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:


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.

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

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

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.

SDG 16: Peace, Justice and Strong Institutions highlights the role of governments and institutions in promoting peaceful and inclusive societies for sustainable development, providing access to justice for all, and building effective, accountable and inclusive institutions at all levels. To achieve the SDGs, governments and private institutions must be held accountable. Corruption, crime, bribery, and any number of unacceptable behaviors that are rampant in countries around the world must be addressed and ultimately eradicated. Moreover, violence against marginalized groups – whether on the basis of religion, geography, class, race, ethnicity or other factors – must be stopped. The realization of peace and justice and access to such things as housing, education, healthcare, food and nutrition requires strong institutions and governments that are held accountable for putting the needs of their people above the interests of their leaders.

Progress toward SDG 16 underpins all of the other SDGs. Peace, justice and strong institutions can facilitate better use of human capital and financial resources, which can result in attracting more investment capital and spurring economic growth in a country or a community. The synergies between SDG 16 and other goals are highlighted below.

Learn More About Investing in Solutions for Peace, Justice and Strong Institutions

Invest in Access to Fair Treatment and Equal Opportunity

The World Bank Group considers corruption a major challenge to ending extreme poverty by 2030 and boosting shared prosperity for the poorest people in developing countries. Corruption, a major barrier to fair treatment, has a huge impact on the poor and vulnerable, increasing costs and reducing access to services, including health, education and justice. Corruption impedes investment, with consequent effects on social and economic stability, growth and jobs. Elimination of corruption and unfair practices will lead to more efficient use of human and financial resources, resulting in more investment capital and ultimately better economic growth.1

Much of the world’s costliest forms of corruption could not happen without institutions in wealthy nations: the private sector firms that give large bribes, the financial institutions that accept corrupt proceeds, and the lawyers and accountants who facilitate corrupt transactions.2 To ensure fair treatment and equal opportunity, corporations must commit to and be held accountable to fair and just practices and have good corporate governance practices in place. Moreover, civil society institutions must be supported and allowed to thrive so that they can advocate for the rights of marginalized people and hold governments accountable. Finally, government institutions – including elected officials and bureaucrats – must abide by the laws of their nations, and enact new laws if their laws are fundamentally unjust, if we are to realize a true vision of world with equal opportunity and fair treatment for all.3

Invest in Access to Adequate Housing and Living Conditions

Inadequate housing affects millions of people in urban areas as well as rural areas. A chronic lack of adequate housing is one of the major challenges of urbanization as people migrate from rural areas to cities. Densely populated urban areas that experience crowding, rundown housing, poverty and social disorganization experience greater violence and instability. Reducing the rate of violence against women, people with disabilities, and poor people, and ridding the world of the scourge of human trafficking, will require a fundamental redesign of how communities are organized, the conditions in which they live, and ultimately, their access to resources. This kind of transformation in how people live will require legitimate and effective governments and investment that focus on the well-being of people and communities.4

Learn More About Investing in Solutions for Peace, Justice and Strong Institutions

SDG 16: References

1 The World Bank, Combating Corruption, 2018
2 Ibid
3 United Nations and the Rule of Law: Equality and Non-discrimination
4 Habitat for Humanity, Adequate housing included in the Sustainable Development Goals, 2015.

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…”


“…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.

This article originally appeared in Investment News on December 13, 2018. 

Sustainable and impact investors are set to intensify their decades-long support for action on climate change on the heels of a recent report from the Intergovernmental Panel on Climate Change and the Fourth National Climate Assessment, issued by the U.S. government.

The U.S. government notes that unless urgent action is taken, climate change could shrink the U.S. economy by hundreds of billions of dollars every year in direct costs. Consistent with these findings, the IPCC’s alarming (and unsurprising) conclusions are that urgent global economic transformation is needed to head off catastrophic damage to ecosystems, communities and economies beginning within a quarter century.

Many investors now understand that climate change is not merely an environmental issue but a material economic risk for long-term portfolios. However, investors should avoid a single-minded focus on climate change that ignores the relationship between ecosystems and human development.

