In the process of painting, an artist will back away from a canvas and intentionally blur her vision, simulating distance, in an effort to take in the work as an aesthetic whole and not merely an accumulation of discrete marks, painstakingly applied. She may turn the canvas upside down, sideways, lay it flat to view from above, refreshing her vantage on the balance and rhythm of the overall composition. These “sensitivity tests” reflect an intuitive understanding that the work of art exists as a system, with a logic of color, form, and mark. Too tightly focused attention — fetishizing — on any one attribute of the work compromises overall system intelligence. Novelists allude to this call-and-response in writing when they answer the admiring reader’s query, “How did you write that character?,” by stating simply, “She wrote herself.” More medium than maker, an artist’s primary task is setting up conditions that invite, capture, and sustain system flow.
The speculative financialization of art — the last unregulated market — proceeds apace with the financialization of the global economy. However, distinct from the production of our built and natural world, we have yet to have financiers actually making the art, notwithstanding the entrepreneurial savvy of market players such as Koons and Hirst, themselves prefigured by Warhol, whose trenchant quip, “Making money is art and working is art and good business is the best art,” speaks to his value-driver framework. Production systems of artist-led ateliers have been a mainstay since the Middle Ages, with themed templates and serialization maximizing output. Although responsive to patron dictates or cultural trends, an artwork’s value issues from the artist’s singular capacity to exceed base-line deliverables of verisimilitude (portraiture), reverence (religious art), and trophy ornament (something to hang over couch).
Bringing system intelligence to real estate
In the built environment, the real estate industry, comprising over a third of the world’s tangible wealth, has an especially counterproductive value-driver framework. This is interesting as the industry intersects two millennia-long sources of wealth creation — art and land. Financiers churning to keep ahead of real estate cycles deploy art and artists as cost-efficient value drivers, contributing cultural vitality to desultory, pro forma-driven, assembly-production developments. The land upon which these financial instruments are constructed, with their narrowly focused, fetishistic insistence on 18-month returns, is abstracted to a square-foot or per-acre line item. Yet, soil, according to geomorphologist David R. Montgomery, is the “delicate blanket of rotten rock that makes our terrestrial world habitable.” From an artist’s perspective, this profit maximizing delivery of our built world lacks system intelligence — socially and ecologically. By comparison, art produced to these crude, reductive metrics we call kitsch.
The status quo of real estate development not only squanders social and ecological capital, its brutal short-termism leaves unprecedented financial spoils on the table too. The Financial Times recently reported on one of the biggest intergenerational wealth transfers in history, an estimated $4 trillion in the U.K. and North America alone, anticipated in millennial inheritance from their baby boom elders. Millennial investment priorities: sustainability, clean energy, impact investing. Follow the money. “What is very clear to me is that millennials’ values are distinctively focused on making the world a better place, using financial capital for social return, having an impact and supporting sustainable development,” says Burkhard Varnholt, deputy global chief investment officer at Credit Suisse, in the FT. This newly wealthy generation, ready to start their own families, will choose to live and work in communities that align with these sustaining priorities.
Great art works are legacies, handed down generation to generation. Applying the artist’s holistic, system intelligence to producing the built environment is a legacy project, an investment that will perform financially, ecologically, and socially for generations to come. It requires a patron/investor/commissioning body to finance, an artist to envision, and her atelier of premier artists/artisans — designers, engineers, accountants, lawyers, contractors — to implement. This good business is the best art, for the earth and for each other.
The work of TILL
Upcycling downmarket suburbia through an aggressive three-part platform of decarbonization is the value driver framework of our community-based development practice, TILL. We target brownfields, industrially impacted landscapes, acquired at discount. Rather than remediate these damaged sites with conventional methods of encapsulation (“capping”) or “dig and haul,” we regenerate the soil using living plant material. Restoring soil health leverages soil’s capacity to sink carbon. Re-carbonizing the soil, decarbonizing the atmosphere: healthy soil deepens our carbon reservoirs. Brownfields comprise 20% of U.S. real estate, with the built environment contributing 1/3 of the world’s greenhouse gas emissions. At scale, soil regeneration is a tool in our development portfolio to positively impact climate change, from the ground up.
Above ground, TILL builds new construction using cross-laminated timber (CLT), a jumbo plywood that is 50% sequestered carbon and a renewable resource. CLT construction is 30% faster and requires less heavy equipment than conventional construction, yielding cost savings while reducing the carbon footprint of building production.
Further decarbonization is realized in our mobility platform integrating AV, EV, dynamic ride and car sharing. Transportation contributes 27% of U.S. greenhouse gas emissions; reducing private-car dependency with mobility options for mobility-poor suburbia is an economic catalyst that also offers critical social connectivity for aging populations as driving becomes untenable.
Like the iPhone, the world-changing, best-selling product of all time, TILL works because it aggregates decades-old, proven technologies of soil regeneration, mass timber construction, and smart mobility. Like the iPhone, TILL is confluence technology, not invention. Our innovation is the compilation and real-world implementation of these proven technologies for real-world impact that scales.
