Cornerstone’s Chief Impact Strategist, Katherine Pease, moderated a panel at The Exchange 2020, the annual conference organized by Social Impact Exchange (SIE). For the past ten years SIE has hosted the nation’s only annual conference exclusively focused on scaling social impact. At this year’s event the focus was “Unifying Leadership.”

The session “Financing Change and Financial Inclusion explored innovative and promising financing strategies that support systems change efforts over the long haul and at the appropriate levels. The panel discussed how to increase effective capital flow into low income communities and what it takes to build the field infrastructure to do this well and at scale, such as the necessary structural adaptations and firms that are driving different investment models to shift the system.

Panelists:
— Ben Bynum, M.D., Portfolio Director, Program Related Investments, Colorado Health Foundation
— Eleni Delimpaltadaki Janis​, Chief Capital Markets Officer, National Community Reinvestment Coalition
— Jake Segal, Vice President of Advisory Services, Social Finance
— Ebony Thomas, Racial Equality and Economic Opportunity Initiative Program Executive, Bank of America

 

The climate crisis is fueling a human health emergency. Numerous climate-sensitive health risks are scientifically established:

The human and economic costs of these increased risks to health are potentially enormous. The current coronavirus pandemic is just one stark reminder of the toll a disaster can take on society. Climate change has become a determining factor in the likely health outcomes for populations in a variety of locations and socioeconomic groups.

From an investment perspective, assessing portfolio risk from climate change has become critical. How are sectors, regions and companies responding to current threats? What preparations are they making for future extreme weather events or infectious disease outbreaks in terms of supporting their employees, customers and other stakeholders (and, of course, protecting their bottom line)? Institutional investors are increasingly considering such analysis as part of their fiduciary duty to clients and beneficiaries – and those who are not, we would argue, are not doing their jobs properly.

In this report, we discuss the relationship between climate change, socioeconomic status and health. We highlight the primary categories of climate impact, the populations most affected, and how investors may play a role in funding solutions.

In outlining potential investment solutions, we take a holistic approach given the interconnectedness of contributing factors.  We focus on investment strategies that address specific climate-related interventions. Ultimately, however, solving the root causes of climate change and the subsequent effects on human health will require a comprehensive approach, one that considers the interplay of relevant issues: health, climate, transportation, education, financial stability, among others.

Download Climate Determinants – Human Health

Please see our report Climate Determinants — Financial Services: Transformative risks for the financial sector, governments and consumers

During Climate Week NYC 2020, Cornerstone Capital Group hosted eminent climate scientist Sir David King, Founder of the Centre for Climate Repair at Cambridge University. The Centre is a cross-disciplinary research institution, aiming to develop and understand the solutions that will safeguard our planet from the disastrous consequences of global warming. Climate Week NYC, the annual climate summit held in association with the United Nations and New York City, brings together business and government leaders to share developments in climate action and find areas of future collaboration.

Sir David possesses a wealth of experience in climate science, having served as the UK’s Special Envoy on Climate Change, and as the UK Government’s Chief Scientific Adviser. He has published over 500 scientific papers, covering policy, climate change, and physical chemistry.

Cornerstone CEO Erika Karp hosted this opportunity to hear from one of the most distinguished leaders in the field. Chief Impact Strategist Katherine Pease shared perspectives on how to embed climate action as a component of one’s investments.

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.

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.

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

On March 19, 2020, Cornerstone Capital Group held a conference call addressing concerns about the current coronavirus pandemic and its impact on the markets, the economy, and importantly, the changes in how we think about the infrastructure of our society over the longer term. Cornerstone’s Erika Karp, Craig Metrick and Michael Geraghty were joined by two equity managers on the Cornerstone platform: Cathie Wood of Ark Investment Management, and Garvin Jabusch of Green Alpha Advisors. The full call replay can be accessed here.

Managing Portfolio Risk Through Integrated Analysis

The participants on the call focused on the benefits of integrating environmental, social and governance (ESG) factors into the investment process in an effort to de-risk long term portfolios and identify critical growth opportunities.  Both Ark and Green Alpha look at multiple risk factors at a systemic level to minimize exposure to threats such as climate change. This extends to investing in methods to address risk — such as pandemic crisis. In their view, by focusing on innovation and the future while considering all stakeholders instead of only shareholders, investors may experience better long-term returns with lower volatility.

