with that? The more the investor base of the modern corporation consists of shareholders concerned about these things, the more latitude management has to focus on the long term, on sustainability, and on having a positive impact.

This guest post was originally published by Jon Hale on his blog, The ESG Advisor. Jon is the Global Head of Sustainable Investing Research for Morningstar. The views expressed here may not reflect those of Morningstar Research Services LLC. or its affiliates.

In the absence of clear and consistent government regulation, corporate policies have been pivotal to the provision of legal protections for LGBTQI workers. For companies, greater inclusion is associated with improved brand reputation, reduced turnover, and increased productivity and innovation. The most progressive companies seek to integrate their values into their operations, using their financial clout to push back on harmful practices even if they risk additional costs in the near term.

To be clear, policies have not eliminated discrimination: More than half of LGBTQI employees report that discrimination negatively affects their work environment.

As bias and discrimination toward LGBTQI people are related, at least in part, to normative expectations of gender within the workplace. Recognizing the intersection between gender discrimination and LGBTQI equity results in a profound reorientation of how investors and advocates can approach companies and their attitudes toward full inclusion.

As investors continue to make the case for full inclusion of LGBTQI people, there is a practical and ethical mandate to align LGBTQI interests with those of gender lens investors and others who recognize that the establishment of corporate cultures and practices that embrace all employees, customers and stakeholders, will benefit everyone.

In this report we make the case for this thematic fusion, discuss how investors and asset managers can consider LGBTQI alongside gender equity in their investment analysis, and highlight existing investment strategies that reflect this approach.

Download the full report here.

On May 20, we hosted a video webinar with Cornerstone’s Katherine Pease and Craig Metrick, who provided an overview of our new impact measurement framework, the Access Impact Framework.  Katherine and Craig provided background on why Cornerstone created the framework, our rationale for basing our framework on the UN Sustainable Development Goals, and described our methodology.

On April 1, Head of Research and Corporate Governance John Wilson hosted a panel discussion to address current topics in corporate governance, such as:

John was joined by Catherine Jackson, Founder of Jackson Principled Governance, a firm that brings the investor and sustainability perspectives into the boardroom to help prudent boards identify, understand and manage their ESG risks and opportunities; Karina Litvack, a corporate governance and sustainable investment expert with a 25-year career in finance and sustainable business practice (and current board member of energy firm Eni); and Timothy Smith, Director of ESG (Environmental, Social and Governance) Shareowner Engagement at Walden Asset Management.

Here is a replay of that video discussion.