While our business strategy at project launch targets industrially impacted sites — buying value at discount — there is every reason to implement TILL’s confluence technology in urban and suburban sites beyond brownfield landscapes. Living in garden settings that contribute toward urgent decarbonization of our atmosphere aligns with the mission-oriented millennial and Gen Z age groups, prized as new business generators and a demographic canyon in aging ex-urban communities and disinvested municipalities.
Investment follows talent.
Talent pursues mission.
Mission makes market.
Anticipating both growing consumer demand for sustainable options and the inevitability of carbon pricing gives TILL competitive advantage and compounds future value as we build long-term community health and prosperity. This best art is excellent business.
TILL is an international, intergenerational, multidisciplinary practice focused on holistic community-based brownfield regeneration. It seeks community-specific solutions that engage the global context. TILL’s fiscal sponsor is the New York Foundation for the Arts.
Jane Philbrick is founder of TILL (Today’s Industrial Living Landscapes). Jane is graduate faculty in the Art, Media, and Technology Program at Parsons School of Design/The New School, NYC. She holds a bachelor’s degree from Barnard College, Columbia University, and a masters degree from the Graduate School of Design, Harvard University.
Olivia Greenspan, TILL co-founder, is a fellow at Fordham University’s Social Innovation Laboratory and is a junior at Fordham College at Rose Hill studying Economics.
At Cornerstone Capital Group, we have always been committed to investing with gender lens – it’s part of our heritage as a woman-owned investment firm, and equity and inclusion are core values. One of our first clients to embrace a total gender lens portfolio was the Ms. Foundation for Women (www.forwomen.org). We are proud to partner with the Ms. Foundation as their investment advisor and as a thought partner on important matters facing women and girls including addressing the prevalence of sexual and gender based violence (as in our recent report).
On April 10 we were thrilled to welcome Teresa Younger, President & CEO of the Ms. Foundation, for an event we co-hosted in Denver with the Women’s Foundation of Colorado (www.wfco.org). The event was attended by many leading investors and philanthropists in Colorado. Here are a few photos from the evening.
Katherine Pease is Managing Director, Head of Impact Strategy. In this role she helps develop and monitor impact strategies and provides contributions to Cornerstone’s professional research team. She previously served as the Principal of KP Advisors, Inc., whose mission is to help foundations, nonprofits and investors develop thoughtful, innovative approaches to address the challenges they care most about by using a variety of types of capital and other resources to make the world more just, fair and equitable.
The language of impact. At Cornerstone Capital Group, we apply the discipline of environmental, social and governance (ESG) analysis along with financial analysis in assessing investment opportunities designed to help our clients achieve positive impact – the societal and environmental change resulting from investment decisions. Our overarching objective as a firm is sustainability, which we define as “the relentless pursuit of material progress towards a more regenerative and inclusive society.” In this report we use ESG in discussing issues and investment strategies, and “impact-driven investing” when “investing for impact” would be cumbersome. We use “sustainable” or “sustainability” when referring to broad concepts.
Why invest for impact? A growing number of investors wish to integrate their investing activities with the values that inform the rest of their lives or their organizational missions. They want to invest in ways that pay heed to both their financial priorities and their commitment to environmental or social issues. Some investors believe that doing so will grant them a financial edge in the marketplace. Others wish to influence the direction of the economy because they see their own futures as inexorably linked to the future health and prosperity of the world.
Why is this trend becoming more mainstream now? Increasing demand for impact-oriented investments is being driven by a “perfect storm” of factors. The global financial crisis of 2007-08, the Deepwater Horizon disaster and other events have made investors increasing conscious of the systemic risks facing their portfolios. Beyond financial instability and the risk of industrial accidents, these risks include climate change, globalization, and inequality. Also, technology is driving greater transparency and accountability for companies, even as more of their value is tied to intangible factors that are becoming harder to measure through traditional financial analysis.
Key players. Today, the sustainability ecosystem includes some of the most sophisticated investment organizations in the market, as well as professional associations, data providers and others that can help investors invest for impact. With the help of a financial advisor who possesses the right expertise, investors can select the optimal mix of strategies designed to achieve both financial and impact objectives.
ESG-focused investing strategies and financial performance. Traditionally, the mainstream financial world has claimed that ESG-focused strategies would underperform their more traditional counterparts. However, experience and research have shown that these investments offer competitive returns. Recently, evidence has emerged that attention to ESG concerns may help both investors and companies mitigate risk and, in some cases, boost performance. Of course, investors may differ in the societal values that they bring to the market, just as they have differing risk tolerance and time horizons. Numerous strategies have evolved to help investors integrate their values into their investment portfolios. The best-known strategy, screening (positive or negative), remains important, but investors seeking social impact may also choose strategies such as active ownership, ESG integration or thematic investing.
Download our report here.
Editor’s note: Ms Foundation has just released a new report: “Centering Black Women, Girls, Gender Nonconforming People and Fem(me)s in Campaigns For Expanded Sanctuary and Freedom Cities,” by Andrea Ritchie and Monique Morris (National Black Women’s Justice Institute). Below we share the executive summary. Download the full report here: https://forwomen.org/resources/sanctuary-city-report/
Centering Black Women, Girls, Gender Nonconforming People and Fem(mes) in Campaings for Expanded Sanctuary and Freedom Cities: A Policy Brief by Andrew J. Richie and Monique W. Morris, Ed.D.