Kicking off the discussion, Erika highlighted that “sustainable investing is a proxy for quality. It’s a proxy for innovation and a proxy for resilience. And that is precisely what we need right now.” She asked whether, when we emerge from this current crisis, we would be forever changed:

“We have to think about issues like distance learning, telecommuting, distributed health systems. We have to think about supply chain logistics. We have to think about surge capacity. We have to think about virtual entertainment, emergency service centralization, obviously food safety, water quality, hygiene standards. We have to think about mental health provision. We have to think more proactively and in an innovative way about investing. Going forward to attack these challenges, we remind everyone that impact and sustainable investing is just investing.  But a more conscious, predictive way to invest.  Impact investing is the new cornerstone of capitalism.”

Michael Geraghty, Cornerstone’s market strategist, discussed the volatility of the markets under the current coronavirus situation. He doesn’t believe the markets will stabilize until the virus is either contained or a vaccination is developed and made available to the public. Michael notes, however, that this is a short-term shock to the system and not a structural one. That’s not to say that this pandemic won’t have a profound effect on the economy or the markets near term.  The consumer accounts for 70% of U.S. Gross Domestic Product (GDP). If consumers are staying home and hunkering down, a cut in rates by the Federal Reserve and a payroll tax cut by the Federal government won’t have a strong impact on consumer behavior.

Craig Metrick noted that Cornerstone focuses on long term investment objectives while creating an investment plan which is designed to achieve social and environmental impact. He then interviewed Cathie and Garvin as to their views on the longer-term implications of the current crisis.

Investing in Disruptive Innovation and Strong Governance

Ark Investment Management focuses on investing in disruptive innovation over a five-year time frame.  Its five core themes are: DNA sequencing, robotics, artificial intelligence, energy storage and blockchain technologies. Cathie Wood noted that the companies her firm invest in are not typically in any indices. Other managers are selling these names while buying names in the indices, such as the S&P 500, giving firms like hers an opportunity to buy these innovative company stocks at lower valuations. Over the long haul, she believes these investments should outperform older economy names that still dominate the indices.

Garvin Jabusch noted that a recession is already priced into the markets and his firm is looking for companies that will perform well out of the downturn.  Bottom-up analysis is key, in his view. He looks for companies that are good stewards of capital, are innovative and create solutions that will make the economy more productive. Green Alpha is a long term buy and hold manager. The firm focuses on innovative companies that can help de-risk the economy such as those engaged in decarbonization, biotech and electrification.

Summing up the discussion, which included a very lively Q&A, Erika noted: “When it comes to ESG analysis, the “G,” governance, is first among equals. Because if we’re talking about a well-governed company, then by definition it is looking at environmental and social issues. And if a company is not looking at environmental and social issues, it is by definition not well-governed. It’s tautological.”

Ark Investment Management and Green Alpha are two of the strategies included in the Cornerstone Capital Access Impact Fund. Click the link to view standardized performance and the Fund’s top ten holdings:  https://cornerstonecapitalfunds.com/quarterly-commentary

You should carefully consider the investment objectives, risks, and charges and expenses of the Fund before investing. The prospectus contains this and other information about the Fund, and it should be read carefully before investing. You may obtain a copy of the prospectus by calling 800.986.6187. The Fund is distributed by Ultimus Fund Distributors, LLC. Cornerstone Capital Group is the adviser to the Fund. Investing involves risk, including loss of principal. Applying ESG and sustainability criteria to the investment process may exclude securities of certain issuers for both investment and non-investment reasons and therefore the Fund may forgo some market opportunities available to funds that do not use ESG or sustainability criteria. Securities of companies with certain focused ESG practices may shift into and out of favor depending on market and economic conditions, and the Fund’s performance may at times be better or worse than the performance of funds that do not use ESG or sustainability criteria.

9827671-UFD-3/23/2020

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

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.

Civic engagement and community education were common themes at CBCA’s Arts + Impact Investing Forum on Monday, August 19 at the Commons on Champa.

Attended by 100 people, the Arts + Impact Investing Forum was part of CBCA’s quarterly Arts + Industry Forum Series. Each forum in the series explores the unique intersection between the arts and a specific business sector significant to Colorado’s economy.

Expert speakers discussed why and how the field of impact investing should be looking at the creative sector when exploring investment options. There is ripe opportunity to seize on this trend of investing with a #CreativityLens (as advocated by UpStart Co-Lab), which can yield both powerful social and fiscal returns.