The IPCC report stresses that an effective fight against climate change must include efforts to achieve sustainable development goals such as gender equality, the eradication of poverty, and food security.

In other words, how we fight climate change matters. Even the most optimistic scenarios will require substantial human adaptation to changed ecosystems, which will be especially challenging for poor or marginalized communities. Achieving sustainable development goals will strengthen the ability of poor communities to adapt to inevitable change and complement more direct efforts to mitigate climate change. However, these climate mitigation efforts by themselves may either help or hinder progress towards the sustainable development goals.

For example, mitigation strategies such as reforestation or biofuel development may reduce the land available for agriculture at a time when crop yields are already declining because of rising temperatures and water stress. The resulting increases in food prices have the effect of reducing buying power and possibly destabilizing civic and political cultures in developing countries.

Conversely, sustainable agricultural strategies, conducted with attention to social equity, can increase food security and counteract some of the negative effects of climate change on drinking water, biodiversity and income inequality, while reducing greenhouse gases associated with intensive farming practices.

The empowerment of women can also support and reinforce both climate change mitigation and adaptation. Improving the quality of cookstoves available to poor women has the direct effect of reducing fuel use and deforestation. It also reduces asthma rates, which improves educational outcomes, and empowers women by freeing them from the labor-intensive “drudgery” of traditional cooking methods.

Numerous studies have also shown that as women gain education and empowerment, they earn more income and often choose to have fewer children, which is associated with reduced poverty and lower greenhouse gas emissions.

The introduction of modern technologies such as cookstoves into poor households would have an undeniably positive effect on quality of life for the poor and the resilience of their communities. However, the resulting increase in the demand for energy could undermine the intended climate benefits unless these strategies are accompanied by investments in renewable energy and energy efficiency — both of which come with additional benefits for income and energy access.

These and many other examples demonstrate the need for a holistic understanding of the connection between issues of climate and human development. Yet much of the financial capital flowing into climate mitigation today is motivated solely by opportunities for financial return arising from new public policies and the dramatic improvement in renewable energy technology.

These flows are important for achieving global scale for environmental solutions. However, a lack of attention to the social dimension of investment decisions may create a blind spot for unintended consequences that counteract environmental benefits.

The insights of sustainable and impact investment offer an essential complement to mainstream financial analysis. Integrating environmental, social and economic concerns into investment analyses can yield a more nuanced understanding of the complex interactions between climate and society. As part of this analysis, a commitment to stakeholder engagement will help investors incorporate the perspectives of local communities who will be impacted by investment decisions — because, as the IPCC report notes, climate change will impact people differently depending on geography, income and culture.

So what can investors who are concerned about climate change do? First, their investment policy statements should explicitly incorporate both climate change and key related social issues, such as gender equity, poverty, food security, and health. Second, the evaluation of investments or investment strategies intended to address climate change should integrate an analysis of their impact on broader sustainable development goals. Third, investors should use their voice to ask companies, governments and financial markets how climate change and sustainable development is incorporated into policy, planning and performance measurement.

An effective response to climate change will require the mobilization of every resource available to society, including governments, business, and civil society. Given the unique power of financial markets, investors can contribute to a long-term solution or exacerbate existing problems. Sustainable and impact investors have an opportunity to influence the outcome, if they choose to take it.

We recently hosted a live video webinar to discuss ways in which investors can contribute to the narrowing of economic disparities through a dedicated emphasis on investing in underserved minority communities. Our panel, moderated by Randall Strickland, Cornerstone’s Director of Client Relationship Management, featured Pat Miguel Tomaino, Director of Socially Responsible Investing for Zevin Asset Management, and Julianne Zimmerman, Managing Director of Reinventure Capital.




In today’s economy, the goods we consume are often produced far from where they are purchased, successively changing hands along complex and opaque corporate supply chains. The International Labour Organization estimates that across these supply chains, there are approximately 24.9 million victims of forced labor in the world.

Where forced labor risks are not addressed, they can result in serious legal, reputational, and financial repercussions for companies. Investors are uniquely positioned to help companies recognize the importance of managing this risk, and are increasingly using their voice to do so.