In recent decades, as anti-immigrant rhetoric has intensified and policing, detention, and deportations of immigrants have dramatically increased, social movements have responded with calls for the creation of sanctuary spaces, institutions and cities offering protections to immigrants. In response, a growing number of municipalities have declared themselves “sanctuary cities” by enacting administrative policies and legislation limiting collaboration with federal immigration authorities to varying degrees. In the wake of 2017 federal executive orders and a proposed 2018 federal budget advancing an agenda of mass deportation which relies on criminalization of immigrants as both a mechanism and justification for deportation and exclusion, immigrant rights and racial justice groups have issued renewed – and expanded – calls for sanctuary. Progressive legislators and institutions have responded to this call to action – and to attacks on “Sanctuary Cities” by the federal government – by recommitting to protecting immigrant communities.
Organizations like BYP100, Mijente, and Black Alliance for Just Immigration (BAJI) are also going beyond existing frameworks to call for sanctuary for all communities experiencing aggressive criminalization, policing, and incarceration, including and especially Black communities, both immigrant and U.S. born, launching national campaigns for “Expanded Sanctuary” and “Freedom Cities.” Building on municipalities’ and institutions’ declared intentions to resist federal efforts to target immigrants by remaining or becoming “sanctuary cities,” these campaigns call on policymakers – and on all of us – to not only resist egregious federal efforts to coerce cities and counties to participate in discriminatory and harsh immigration enforcement efforts, but also to dream bigger and do more. Expanded Sanctuary and Freedom City campaigns call for an end to all policing and immigration enforcement practices that target Black and Brown communities, immigrant and U.S. born. They also call on us to envision and build the communities we want, through reinvestment of resources away from surveillance, punishment and exclusion and toward addressing community needs. Focusing on shared experiences of racial profiling, criminalization, and exclusion between immigrant and U.S. born Black and Brown communities offers opportunities to build bridges across divides of race, immigration status, gender, sexuality, and faith in a time of division and scapegoating. It also facilitates building strong coalitions rooted in mutual aid and shared commitment to protecting all members of our communities.
A rallying cry of campaigns for Expanded Sanctuary and Freedom Cities has been “Black people need sanctuary too” – referring not only to Black immigrants, but also affirming that non-immigrant Black communities are entitled to protections from police profiling, discriminatory and abusive policing, as well as collaboration between police and other public institutions such as schools and hospitals that contribute to criminalization and mass incarceration, in the same ways that immigrants are entitled to protection. In this policy brief, we expand and deepen that call to say “Black women, girls, gender nonconforming people and fem(me)s need sanctuary too!” and outline a series of concrete steps policymakers, institutions and communities can take to protect Black women, girls, trans and gender nonconforming people.
Often invisible in conversations about profiling, policing, criminalization, mass incarceration and deportation, Black women, girls, and fem(me)s face unique forms and sites of criminalization, state violence, and intra-community violence. It is essential that as we dream of Expanded Sanctuary and Freedom Cities, we center Black women, girls, and fem(me)s in our vision, advocacy, organizing, and implementation. In order to protect Black women, girls, gender nonconforming people and fem(me)s sanctuary cities, institutions, and spaces must:
• Offer the maximum degree of protection from information sharing and collaboration between police, public and private institutions, and immigration authorities;
• Protect sensitive locations such as churches, hospitals, health care, and birthing facilities, shelters, courtrooms, social service agencies, foster care facilities, schools and other learning institutions and other locations where Black women and girls may be vulnerable from immigration enforcement agents;
• Decriminalize offenses most likely to funnel Black women and girls into the criminal and deportation systems, including drug offenses, “broken windows” and poverty-based offenses, and prostitution-related offenses, and offenses imposing higher penalties on people living with HIV;
• Create and support culturally competent pre-arrest diversion programs;
• Eliminate mandatory arrest policies;
• Remove police and end criminalization of students in schools and other learning environments;
• Protect women, girls, trans and gender nonconforming people from gender-specific police abuses including police sexual violence and violations of the rights of trans and gender nonconforming people;
• Imagine, develop, implement, and assess community-based responses to violence that will ensure safety for Black women, girls, gender nonconforming people and fem(me)s within our families, homes, relationships, communities, and institutions.
Finally, beyond providing sanctuary or building toward freedom by challenging and eliminating immigration enforcement and policing practices that cause harm to Black women, we have a responsibility to create conditions that will ensure safety from intrapersonal and intra-communal violence for Black women, girls, gender nonconforming people and fem(me)s.
Monique W. Morris, Ed.D. is an award-winning author and social justice scholar with nearly three decades of experience in the areas of education, civil rights, juvenile and social justice. Dr. Morris is the author of Pushout: The Criminalization of Black Girls in Schools (The New Press, 2016), Black Stats: African Americans by the Numbers in the Twenty-First Century (The New Press, 2014), and Too Beautiful for Words (MWM Books, 2012). She worked with Kemba Smith on her book, Poster Child: The Kemba Smith Story (IBJ Book Publishing, 2011) and has written dozens of articles, book chapters, and other publications on social justice issues and lectured widely on research, policies, and practices associated with improving juvenile justice, educational, and socioeconomic conditions for Black girls, women, and their families.