Forum speakers were: Phil Kirshman, Chief Investment Officer, Cornerstone Capital Group; Chuong Le, Partner, Snell & Wilmer, Thadeaous Mighell, Curator at Understudy Arts Incubator Space and an Independent Community Outreach Program Consultant; Jana Persky, Opportunity Zone Program Director, Colorado Office of Economic Development; Chris Scharrer, Senior Financial Analyst, Meow Wolf; and Gary Steuer, President and CEO, Bonfils-Stanton Foundation. Emily Winslow, Senior Manager of Investments and Impact Opportunities at Social Venture Circle, moderated the panel conversation and provided an opening presentation to set the stage.

As part of his introduction, Kirshman compared investing to voting. It’s a way to empower people to act on their values and participate in the betterment of our society. Cornerstone Capital Group published a report in October 2018 on the emerging theme of arts and creativity in impact investing.

Mighell echoed the sentiment about community engagement and spoke about his work with BuCu West in Denver’s Westwood neighborhood. He highlighted the importance of hearing from local citizens about their needs and wishes, and to inform development decisions.

Persky further encouraged residents, including those in the arts, to get involved and have a say in revitalization projects in Opportunity Zones. This point is particularly true in rural Colorado, where the creative industries are often leading economic development strategies within their communities. Enacted as part of the 2017 tax reform package, “opportunity zone is a federal tax incentive for investors to invest in low-income urban and rural communities through the favorable treatment of reinvested capital gains and forgiveness of tax on new capital gains” (Colorado Office of Economic Development and International Trade).

Scharrer mentioned that Meow Wolf is also a B-Corporation. With that B-Corp status, Meow Wolf demonstrates their corporate commitment to the highest standards of social and environmental business practices. He also encouraged consumers to seek out B-Corps and support their social causes with your patronage. Once again, an intentional investment, no matter how small, is a powerful act.

There is still a lot of education needed to help investors and funders better understand the creative sector and develop formal tools to facilitate their investments. Winslow told the story of being in a room of investors when Meow Wolf was getting started and seeing their blank and confused stares. She said they didn’t know what to make of this unique investment opportunity as the standard tools for assessing risk and valuation didn’t apply.

Steuer talked about mounting interest in pooled capital to support creative enterprises in Colorado. He mentioned the newly launched NYC Inclusive Creative Economy Fund from LISC. This exciting new LISC fund is “an opportunity for accredited investors to invest in New York City’s affordable, inclusive creative work spaces, fostering 21st Century quality jobs for low- and moderate-income New Yorkers.” But what about Colorado?

As the evening went on, speakers and audience members also touched on creative business models, intersectionality in arts organizations (arts and…) and the need to match the right type of capital to the right type of project. Following the panel, attendees formed small breakout groups or chatted with new connections.

To support this emerging trend of impact investing in creative enterprises, we need more creatives participating in community development conversations, more education for investors on innovative artistic business models, and more awareness and appreciation for the wide-ranging social benefits of the creative sector.

The 2019 Arts + Industry Forum Series is sponsored by College of Arts & Media at CU DenverDenver Business Journal and Footers Catering. The Arts + Impact Investing Forum was sponsored by Bonfils-Stanton Foundation and RBC Wealth Management, with support from Colorado Association of Funders.

This recap was originally published by the Colorado Business Community for the Arts (CBCA). 

It seems clear that the “circular economy” is the only way forward for humanity.  In my view, adopting circular economy principles will combat our current crisis of waste – wasteful manufacturing, wasteful packaging, food systems, technology, extractive materials.  We can begin to repair the planet. The concept resonates deeply with me and the team at Cornerstone, which was founded with the vision for a regenerative and inclusive global economy.

For those who don’t know, a circular economy “aims to redefine growth, focusing on positive society-wide benefits. It entails gradually decoupling economic activity from the consumption of finite resources, and designing waste out of the system.” [1]

I recently attended the Circularity 2019 conference, hosted by Greenbiz. It was a fascinating and thought-provoking few days, with sessions ranging from Digitizing Circularity  to Catalytic Capital.  I participated in a fascinating panel with Ron Gonen, Co-Founder and CEO of Closed Loop Funds, and Emily Landsburg, Director at private equity firm Ultra Capital, on the role of investors in financing companies engaged in the circular economy. I’m pleased to share Greenbiz’s recording of that conversation.