KnowTheChain is a resource for companies and investors to understand and address forced labor risks. We believe that companies and investors can be a powerful force for improving the lives of people who labor in their global supply chains.

Through benchmarking current corporate practices and providing practical resources that enable companies to operate more transparently and responsibly, we aim to drive corporate action while also providing considerations for investor action. KnowTheChain recently evaluated  38 of the largest global food and beverage companies on their forced labor policies and practices.

The 2018 Food and Beverage Benchmark Findings Report finds that while many of the companies evaluated may have policies and commitments in place, the majority do not provide evidence that their policies and practices are being effectively implemented. Without evidence of implementation of these policies, companies may be unprepared to respond to an egregious abuse uncovered in their supply chain by an NGO, trade union, or reporter.

Agriculture workers are particularly vulnerable

Human Rights Watch tells the story of Saw Win, a Burmese migrant worker smuggled into Thailand on the promise of a food processing job for US$4.50 a day. He was sold to brokers who were controlling work crews at fishing piers in a Thai port town. Initially, he worked on a trawler with no pay for three months. Upon returning to the port town, he was locked in a room for three days before being sold again to another boat. Eventually, Saw Win escaped by jumping overboard near the Malaysian coast and returned to land for the first time in two years.

Men and women seeking gainful employment in the agriculture industry are particularly vulnerable to exploitation – whether through force, fraud or coercion – and are often made to work for little or no pay, cut off from their homes or families. As the food and beverage sector increasingly pushes agricultural work into more rural areas to accommodate its land-intensive activities, it’s exacerbating the remote nature of the work and putting workers at greater risk.

How are companies scoring?

Unilever, which was the top scoring company in KnowTheChain’s first food and beverage sector benchmark in 2016, remains at the top with a score of 69 out of 100. Kellogg took second place with a score of 66.

Five companies score below 10 out of 100. None of them have a publicly available supplier code of conduct, nor do they take any action on worker voice and recruitment.

Scores by theme

The average score across the benchmark remains low, at just 30 out of 100, indicating that companies need to take further action to address forced labor risks across all tiers of their supply chains.

Overall, companies scored the lowest on indicators of worker voice and recruitment, suggesting that little or no action is being taken to listen to, engage with, or empower laborers across supply chains. These themes have the most direct impact on the lives of workers, and concerned investors can ask companies about their practices.

Improvements are (slowly) being made

Comparing the 2018 benchmark to its 2016 counterpart, we can see that more companies now have policies prohibiting recruitment fees, and in general, companies are providing more substantive examples of how their policies are used in practice. Of the 19 companies benchmarked in both 2016 and 2018, 17 disclosed additional steps taken to address forced labor risks.

It’s encouraging to see some companies making additional commitments since the 2016 benchmark, but progress for workers is not moving fast enough. Companies across the board must do better to make demonstrable improvements for workers.

Investors are taking action

In addition to scoring and ranking companies, this report provides good practice examples and recommendations for companies as well as considerations for investor action.

Investors representing more than $3 trillion in assets have signed the KnowTheChain Investor Statement, which lays out expectations for how companies should address forced labor risks, in-line with international standards and existing human rights due diligence tools.

Investors may wish to integrate KnowTheChain’s findings into their investment decision-making and active ownership practices. Shareholder advocacy organization As You Sow introduced a resolution on behalf of Monster Beverage shareholders, citing its 0/100 score in our 2016 benchmark report and asking the company to address the lack of transparency regarding slavery and human trafficking in its supply chain. (Monster scored 4/100 this year.)

Through responsible purchasing practices, strategic collaborations, and extended standards on issues such as ethical recruitment to lower-tier suppliers, companies can positively impact working conditions across their supply chains.

Investors who hold any of the companies KnowTheChain has benchmarked can use KnowTheChain to engage their portfolio. For each company in the benchmark, KnowTheChain has created a two-page summary identifying what steps the company can take. These company scorecards can provide a clear path for engagement for investors. Investors can further ask how companies are working to ensure migrant workers are not exploited, and how they engage with workers in their supply chains to empower them to exercise their labor rights, while ensuring that an early warning system is in place for when abuses occur.