Andrea J. Ritchie is a Black lesbian immigrant, attorney, policy advocate and consultant, and a Researcher in Residence on Race, Gender, Sexuality and Criminalization at the Barnard Center for Research on Women. She is is a nationally recognized expert and sought-after commentator on policing issues, and the author of Invisible No More: Police Violence Against Black Women (Beacon Press, 2017) and co-author of Say Her Name: Resisting Police Brutality Against Black Women and Girls (AAPF, 2015) and Queer (In)Justice: Criminalization of LGBT People in the United States (Beacon Press 2011).
On June 23 Cornerstone hosted Jalak Jobanputra for a discussion on the blockchain’s transformative potential. Jalak is the Founding Partner of Future\Perfect Ventures, an early-stage venture capital fund focused on next-generation technology such as blockchain and machine learning. She was an early investor in the space, and is widely considered to be an expert.
Cornerstone’s Sebastian Vanderzeil, Director and Thematic Analyst at Cornerstone, led the session. In addition to recent developments in the space, Jalak and Sebastian discussed a number of ways emergent applications for blockchain technology could address social challenges, particularly in less developed regions. The two also addressed issues of governance and accountability, following on from Sebastian’s recent report Governance and the Ungovernable: Implications of Blockchain Proliferation.
On May 5, 2017, I addressed a group of people convened in the Vatican by Cardinal Peter Turkson, President of the Pontifical Council for Justice and Peace. The subject of the conference was the link between impact investing and the principles outlined in the papal encyclical Laudato Si’ (“Praise Be”): On the Care for our Common Home.
In Laudato Si’, Pope Francis addresses the subject of the care of the environment. The central theme of the letter is what His Holiness calls “the integral ecology,” the idea that a culture of excessive consumption and waste threatens both our natural environment as well as our social fabric. “Caring for our common home” requires a holistic embrace not solely of the physical environment or the social good but both simultaneously, while rejecting materialism and consumerism.
Cardinal Turkson, let me express my gratitude to you for convening this event, and to my colleagues in the Right Now! Coalition for inviting me to present to you today. I am going to speak today about the connection between the principles embodied in Laudato Si’ and impact investing. Specifically, I would first like to explain how I think that Impact investing is one way to bring about an integral ecology, and second to offer some considerations or even cautions to impact investors arising from the text.
To start, I want to point out that there are really only two purposes of investing, whether impact investing or otherwise: a private purpose and a social purpose. The private purpose is to meet our long-term material needs through prudent management of our wealth. Some examples are an individual saving for retirement, or a Church organization creating an endowment to carry out its mission.
The social purpose of investing is to deploy capital towards the most effective possible use. This is the question of what activities we choose to fund with our capital. The challenge is to decide what “effective” means? This is an important question, because investment decisions have real influence over which economic activities go forward and which do not. The priorities of the financial community can play a strong role in shaping the “real economy.”
The problem is that over time, the private purpose has come to overwhelm the social purpose. An effective investment is seen as one that returns the most to the investor. The social purpose is not seen as intrinsically valuable except in how it returns cash to investors. The “real economy” exists for no other reason to serve the “financial economy.”
However, we can see that this approach is self-defeating. The global financial crisis began because of certain investments that were profitable, for a time. The results of the global financial crisis were terrible in human terms, but it is also the case that investors themselves suffered as returns fell. Moreover, it wasn’t just investors who made poor choices that suffered: the financial crisis harmed “saints and sinners” alike.
The unfolding climate crisis is a similar problem. There is the danger of both environmental damage and human tragedy. There is also the likelihood that in the long term, the value of investments will be affected if we don’t turn away from investments in fossil fuels and polluting methods of production and consumption.
Beyond this, we can see the effects on certain individual companies who put profit at all costs over the impact on human beings in the experiences of companies like Wells Fargo, Volkswagen and United Airlines. By ignoring human considerations, these companies have also put shareholders at risk.
So, we see that the philosophy of profit at all costs is not only unacceptable in human terms. It also is a poor way to serve the private purpose of the investor, when viewed with a long-term perspective.
The integral ecology offers a different perspective. The investor is not part of a separate “financial economy” that controls the “real economy” to serve its own ends. Rather, the investor is one participant in the economy along with every other person. Investors prosper when the economy prospers; the economy prospers when all people and communities are able to participate to their fullest potential. Therefore, investor serves the economy and society as an enabler of human creativity.
Here I am not just talking about the recipients of capital, but the broader group of people who are affected by business activities supported by investment: customers, workers, communities, and those who care for the natural environment – the stakeholders. The impact investor with the perspective of the integral ecology considers the impact of investment on every stakeholder who is affected by that decision.
The integral ecology perspective restores a balance between the private and social purpose of investing, and brings greater sustainability to both.
But how do we do that? We have two strategies available to us.
First, we have influence through our investment decisions. Impact investors will look at possible investments through the lens of financial value and also the lens of social values. There will be some investments that so violate our core values that any investment is unacceptable. For some people for example, fossil fuels falls into this category because of its damaging effects of the environment.