[1] https://www.ellenmacarthurfoundation.org/circular-economy/concept

 

UN Sustainable Development Goal 11: Sustainable Cities & Communities encompasses both the challenges and opportunities presented by the increasing concentration of our global population both in urban centers and smaller but still heavily populated towns. By 2050, an additional 2.4 billion people are expected to be living in urban areas as this trend continues.1 Cities put a strain on natural resources in surrounding regions, and present difficulties in terms of creating housing and transportation systems that are both sustainable and inclusive. On a positive note, dense population means that sustainable solutions to urban challenges can improve the lives for many at once. SDG 11 is further refined by targets that can be more readily translated into actions. These targets highlight the interconnected nature of the goals: For example, strategies to support SDG 11 dovetail with those that support SDG 6 (Clean Water and Sanitation), SDG 7 (Affordable and Clean Energy), and SDG 3 (Good Health and Well-Being). Below are a series of synergies that can come from providing access to products, services and systems that address Sustainable Cities & Communities.

Invest in Access to Clean Air

Nine out of ten urban residents breathe air that does not meet World Health Organization quality guidelines. 2 Air pollution is higher in cities than other areas due to high concentrations of human-generated sources3 vehicles, industrial activity, and power plants are the greatest contributors.4 Of particular concern is black carbon, a sooty fuel by-product that causes respiratory disease, cardiovascular disease, and cancer.5 Encouraging solutions to increase access to clean air will greatly improve the quality of life in urban communities.6

Learn More About Investing investing in Sustainable Cities & Communities

Invest in Access to Clean Water, Sanitation and Hygiene

Close to 1 billion city residents live in slums, where both running water and sanitation services are rare.7 For those living in formal housing, clean water is still not guaranteed. City water in developing countries often contains high levels of contaminants such as fecal bacteria.8 Meanwhile, the water crisis in Flint, Michigan, highlighted widespread exposure to unsafe drinking water in many urban areas in the US.9,10 At the same time, cities are major sources of water pollution. Ninety percent of sewage in developing countries is discharged, untreated, directly into bodies of water,11 and rainwater runoff from cities around the world contaminates streams and rivers. 12 Access to clean water ensures the health and prosperity of growing urban populations, and encouraging better water management in cities will be critical for water quality improvement beyond their boundaries.

Invest in Access to Affordable, Sustainable and Modern Energy

Cities account for 65% of the world’s energy demand, which will grow with rising urban populations.13 This demand translates to 70% of energy-related CO2 emissions globally, making urban areas major contributors to climate change.14 In cities that rely on the burning of fossil fuels for energy, air pollution often exceeds guidelines.15 At the same time, modern energy is essential to basic services such as lighting, cooking, and heating,16 yet 58% of people living in cities in low-income countries lack access to electricity.17 Improving access to sustainable, affordable, and modern energy in cities will bring benefits to more people and safeguard against harmful environmental impacts.

Learn More About Investing investing in Sustainable Cities & Communities

Invest in Access to Sustainable Sources of Food and Nutrition

As urbanization intensifies, so do the challenges of ensuring access to healthy food for residents.18 For many, price is a major barrier. For example, poor urban households in many parts of Africa spend 60-80% of their income on food, and report often going without food due to cost.19 In the US, lack of access to healthy food is also linked to distance as over 4 million urban households live further than a half-mile from a supermarket and lack access to a vehicle.20 These households frequently resort to nearby fast-food and convenience stores, leading to high levels of obesity and diet-related diseases.21 The well-being of all city dwellers depends on continued efforts to increase access to sufficient, healthy, and affordable food.

Invest in Access to Adequate Housing and Living Conditions

In the developing world, the number of people living in urban areas with substandard housing continues to grow. These residents often lack access to basic services such as electricity, running water, or sanitation.22 In developed cities, rising housing costs are placing unsustainable burdens on residents: Nearly half of all US renters pay more than 30% of income on housing,23 and more than 300 million urbanites globally are financially stressed by housing costs.24 This burden forces people to divert money from necessities like healthy food or medical care to pay for housing.25 Expanding access to affordable, safe, adequate housing means improving the health, finances, and stability26 for growing urban populations.