KnowTheChain will be releasing a similar benchmark report on the apparel and footwear industry in the very near future, and we hope the audience for this research continues to grow.

“Creativity & The Arts” is a relatively new theme for impact investors to consider, despite being embedded in every cultural and technological advancement that has occurred since the dawn of civilization. As illustrated in this report, many impact-focused development initiatives integrate arts and creative endeavors, even when not defined as such. This highlights the importance of establishing common frameworks of understanding when considering impact investing.

The UN Sustainable Development Goals (SDGs), though not originally designed for investment or philanthropic applications, have become an important frame of reference for sustainable and impact investors. We at Cornerstone Capital Group have been developing our own framework for supporting investors to incorporate SDGs into their investment process. Our efforts have focused on:

One challenge we face in considering the SDGs in an investment context is their interrelated nature. Performance or improvement in any one SDG will likely be highly correlated with performance across a range of SDGs. Similarly, one can make a case that “arts and creativity” are intertwined with almost every SDG.

Of particular relevance to this report are SDG 5: Gender Equality and SDG 10: Reduced Inequalities. Several of our contributors specifically reference the ways in which artists and creatives who are women and/or people of color and/or LGBTQ can be nourished and supported through affordable live/work art spaces. These are tangible examples of how art and creativity can be considered in the context of the SDGs – and specific investment opportunities.

As an example of the interrelated nature of the SDGs, affordable housing in a broader sense is responsive to SDG 11: Sustainable Cities and Communities. One can target SDG 11 as a matter of personal interest, while simultaneously considering SDG 5 and SDG 10, using art and creativity to connect the three.

In addition to creative culture serving to connect various impact investment goals—and more important—it is a bridge-builder between and among cultures. The arts can help communicate shared human experience in ways that transcend language and other societal structures and social norms. The arts offer amazing ingenuity, fresh and unique perspectives, and uses of media and tools from across every corner of the globe and every culture.

With this report, we hope to convey the numerous ways in which a focus on the arts and creativity can reveal meaningful and impactful investment opportunities. We can readily identify opportunities not only to support artists and creatives themselves, but also the spaces in which they live and work, the positive effects that they can bring to the communities in which their work is made and shown, shared experiences and bridging of cultures and communities, and improvements in the overall human condition.

At Cornerstone, we think of impact investment in a total portfolio context. This report shares perspectives from asset owners who are interested to find a fiduciary-level investment perspective on this issue. We hear from entrepreneurs using art and creativity as a driver of value in their business models. We also feature several managers currently offering diversified managed investment strategies in the private equity and fixed income asset classes, as examples of the creative thinking occurring in the finance arena. As the landscape of such opportunities continues to develop, Cornerstone will thoughtfully review the investment and impact goals of all such strategies.

Creativity and the arts are critical elements to finding the solutions to the systemic challenges that we face today. For those ready to participate in creating a better world through impact investing, we welcome the inclusion of arts and creativity as guideposts to our investment process, and an important new tool to creating the more sustainable world we want to build.

Executive Summary

Access our full report here.

The US legacy of inequality based on race and ethnicity is rooted in centuries-old policies and practices that were designed to provide greater opportunity and wealth to some people (white people) and less opportunity and wealth to others (people of color). These practices were sometimes promoted at the outset as “race-neutral,” while in actuality they were nothing of the sort. For instance, policies such as the G.I. Bill granted opportunities to build wealth but were implemented to benefit white Americans while suppressing others’ access to those opportunities. Over time, investors have done little to break the economic divide; indeed, in many cases investment practices have only served to reinforce the accumulation of wealth among a small percentage of people.

Investors cannot alter centuries of structural racism that have led to economic inequality on their own, but they can support ways to help build an economy that provides opportunity for everyone. In this report, we look at some ways that investors are attempting to alter the economic paradigm through their investing practices.