Most investment decisions are not so clear-cut, however, because investments have both good and bad effects. For example, many people are concerned about fossil fuels effect on the climate, but also recognize that, at present, society needs fossil fuels to function. We were all able to come here today because of fossil fuels, for example.
For these more complicated questions, we need criteria to evaluate the consistency of these investments with our values. There are many such lists of environmental and social issues of concern, many of which are very useful for impact investors.
However, not all issues are important for all companies. A more general approach is to examine the relationship of the company, project or business activity with its stakeholders. I suggest three steps, suggested by a framework used frequently in Catholic Social Teaching: “See, Judge, Act”
- First I consider whether the company has the awareness of the stakeholders who are impacted by their activities, and the intention to balance the interests of all stakeholders.
- Second, I consider whether the evaluation of stakeholder interests is inclusive of stakeholder perspectives. Does the company listen to the voice of its stakeholders?
- Third, I consider whether the company has concrete plans to integrate stakeholder concerns into its business operations and strategy. It’s important to understand that this does not mean that the company perfectly balances all stakeholder needs. This is impossible. Instead, the question is whether there is a commitment to continual improvement towards this goal.
And it is in this third criteria where the second tool — engagement — is so important. An investment is not simply a transaction that ends when money changes hands. It is an ongoing relationship, where the shareholder is in dialogue with the company to ensure that the commitment to stakeholders remains strong and increases over time. Because investors have a holistic and long-term view, they are interested in the well-being of all stakeholders and thus can become the “voice of the voiceless” — or even better, an advocate for all voices to be heard.
Lastly, I want to raise three words of consideration for impact investors that grows out of the perspective of Laudato Si’. Even as we undertake investments intended to address social and environmental problems, there are some things to avoid.
- It is important not to impose our own solutions on recipients of our investments or their stakeholders. This could replicate the model of a separate “financial economy” that controls the “real economy.” Recall that investors are meant to be enablers of human creativity and productivity. As an example, early efforts to prevent the cutting down of the Amazon rainforest did not take into consideration the needs of those who lived in the forest. More recent efforts have taken place in collaboration with local people and have been much more successful.
- Avoid “technocratic” solutions to social and environmental problems that rely on technology alone, to the exclusion of the human considerations. I am thinking here of a company that is known for its efforts to produce technology that will help solve climate change. But there are concerns about the safety of the workers in its factories as well as pollution in the communities where it obtains raw materials. I am concerned that these problems may place at risk the good the company intends to do through technological development.
- Finally, impact investors should not limit themselves to the tools of finance alone. Right now, there is a trend towards creating on quantitative “impact metrics” based on more traditional financial metrics. These are useful and important, but they do not tell the whole story. For this we need to turn to other disciplines, which may include such disciplines as ethics, sociology, anthropology, ecology and even theology. Only through a broader lens can we truly understand the impact of our investments on the integral ecology.
John K.S. Wilson is the Head of Corporate Governance, Engagement & Research at Cornerstone Capital Group. John has close to 20 years of experience in socially responsible investing and corporate governance. Previously, he was Director of Corporate Governance for TIAA-CREF, where he oversaw the voting of proxies at CREF’s 8,000 portfolio companies and engaged in dialogue with corporate boards and management to promote sustainability and good corporate governance. An Adjunct Assistant Professor at Columbia Business School, John is also a member of the Advisory Council to the Sustainability Accounting Standards Board. He writes and presents widely about the relevance of social responsibility to investment performance.
At Hetrick-Martin Institute, the nation’s oldest and largest non-profit service provider focused on serving LGBTQ youth, we know resilience when we see it. In the financial and risk industries, building resilience is about helping companies or governments achieve success in an ever-changing world of challenges. When it comes to building resilience among young people, the strategies might look different, but the results — clients that thrive — are very much the same.
40% of homeless youth identify at lesbian, gay, bisexual, or transgender (LGBT), yet LGBT youth represent only an estimated 7% of all youth in the US. Why are the numbers so high for LGBT young people and what can we do to help? While there are many, often compounding, reasons that youth experience homelessness, family rejection is the leading cause among LGBTQ youth. Over 30% of LGBTQ youth reported being kicked out of their homes when they came out and many face negative reactions from their families and communities.
Looking to the the broader world outside of home: discrimination, rejection, and violence against LGBTQ youth persists. When asked, the majority of young people reported witnessing acts of violent discrimination towards LGBTQ people at school. When it comes to safe working environments, over 90% of transgender people asked reported experiencing discrimination in the work place. The data gives us examples of the challenges and shows that these challenges exist for LGBTQ youth across many different environments. What is needed is a two-pronged approach to meet the immediate needs of young people and meet the need for systemic change to make environments safer and more inclusive for LGBTQ youth.
Emery Hetrick and Damien Martin, founders of Hetrick-Martin Institute, set out to tackle both when they heard the personal story of a young man who was assaulted and kicked out of his group home for being gay. They immediately recognized that self-realization starts with safety. A young person needs to feel safe before they’ll sit and have a bite to eat, before they can pause to talk about their day, before they can look around and evaluate their life goals. So we start with safety. We create safe spaces for youth to be themselves, to explore themselves, to questions themselves, to access safe housing, to have a hot meal, to seek legal and medical support, to learn to read, to learn to add, to learn what life has to offer. But beyond the walls of a safe space, how does one bring change into the world? Advocacy.