Learn More About Investing investing in Sustainable Cities & Communities

SDG 11: References

1 UNCTAD Handbook of Statistics 2017- Population
2 UN Sustainable Development Goals
3 Rural and Urban Differences in Air Quality, 2008–12, and Community Drinking Water Quality, 2010–15 — United States. Surveillance Summaries, June 2017
4 World Health Organization
5 Environmental Protection Agency Black Carbon Research
6 2018 Revision of World Urbanization Prospects, Population Division, UN
7 World Resource Institute Cities for All
8 Reducing Inequalities in Water Supply, Sanitation, and Hygiene in the Era of the Sustainable Development Goals. World Bank Group. 2017
9 Elevated Blood Lead Levels in Children Associated With the Flint Drinking Water Crisis: A Spatial Analysis of Risk and Public Health Response. Hanna-Attisha M, LaChance J, Sadler RC, Champney Schnepp A. Am J Public Health. 2016
10 Environmental justice and drinking water quality: are there socioeconomic disparities in nitrate levels in U.S. drinking water? Laurel A. Schaider, Lucien Swetschinski, Christopher Campbell, and Ruthann A. Rudel. Environmental Health. 2019
11 United Nations World Water Assessment Programme, “The United Nations World Water Development Report 2015: Water for a Sustainable World”
12 Environmental Protection Agency “Urban Facts”
13 International Renewable Energy Agency, Renewable Energy in Cities, 2016
14 Ibid
15 World Health Organization https://www.who.int/phe/health_topics/outdoorair/databases/background_information/en/index2.html
16 Powering Cities in the Global South: How Energy Access for All Benefits the Economy and the Environment. WRI.
17 World Bank. 2016. World Development Indicators
18 International Institute for Environment and Development, Urban poverty, food security and climate change
19 Penn Institute for Urban Research, Feeding Cities: Food Security in a Rapidly Urbanizing World, 2013
20 USDA Economic Research Service, The Extent of Limited Food Access in the United States
21 Ibid
22 World Resource Institute Cities for All
23 America’s Rental Housing 2017. Joint Center for Housing Studies. Harvard
24 McKinsey Global Institute, A blueprint for addressing the global affordable housing challenge, 2014
25 National League of Cities, Affordable Housing & Health: City Roles and Strategies for Progress, 2019
26 Scott, M. 2012. “Beyond Four Walls.” In The Big Idea: Global Spread of Affordable Housing, edited by Scott Anderson and Rochelle Beck, 79–81. Washington, DC.

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.

Rising income and wealth inequality is a widely recognized social concern in the United States. This is a multi-faceted issue, with root causes that vary according to demographics, and one that impact investors have shown strong interest in addressing.

Since the 1990s, there has been a growing disparity in economic opportunity for rural Americans. This demographic issue has gained public awareness in mainstream social discourse in the recent past. In this report, we lay out the key challenges faced by rural America, highlight approaches to revitalization that have proven effective, and describe existing investment strategies.

Download a brief overview or our full report.

Key challenges

The decline of manufacturing and shift to a knowledge- and service-based economy left many rural communities unable to recover adequately from the Great Recession of the late ’00s. The resulting challenges can be summarized as:

Effective strategies for revitalization

Asset-based community development (ABCD) is a “self-help” strategy that sets the stage to attract private loans and investments by taking advantage of a community’s existing strengths. Initially a community might use government or foundation funding to develop community assets, e.g. supporting existing local entrepreneurs or developing local natural resources to offer an attractive quality of life. Once an initiative proves viable it may be possible to attract private investment.

Community Development Finance Institutions (CDFIs) and other local intermediaries can help aggregate capital to support local investment. Aggregators attract capital to an investment theme and allocate sums to projects that need funding.

Real estate development is another possible path to revitalization, with Opportunity Zones potentially attracting investment that might not otherwise be economically feasible.

We highlight several initiatives that are under way related to broadband projects in small communities that may finally begin to deploy this critical infrastructure.

Lastly, we highlight how some communities are making a concerted effort to attract a younger population and stem the “brain drain” of rural youth to urban areas.

Investment opportunities

For investors interested in promoting capital investment in infrastructure and businesses that create jobs in rural America, there are various strategies one can consider across asset classes. We describe these strategies in this report; some are general categories of investment, and in other cases we refer to specific strategies available to our clients.

The U.S. Impact Investing Alliance and the Beeck Center at Georgetown University have authored a paper outlining a framework for Opportunity Fund managers entitled Prioritizing and Achieving Impact in Opportunity Zones. The framework provides guiding principles for investors to combat economic inequality and barriers facing low-income and underinvested communities while avoiding unintended outcomes (such as gentrification vs. generating community benefits). The paper outlines a reporting framework that helps fund managers provide effective information to encourage market formation and enable community engagement before and during investments. The authors and contributors also highlight a method for impact measurement and reporting to track transaction level data along with community impacts and metrics. Responsible exits and outcomes reporting are discussed as well.

“The best investments in Opportunity Zones will be firmly rooted in local context and will engender local champions by being responsive to community priorities or input,” says Fran Seegull, Executive Director of the Alliance. “The framework is meant to guide all of us working in this new market – investors, local leaders, fund managers and others – through that conversation so we can lift up and amplify best practices around the country.”