People of color in the US earn far less and possess a fraction of the household wealth of white communities. The disparity reflects, in large part, 20th century policies such as the New Deal that set the stage for the emergence of a robust middle class but also embedded discriminatory practices that severely limited the participation of communities of color in that upward mobility. Many decades on, the overhang from these policies persists, and for many households of color were exacerbated by the impact of the 2007-09 recession.

Household wealth underpins financial security, helps families weather difficulties such as health issues or natural disasters, and enables people to maintain their standard of living during periods of unemployment. Family transfers of wealth are key to funding higher education, the formation of businesses, and home ownership for the next generation.

The implications of this wealth disparity go beyond the disadvantages it creates for the people directly affected. People of color will become the majority of the US population as early as 2045, according to a new US census projection. If the current income and wealth gaps between whites and people of color remain static, the overall pool of investment capital for entrepreneurship and home equity will be concentrated in fewer hands and sectors of the economy. This could fuel social instability and create major headwinds for future US economic growth.

Whether motivated by a desire to address racial inequities or concern about the future health of the US economy overall, investors are interested in understanding concrete ways to invest toward a more equitable economic playing field — one that fosters the creation of durable wealth. Investors are increasingly seeking companies, funds, and other assets that address long-term risks resulting from racial inequality and that are positioned for success if society moves to confront the status quo. We have assessed how investors may be able to contribute to solutions to three of the main current components of wealth inequality:

In crafting impact investment strategies, Cornerstone Capital Group evaluates how investments can improve access to resources needed to improve individual, community, and societal outcomes. In considering what investors can do to help break the cycle of racial and ethnic wealth inequality, we look for ways to foster wealth creation by tackling those three challenges.

Fortunately, the scope and number of investment vehicles designed to improve access to housing and capital is broadening along with growing interest in targeting investments for impact.

This editorial was originally published in FA Online, April 26, 2018.

There was a time when I regularly quoted a well-known statistic that one third of women and girls experience sexual assault from an unknown or known perpetrator in their lifetimes. At the time, that percentage seemed pretty high. And then #metoo happened. The more I heard stories from women—personal stories or stories circulated through social media and then the mainstream media—the more I realized that it was the rare woman or transgender person who I knew or knew of who hadn’t experienced sexual or gender-based violence.

So here we are, in a time where social media has finally made evident the extent of the problem. How did we get here? How is it that the systematic cover-up of violence and abuse in society and in companies is so pervasive?

In a recent article published by Cornerstone Capital Group (where I work), my colleagues Emma Currier and Sebastian Vanderzeil noted that sexual and gender-based violence may present a material risk to companies and industries in three key areas:

Simply put, violence and harassment in the workplace is bad for business. When allowed to run rampant, it can lead to greater turnover and lower performance. It can also create tension with the communities in which businesses work when management is perceived to be complicit with perpetrators and noncompliant with local customs and laws. And, as we have seen with the Weinstein empire and others, when it comes to companies that fail to create inclusive cultures and address harassment, consumers are quick to abandon brands, a phenomenon that is growing thanks to the prevalence of social media.

But there is something that can be done. Shareholders and investors can insist that the companies in which they are invested disclose critical information that will bring to light corporate practices and cultures related to sexual and gender-based violence. Unfortunately, this is easier said than done due to the current state of reporting by companies on matters related to an array of issues that are important to women and others who experience marginalization. Consistent with broader corporate negligence around gender equality, there is a serious gap in corporate reporting on sexual harassment and violence, a gap that currently makes it very difficult to evaluate corporate behavior.

Given this urgent need for more disclosure, In the short run, investors should demand that companies disclose:

  1. Sexual harassment claims and companies’ specific steps to resolve the claims
  2. Initiatives to support victims in reporting sexual and gender-based violence

A handful investors are already taking significant steps toward aligning their investments with companies that disclose their practices related to equity and opportunity in the workplace. This is being made possible in part because of new efforts to systematically improve disclosure and reporting practices among corporations. For example, EquiLeap, an Amsterdam-based organization, measures gender equality in public companies against an extensive proprietary Equileap Gender Equality Scorecard, which looks at 19 different data points, including recruitment, training and promotion, the gender composition of management and workforce (gender balance being the ideal), fair wages and equal pay, family leave policies, work-life balance and supply chains. It also includes alarm bells to mark, and if necessary, to exclude companies that have cases taken against them or have been judged to be guilty of gender discrimination and/or harassment. The Equileap Scorecard is inspired by the UN’s Women’s Empowerment Principles, and looks at the workplace from a rights-based perspective rather than purely from a diversity prospective, which most gender-lens investment strategies focus on.