Being able to present, share and discuss discordant points of view is the heart of social progress. HMI teaches its young people to self-advocate on the interpersonal level and also on the systemic level. There are government officials and state institutions ready to learn, ready to talk, and ready to expand the ways they serve us, we the people… we the people need to build up the tools we are giving to the next generation to build safer and more supportive communities, that won’t reject or forget those who are different or “other.”
Including all-too-often marginalized young people in the conversation, we can begin to shift the paradigm, recognizing the historically described voices of the oppressed as the powerful leaders of tomorrow, the voices of the resilient. That is why honoring our leaders and visionaries at galas and luncheons, like the WOMEN WHO LEAD event on April 28th, where we will be honoring Erika Karp and Fern Mallis, are so important. The bravery and intention that moves us forward as a society needs to be celebrated to give our young people something to work towards and something to aspire to… proof that being tenacious and resilient and taking steps towards change can lead to so much more than the next step, and it can lead to more than career success, it can lead to a stronger community and better society for all of us.
For more information go to: www.hmi.org/womenwholead
Ross Schwartz is a recognized New York public relations professional, LGBTQ activist and advocate for social justice. He serves as the Communications Director at Hetrick-Martin Institute.
Cornerstone Capital Group recently hosted a live video webinar on the intersection of Islamic finance and social responsibility. John Wilson, Cornerstone’s Head of Corporate Governance, Engagement and Research, interviewed Umar Moghul, an expert on the topic and author of the recently published book, A Socially Responsible Islamic Finance: Character and the Common Good.
Among the topics explored:
- How do Islamic values and traditions shape one’s approach to impact investing?
- What are the key needs being filled today by Islamic finance principles? What needs are left unaddressed?
- What are the common themes or objectives shared between Islamic finance and more traditional sustainable investing?
- What can each of them learn from the other?
- How is Islamic finance changing relative to previous generations?
On March 1 Cornerstone hosted the first of in a new series of Access & Insight events, a webinar titled “Climate Investing in 2017: What Can Investors Do Now?” Our Sebastian Vanderzeil and Craig Metrick were joined by William Page, portfolio manager at Essex Investment Management, for a discussion centering on:
- Climate realities and responses
- The transition to clean power
- Infrastructure and environmental investing
- Different approaches and asset classes available for tacking the issues
Cornerstone Capital Investment Advisory (CCIA) Chief Investment Officer Phil Kirshman lent his insights into investment performance, and CCIA Managing Director Jan Morgan fielded questions from attendees.
The genesis of the webinar was a recent Cornerstone research report, “Climate Investing in 2017,” also authored by Sebastian and Craig. The report addresses the imperative for an effective response to climate change following the hottest year on record. The team writes, “Climate investing faces risks in 2017, particularly from the incoming US administration, but nuanced opportunities exist for positive environmental and social impact coupled with attractive potential returns.”
In this report we identify investment opportunities that offer competitive financial returns while helping to address concerns about increasing levels of inequality and income stagnation.
The rise of populist and anti-globalization political movements in the developed world is in part a reaction to middle-class wage stagnation and inequities based on age, race, gender and geography. The increasingly popular belief that the global economic system does not serve the interests of all is a source of social tension and political upheaval, creating long-term risks for investors.
Middle-income workers in developed countries face rising economic pressures:
- Globalization and automation have benefited economic elites and workers in some developing countries while contributing to wage stagnation for many developed country workers.
- Decreasing returns on investment in education are reducing opportunities for economic mobility in the US.
- The prices of certain necessary goods, like college, medical care and shelter, have increased relative to wages.
- Inequality is becoming more pronounced among younger people, potentially hampering their long-term economic mobility. The percentage of US households earning a middle-class income has decreased.
Age, geography, gender and race further limit upward mobility for many groups of people. For instance, the likelihood of a low-income child in the southeast US achieving a high income in adulthood is notably less than for rest of the country.
Populist and nationalist movements are pledging to reverse these trends for some groups or all, sometimes gaining support by exploiting social tensions associated with these inequities. Such a response to globalization might exacerbate social tension and do more harm than good to the economic and political foundations for prosperity in the developed world.
Investors can address concerns about inequality responsibly by selecting managers who employ a number of sustainable investing strategies. Inequality cannot be addressed without supportive public policy. Yet, investors can still make a substantial impact through certain strategies such as:
- Proxy voting and corporate engagement. Investors have a voice in company policy through their equity ownership stake, on issues such as equitable compensation policies, improved diversity and fair labor policies.
- Investing in fixed income instruments to support investments in communities. A small group of fixed income funds offers market rate returns supporting affordable housing and social and environmental infrastructure. These funds can be targeted geographically and thematically.
- Affordable housing or other real estate funds. Affordable housing funds offer an avenue for investment that provides subsidized housing and links residents to social services while still earning market returns for investors.
- Private debt strategies. These funds finance small businesses and other organizations in underserved communities. Some low-risk/low-return vehicles lend directly to small businesses and non-profits in low-income areas to provide services in underserved communities.