For more details regarding Opportunity Zones, and the questions regarding these investments, please refer to our recent report, “Opportunity Zones: Positive Intentions, Many Questions.”

While there are still many questions regarding Opportunity Zones which will not be answered until the final rules for Opportunity Zones are announced by the U.S. Treasury and the IRS, investors might lay the groundwork for their investments by utilizing this framework so they can prepare to invest effectively when those rules are issued.

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.

On October 19th, the U.S. Treasury Department issued proposed regulations regarding Opportunity Zones and Qualified Opportunity Funds (QOFs). Investors have questioned whether Opportunity Zones and QOFs that invest in these zones would be viable investments. In this report, we discuss the proposed regulations to date and the viability of the investment vehicles for investors with taxable capital gains. Our analysis suggests the following:

Questions include:

Download our full report here.

When we at Cornerstone Capital Group first discussed the idea of exploring arts and creativity as an impact investing theme, our greatest challenge was narrowing the scope. To our thinking, creativity fuels every successful human enterprise.  Creativity, to form something new and valuable based upon a different perspective, is essential for economic development and capital formation.  In fact, in the ancient world the concept of creativity was simply seen as “discovery.”  In truth, it is.   And there is no better time than now to put this capacity to work.  If we are to address to world’s pressing challenges ranging from climate change, the extinction of species, and the poisoning of our seas, to advancing gender and racial equity, and access to nutrition, healthcare and education, then we need to deploy all the resources at our disposal to discover and scale solutions.  After all, as Sharon Percy Rockefeller has stated, “Art is the conscience of a nation.”

And there are compelling reasons to consider “creativity and the arts” as an investment theme in its own right. Cornerstone’s Head of Research and Corporate Governance, John Wilson, lays out the case for investing in the “creative economy” as one way to counter the negative effects of widening income and wealth inequality, and the opportunity gaps, that have resulted from the “knowledge economy.” Laura Callanan, a Founding Partner of the field-building organization Upstart Co-Lab, cites creative enterprises as “an on-ramp to wealth-building for entrepreneurs including women, people of color and others who benefit from lower barriers to entry to a sector of the economy more interested in merit than advanced degrees and pedigrees.”

As for the historical tendency to view “the arts” as the purview of nonprofit organizations and grant-making, Gary Steuer of Bonfils-Stanton offers a compelling argument for eliminating the “artificial distinctions between enterprises rooted in what are often arbitrary or historical decisions on legal corporate structure,” instead finding the best mix of funding, whether philanthropic, concessionary lending or market-rate equity or debt, to invest in creative enterprise. His unique perspective as a leading philanthropic voice whose career has spanned a variety of roles in the for-profit, government and nonprofit worlds has led him to see the “enormous opportunity to drive economic growth and employment through coherent, broad-based strategies to invest in this space.”

This report is intended to provide a window into the rich array of opportunity to make meaningful and profitable investments that empower entire communities both economically and culturally. We thank all of our contributors for their enthusiastic support in bringing these stories together. We would like to offer special thanks to Laura Callanan and Upstart Co-Lab for their tireless efforts to build awareness of creative enterprise as a distinct impact investing theme, and for introducing us to a number of the organizations and individuals who made this report possible.

Download Creativity & The Arts: An Emerging Impact Investing Theme

Individual contributor posts:

Investing to Sustain Innovation, John K.S. Wilson, Cornerstone Capital Group

A Creativity Lens for Impact Investing, Laura Callanan, Upstart Co-Lab

From “The Arts” to “Creative Enterprise”: Perspective from the Philanthropic Sector, Gary P. Steuer, Bonfils-Stanton Foundation

Creating a Seat at the Table, Adam Huttler, Exponential Creativity Ventures

The Creativity Lens in Practice: LISC’s NYC Inclusive Creative Economy Fund, Sam Marks, LISC NYC

Artists, Cultural Enterprises and the Affordability Crisis, Mark Falcone, Continuum Partners LLC

Public/Private Partnerships Fueling a Renaissance, Franklyn Ore, The Newark Community Economic Development Corp

Unlocking Embedded Community Assets, Deborah Cullinan, Penelope Douglas, CultureBank

An Exceptional Model: The Bell Artspace Campus, Greg Handberg, Artspace

Investing for Good: A Creative Land Trust for London, Will Close-Brooks, Investing for Good

Everyone Together, All Forward, Christopher Johnson, Danika Padilla, Drew Tulchin, Meow Wolf