At Cornerstone Capital Group, we are also embedding a robust gender analysis into our investment review process given our clients’ interest in gender lens investing approaches that reflect their values and indeed that have the ability to change how corporations behave.

But we can’t do it alone or even with the limited number of investors who are committed to gender lens investing. We will only be successful in making the needed change that #metoo has given voice to if many more investors ask hard questions of their investment managers and the companies in which they are invested. Collectively we must demand more of companies and we must act to ensure that they take the basic step of disclosing the information that investors need to make informed decisions. Because if not now, when?

Katherine Pease is Managing Director and Head of Impact Strat

Upcoming Event:

Citizen activists are taking to the streets to demand government accountability and action on issues they care about passionately, with groups ranging from #metoo to #neveragain, Black Lives Matter, and the alt-right. Against this backdrop, some of the largest shareholders in the world are now joining long-time shareholder advocates to call for improved corporate governance, equality and environmental stewardship. How will this heightened partisanship and conflict affect relations between companies and shareholders?

Join Cornerstone Capital Group as we convene our panel of corporate governance experts to discuss hot topics in corporate accountability, sustainability and shareholder engagement, addressing questions such as:

April 17, 2018

11:00 am – 12:00 pm

Register here

U.S. Special Counsel Robert Mueller’s recent indictment of 13 Russians for violations of US campaign laws highlights just how broken the U.S. election finance system has become. It illustrates that the public cannot expect to be able to evaluate all the agendas that lie behind election spending, the truthfulness of content, or the legitimacy of the “dark money” that currently dominates campaign finance.

Beginning at least as early as 2014, a Russian organization called the Internet Research Agency (IRA) appears to have violated laws prohibiting election spending by foreign nationals by purchasing ads on social media sites, paying U.S. nationals to engage in political activities, and making other expenditures designed to influence the outcome of the 2016 Presidential election. Such a scheme could flourish for years only because of the general opaqueness of the U.S. campaign finance system. Because U.S. election law allows legitimate donors to avoid disclosure by funneling some political spending through intermediaries, U.S. voters are typically not aware of the funding source of political advocacy efforts.  Transparency advocates argue that this undermines free and fair elections by concealing the possible motivations and agendas of donors.  But emerging details of Russian interference in U.S. elections also shows how this system can pose an even greater threat to national security by covering up illegal activity by foreign agents whose agenda is contrary to US national interests.

An ineffective system…

U.S. campaign finance laws have generally grown laxer over the last decade.  In a series of decisions, most notably the 2010 Citizens United v. FEC decision, the Supreme Court has struck down many limitations on campaign finance for individuals and corporations, while endorsing – but not requiring – greater transparency of political contributions.

In the absence of outright limits, a system of transparency creates accountability of donors to the public and makes illegal donations more difficult to conceal.  However, Congress has shown little political will to act on the Court’s recommendations, leaving a system that fails either to effectively limit election spending or to establish accountability for donors.

Currently, U.S. corporations cannot donate directly to political campaigns. They can instead make indirect contributions to trade associations or “social welfare” organizations for political purposes without disclosing these contributions, as long as these contributions are not coordinated with the campaigns of political candidates.  This substantial loophole has increased the influence of money in US elections.

…Leaves the task to advocates

In the absence of comprehensive campaign finance disclosure rules, advocates are making efforts to encourage disclosure where possible, as a means of raising public expectations of transparency.  Many shareholders of public companies now consider oversight and disclosure of election expenditures to be a necessary part of good corporate governance. They have begun to ask companies to voluntarily disclose all election spending, arguing that oversight is necessary to ensure that funds are spent in shareholder interests, as opposed to advancing the political views or interests of company executives.  Advocates have also pointed to the example of companies whose donations have caused embarrassment when revealed, because they were perceived as contrary to the companies’ own expressed policy views.