Click here to download the full report. To discuss customized advice on this or other investment themes, see contact information at the end of this report.
Erika Karp, founder and CEO of Cornerstone Capital Group, was recently interviewed by Charities Aid Foundation (CAF) America to explore the intersection between market-based solutions and philanthropies, particularly as it relates to investment. We used the request by CAF America to conduct interviews internally with Cornerstone Capital staff and externally with thought leaders in the finance and foundation fields to gather opinions about the nexus of market-based solutions (i.e., traditional for-profit investment via the capital markets) and philanthropy. Topics included the following:
- Areas of collaboration between philanthropy and capital markets,
- Role of Donor Advised Funds (DAFs), and
- Evolution of corporate philanthropy.
For Philanthropies: Aligning Program with Endowment
Interviewees cited collaboration between traditional investors and philanthropies as a key to solving the world’s most pressing issues. Philanthropies bring specific expertise and willingness experiment, while market-based solutions bring scalability and financial sustainability.
Our interviews identified three areas of collaboration:
- Partnerships between philanthropies and investors can bring scalability to projects. Market-based solutions provide financial returns that can be recycled for further impact while philanthropies typically have deep knowledge of specific social and environmental issues.
- Philanthropies can amplify the impact of their capital by allocating investment of their endowments to sustainable investments.
- Collaboration between philanthropies and investors can increase the attractiveness of certain investments, as philanthropies that focus on social impact can act as a guarantor for part of the investment and entice more capital to projects.
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To discuss customized advice on this or other investment themes, please contact us at email@example.com.
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 a 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.
According to Professor Boaz Golany of the Technion – Israel Institute of Technology, collaborations must be SMART: Sustainable, Mutually Attractive, with Reliable, Transparent partners. This is the guiding principle of the Technion’s venture with Cornell University to form the Jacobs Technion – Cornell Institute, a blossoming technology hub on New York City’s Roosevelt Island.
On January 6, Cornerstone had the pleasure of hosting Professor Golany for a provocative lunch conversation facilitated by Dr. Derek Yach, Chief Health Officer of the Vitality Group, also a member of the Board of Cornerstone Capital Group. Professor Golany shared with us the remarkable story of the birth of the Technion – Cornell partnership, which is already becoming a vibrant and innovative addition to the applied research engine of New York.
The conversation touched on these questions and more:
- What role will the Jacobs Institute play in developing expertise for the local tech industry?
- Why did the Technion take on this project, and what role is the Institute playing to bring the Israeli innovation mindset to New York?
- Why are the applied sciences, and deep engagement with industrial partners, a major key to growing any regional economy?
- The imperative for an effective response to climate change only grows following the hottest year on record. Climate investing faces risks in 2017, particularly from the incoming US administration, but nuanced opportunities exist for positive environmental and social impact coupled with attractive potential returns.
- Growth in clean power may face new obstacles arising from federal fossil fuel policies, but is supported by programs at the state and municipal levels. The opportunities are even greater abroad due to falling generation costs.
- The Trump administration’s stated intention to focus on infrastructure could result in much-needed investments in water infrastructure and improving resource efficiency.
- Across major asset classes, we believe:
– Low-carbon and more general sustainability strategies executed by active managers enable investors to shift between sectors, geographies and companies as needed to generate return and impact.
– Active managers in this space tend to outperform the common thematic benchmarks such as the Wilderhill Clean Energy Index and the S&P Global Clean Energy Index.
– Green bonds are being included in core fixed income strategies, offering an avenue for investors looking to increase the impact of their fixed-income investments.
– Sustainable/low-carbon private equity investments have respectable track records in terms of both longevity and performance.
- Cornerstone Capital, as an investment advisor, helps its clients navigate these tumultuous times while supporting their goals of transitioning to a clean energy economy and adapting to the impacts of climate change. We believe in the opportunity for impact and risk-adjusted returns as the role of private investment becomes ever more critical in responding to climate change.
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To discuss customized advice on this or other investment themes, please contact us at firstname.lastname@example.org.
Sebastian Vanderzeil is a 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.
Craig Metrick is Director of Manager Due Diligence and Thematic Research Analyst at Cornerstone Capital Group. Previously, Craig was Principal and US Head of Responsible Investment at Mercer, working with a variety of public and private clients. Before joining Mercer, Craig was a Director at the Investor Responsibility Research Center (IRRC), which provided ESG research to institutional investors. Craig is a Chartered Alternative Investment Analyst, and currently serves as Chair of the Board of Directors of the US Forum for Sustainable and Responsible Investment (USSIF).
Cornerstone Capital CEO Erika Karp recently participated in BSR’s annual conference, themed “Be Bold.” She shared her views on the shifting dynamics of the capital markets in recent years and how these changes spurred her to form Cornerstone. Erika also presented her vision for a convergence of priorities across capital markets constituents (particularly asset owners), corporates, regulators and academia in support of investing for long-term, sustainable shared benefit.
Paraphrasing Albert Einstein, Erika notes that imagination is more important than intelligence — but it must be accompanied by execution and pragmatism.
BSR is a global nonprofit business network and consultancy dedicated to sustainability. It works with its network of more than 250 member companies and other partners to build a just and sustainable world.