Gaming on a Mission, Amy Fredeen, Alan Gershenfeld, E-Line Media

Make Local Work: The Story of an Artist Entrepreneur, Mary Stuart Masterson, Actress, Filmmaker and Entrepreneur

Why and How Impact Investing in the Creative Economy Fosters Innovation, Todd Siler, Ph.D., Visual Artist and Educator

How Consciousness and Creativity Amplify Impact, Robyn Ziebell, Resolve4Life

Creativity and the Arts: Integral to Impact, Phil Kirshman, CFA, CFP, Cornerstone Capital Group

Note: Certain contributors to this report may represent asset managers or specific investment opportunities. Their inclusion is not intended to be, nor should it be construed, as a recommendation or endorsement of their products or services by Cornerstone Capital Inc. The views expressed by external contributors do not necessarily reflect those of Cornerstone Capital Inc.

Do we invest enough in creativity?  The question may seem absurd in an era dominated by the “knowledge economy,” in which companies create value through ingenuity and expertise, while many of our most important emerging product lines enable the advance and communication of knowledge.  But a casual review of the business press reveals that some companies that market themselves as innovators also suffer from toxic workplace cultures and dysfunctional corporate governance.  These problems suggest that it is not enough to invest in “knowledge” while neglecting the people who create this knowledge. The contributions to this report offer impact investors a roadmap for investing directly in the individuals and communities that make creative enterprises possible.

Challenges of Today’s “Knowledge Economy”

Why have so many companies dependent on a motivated and engaged workforce become so toxic for employees?  Finance may be part of the problem.  The need to deliver financial returns pressures companies to bring products to the broadest possible market in the shortest amount of time.  Achieving scale rapidly allows companies to dominate their market and generate outsized returns to investors, while companies that fail to deliver scale in a short timeframe often get left behind.  The pressure to focus solely on growing revenues, market share and company valuations can distract from critical, but less tangible, imperatives such as developing constructive corporate cultures in which creativity can thrive over time.

This model of growth fuels expanding inequality as a few companies come to dominate the market.  The six largest U.S. technology companies make up almost 18% of the S&P 500 by market capitalization.  Despite their size, these companies employ few workers relative to the industrial giants of the past—General Motors employed about 10 times as many people in 1979 as Alphabet does in 2018.

While those who work at top companies enjoy generous pay and benefits, incomes for the most families have stagnated as middle-class manufacturing jobs have been replaced by lower-paying service jobs.  By 2017, median household income in the United States had grown only 2% since 1999. During this time the typical household had suffered through two substantial downturns in median income (2000 and 2008), both of which exacerbated inequality as top incomes recovered quickly and continued to grow.

Inequality may insulate top corporate executives and professionals from the communities that are impacted by their actions. They may forget that their companies can do harm as well as good, and may come to tolerate inappropriate and unacceptable workplace behaviors.  Their product offerings may cater to the elite audience that is familiar to them, neglecting the needs of the broad population that may have very different needs and interests.

Employees may hesitate to bring concerns for fear of seeming disloyal or insufficiently committed to the goals of the company.  Customers may feel powerless to challenge companies with near monopolies over services that seem essential to modern life. Many traditionally marginalized social groups, including women, people of color, and rural communities, find that barriers to inclusion in the “knowledge economy” remain as high as ever.

As numerous examples (e.g., Uber, SoFi, Weinstein Co.) demonstrate, the resulting tensions and resentments may undermine the company’s ability to continue to innovate.  This is bad news not only for investors, but also for employees and a public that hopes for a continual flow of new products and services that improve lives.

An Alternative Approach

An alternative is to invest directly in enabling and nurturing creativity itself.  Each of the business models described in this report exists to develop the human capital embedded in every community, especially those marginalized groups who struggle to compete in the economy because of a lack of resources or because the existing knowledge economy does not sufficiently value their unique capabilities.  The role of these entities is to empower people to transform local artistic, design and cultural resources into sustainable businesses that serve their communities and create engaging work opportunities that will not be lost to outsourcing or automation.

Scale is achieved not by dominating markets with commoditized products but by replicating successful local models in ways that are tailored to the needs of each individual community.  While financial capital is an important resource for these companies, the interests of the community, not the demands of capital, drive business strategy.  Market returns are delivered by unlocking talent untapped by the market and by the creation of sustainable businesses that are deeply embedded in local culture and traditions.

There may be many strategies for accomplishing these goals.  The organizations represented in this report are each involved in one or more of four “enabling technologies” that provide access to resources that are critical to the success of local, sustainable, and replicable cultural production.