According to the Center for Political Accountability, shareholders have engaged over 175 companies, of which 83 have adopted model guidelines for disclosure while approximately 200 others have adopted some form of disclosure and board oversight of political spending.  In 2017, approximately 100 shareholder proposals were filed on this topic, and voting support for most of these proposals typically exceeds 40%, which demonstrates substantial support among shareholders.

Voluntary corporate disclosure of political contributions will not be sufficient to bring transparency to the campaign finance system, because a significant portion of campaign finance comes from private companies, individuals and families, and because the public corporations with high or controversial electoral participation may have the most incentive to resist full disclosure.  Nevertheless, the success of shareholder efforts helps to build support for eventual comprehensive disclosure laws by creating social expectations for transparency and countering arguments that disclosure is impractical or risky.

The Role of Asset Owners

While there is no way to know how much influence Russian interference had on the outcome of the 2016 U.S.  Presidential election, they did succeed in reaching millions of people and mobilizing thousands to take action in what they believed to be legitimate domestic political events.  The Mueller indictment may at least hamper the IRA’s future efforts by shining a light on its methods, and perhaps by spurring greater regulation of social media advertising.  But a model for disrupting US election has now been established.   Until all election finance can be traced back to its source, there is no guarantee that another hostile power could not use a similar roadmap to disrupt future elections.

Increased corporate transparency could make such schemes more difficult to conceal by establishing generalized expectations of transparency by all actors. The role of investors is to influence the corporations and financial markets toward support for this outcome.  Specific steps may include:

All citizens have an interest in living in a robust democracy, and investors have a specific interest in the role that democracy plays in ensuring market stability, respect for property rights, and broadly shared economic growth.

John K.S. Wilson is the Head of Research and Corporate Governance at Cornerstone Capital Group. He leads a multidisciplinary team that publishes investment research integrating Environmental, Social and Governance (ESG) issues into thematic equity research and manager due diligence. He writes and presents widely about the relevance of corporate governance and sustainability to investment performance for academic, foundations, corporate and investor audiences.

“Time’s Up”… #MeToo … allegations of abusive behavior by corporate chiefs … the groundswell of public attention to sexual and gender-based violence (SGBV) is revealing how pervasive it is at all levels of society, in all industries. From an investor’s perspective, the burgeoning movement to root out abuse raises the question of whether capital markets participants might be complicit in its persistence.

It also raises the possibility that issues related to SGBV might evolve into a material financial risk for companies that don’t take appropriate action.

Traditionally, impact and gender lens investing has focused on discrimination, pay equity, and workplace conditions more so than the human rights violations embodied by SGBV. Investors lack access to data regarding the extent of the problem and do not possess the means to gauge the consequences for stakeholders or investment performance. We believe it is incumbent upon investors to demand greater transparency on issues of SGBV related to business activity; to hold companies accountable for reducing SGBV; and to incentivize companies to minimize SGBV.

With this report we launch an inquiry into how investors might better understand SGBV and contribute to a solution, as well as examine what kinds of data would generate useful insights. Key findings include:

Download our full report here.

Emma Currier is a Research Associate at Cornerstone Capital Group. Emma graduated with a Bachelors of Arts degree in Economics from Brown University in May 2016. While at school, she worked with the Socially Responsible Investing Fund and as a teaching assistant for the Public Health and Economics departments. She spent her sophomore summer researching differences between American and Indian educational styles in Arunachal Pradesh, India, and completed a summer investment bank analyst position with Citi in the Media & Telecom group in 2015.

Sebastian Vanderzeil is Director, Global Thematic Research Analyst with Cornerstone Capital Group. He holds an MBA from New York University’s Stern School of Business. Previously, Sebastian was an economic consultant with global technical services group AECOM, where he advised on the development and finance of major infrastructure across Asia and Australia. Sebastian also worked with the Queensland State Government on water and climate issues prior to establishing Australia’s first government-owned carbon broker, Ecofund Queensland.