Access to Affordable Spaces: The concentration of U.S. economic activity into a relatively small number of urban centers has created an affordability crisis for many artists and creative professionals who live there. In many cases, the appeal of these cities is in part the presence of art and cultural institutions that moved in and preserved these communities when industrial and retail companies abandoned them.  Artspace and Continuum are now in the process of developing affordable living and working spaces that will nurture artistic communities and allow them to continue to serve their surrounding areas, network and collaborate with one another, and serve as a platform that amplifies their work. Over in the U.K., where London’s notorious real estate prices have created a similar squeeze on artists, impact investing firm Investing for Good has formed The Creative Land Trust, which intends to build a network of sustainable, permanent spaces that will remain affordable for artists and creative producers in perpetuity.

With projects such as these, government entities often have a role to play, as illustrated by the work of the Newark Community Economic Development Corporation to close funding gaps for private development projects that bring specific benefits to the arts and creative communities; in representing the city of Newark, New Jersey, the NCEDC’s goal is to foster economic revitalization while preserving that city’s vibrant identity as a cultural melting pot.

The actor Mary Stuart Masterson is taking a slightly different approach with her nonprofit organization Stockade Works and intention to launch a for-profit production facility, Upriver Studios. These organizations are intended to build a television and film production industry in the Hudson Valley of New York, which not only offers a beautiful backdrop for the creation of content, but also a high quality of life and reasonable cost of living, making it attractive to the thousands of professionals who work in the film and television industry.

Access to ownership and influence:  Core to the philosophy of the creative economy is inclusive decision-making and common ownership of resources.  CultureBank and Meow Wolf are exploring new models of inclusive ownership that give creative professionals a stake in the organization and ensure that the organizations serve the interests of their stakeholders.  Meow Wolf is expanding on the initial success of its business model in the Santa Fe area by constructing and operating arts and entertainment spaces that are in part owned by the artists who will display and perform their work there.  In exchange, the artists donate their time to building and maintaining the space itself, which ensures that the properties will themselves be entertaining works of art.

CultureBank seeks to unlock the “assets of value, opportunity and inspiration” held by communities “traditionally understood as poor.”  It seeks to create businesses where all stakeholders are considered investors.  Founded in collaboration with the Yerba Buena Center for the Arts, CultureBank plans to include local academics and cultural institutions to perform due diligence on possible investment recipients and to invest through collaborative “gifting circles” that unlock community assets such as language skills, natural green spaces, or creative approaches to food security.

Access to Expertise: Local communities, such as indigenous communities or communities of color, are often rich in history, tradition and capability but may not possess the technical skills to bring their narratives to a wide audience.  Creative economy companies can connect this needed expertise with local cultural assets to reach a wider audience.

E-Line Media offers a compelling case study of the possibilities. What began as an idea of Alaska’s Cook Inlet Tribal Council—to use gaming as a way to connect Alaska Native individuals to their culture and to increase self-sufficiency—grew into a highly profitable partnership that is now extending to other creative initiatives. E-Line media made this venture possible by connecting the community to experienced game designers who could make their vision a reality.

Stockade Works, mentioned above, is training local people in the Hudson Valley for well-paying jobs in the film production industry.

More broadly, Think Like a Genius® makes use of some proven, arts-based learning methods and tools for catalyzing and cultivating innovative thinking, while creative entrepreneur Robyn Ziebell uses her unique methodology to help clients from a variety of backgrounds tap their innate creativity to see solutions and opportunities.

Access to Capital:  Often, creative enterprises lack access to finance, which flows more readily to technologies that scale.  Fortunately, there are companies exploring ways to provide essential financing to distinctive cultural products that can sustainably serve niche markets and maintain market diversity.

Exponential Creativity Ventures believes “creativity and self-expression are human rights.”  It makes market rate investments in “human centered creativity platforms, global networks for developing creative voices, and frontier innovation.”

LISC (Local Initiatives Support Corp) has a long history of serving as an intermediary connecting funding sources with hard-to-reach communities. The LISC NYC branch of this community development organization is launching a fund specifically targeting investments to support creative businesses in the city.

***

Our present era of inequality of opportunity brings with it previously unimagined new products and services that enrich lives.  It also brings abuse, exclusion, and inequality. By investing in creativity and the arts, investors can contribute to sustainable innovation that nurtures talent, empowers communities and brings diversity of thought to the market.

This is an excerpt from Cornerstone Capital’s report Creativity & The Arts: An Emerging Impact Investing Theme.