“Proximity” is a central question for so many sectors and for the capital markets. As policy proposals and realities evolve, and while uncertainty and volatility will persist, there is no doubt that macro and structural trends in the US and Global markets are bigger and more powerful than any administration or regulatory regime over the long term.
In September 2015, the United Nations convened world leaders at a summit in New York City to make history. All 193 members of the United Nations agreed and committed to work together in order to fulfill 17 global goals that will serve as a roadmap for improving the entire planet. The Sustainable Development Goals (SDGs) provided the framework for humanity to join forces from 2015-30 to address the world’s most pressing challenges, such as climate change, sustainable energy, extreme poverty, health, education, gender equality, drinkable water, and economic growth.
To succeed, the SDGs must be clear, digestible, and emotionally resonant—and they must be known across every corner of the planet. To achieve this aspiration, we must not just lean on government, but also mobilize business. By harnessing the power of commerce towards achieving the goals, we will drive impact with brands, executives, corporations, employees, and ultimately consumers.
With this vision in mind, HealRWorld forged an alliance with the world’s largest activation agency and a leading global sustainable business convener of the planet’s most prominent brands to personalize the goals, drive awareness, catalyze engagement, and promote conscious capitalism in support of the SDGs.
SustainRWorld Day was launched September 8, 2016 at the United Nations by HealRWorld and our partners: Sustainable Brands, Geometry Global, and The PVBLIC Foundation. SustainRWorld Day set out to rally the private sector in support of the UN’s Sustainable Development Goals, putting a line in the sand to measure and celebrate progress annually.
The vision launched with a full marketing campaign called “The Seventeen.” Individual business leaders, influencers, academics and celebrities stepped up to be the public faces of each of the seventeen SDGs. The campaign not only personalized each of the global goals, but put a public stake in the ground for businesses to rally for change.
“The Seventeen” campaign includes courageous and visionary leaders who are not afraid to leverage their personal brands to help humanity, such as actor Ted Danson for his work with Oceana, Jostein Solheim (CEO of Ben & Jerry’s), Naveen Jain (Founder and CEO of Moon Express), Eileen Fisher (Founder and CEO of Eileen Fisher), Jigar Shah (ex-CEO of the Carbon War Room and Co-Founder of Generate Capital), Paul Hawken (Environmentalist, Entrepreneur and Author) and Erika Karp, (CEO and Founder of Cornerstone Capital Group), as well as others.
The September 8 event launched with a number of speakers representing the United Nations’ Secretariat and agencies such as UNICEF, UNCTAD and the Global Compact, along with a number of private sector leaders and members of academia, including the Director of Princeton University’s Andlinger Center for Energy and the Environment. The excitement in the room was contagious and one fact became evident — that when you bring passionate leaders together around an important cause, you truly ignite change. The event immediately created momentum for further action and collaboration.
From this initial launch at the United Nations, HealRWorld has been inspired to form “The HealRWorld Foundation,” a non-profit that will be dedicated to furthering sustainability education, awareness and engagement globally and fundamentally igniting measurable actions through our work with the United Nations and other partners.
It’s time that the Sustainable Development Goals become a household name, and our vision is that every business adopts the SDG framework in some manner within their overall strategy.
In 2017, “The Seventeen” campaign will go global, with each country being offered the opportunity to participate by customizing the campaign with their local philanthropists and business leaders to further inspire the movement. From this spark we will create a global “SustainRWorld Day” event series to celebrate the collaborative successes each year. Won’t you join us?
For more information on SustainRWorld Day, “The Seventeen” Campaign or how to get involved, please contact our office at (908) 450-7315 or email me directly at email@example.com. For more information on SustainRWorld Day, go to sustainrworldday.global.
Together we can be a force for change.
Michele A. Bongiovanni is CEO of HealRWorld LLC, a social impact firm whose big data platform aggregates sustainability information (People, Planet, Profit) on global large and small & mid-sized enterprises (SMEs) to power products, drive revenues & foster positive change. For more than 20 years Michele has served in strategy, marketing and product innovation in the financial services industry.
In late September, the Clinton Global Initiative (CGI) convened top leaders from business, government and civil society for the 12th and final time. The end of the CGI Annual Meeting brings to a close not just an event, but a force that has helped change the way that companies everywhere think about social responsibility.
It’s been a decade since the Rockefeller Foundation (RF) endorsed me to advance CGI’s global health work, which at the time was new and already starting to make waves in philanthropy. President Bill Clinton’s enthusiasm for encouraging the private sector to step up as key players in the social impact space — rather than leaving such work to governments and nonprofits — was met with both curiosity and skepticism at the time. But the leadership at Rockefeller recognized that CGI’s approach to addressing global challenges represented a fresh and needed way forward.
By facilitating the development of specific and measurable corporate plans to make a positive social and environmental impact — coined as Commitments to Action — CGI bet on the idea that corporate philanthropy could become more effective by embedding societal values into companies’ core business plans.
It turns out former President Clinton’s experiment worked. Taking philanthropy beyond the traditions of corporate social responsibility — “doing well by doing good” — is now the accepted norm for business ten years later.
Its success paved the way for similar approaches, such as Michael Porter and Mark Kramer’s shared value, PepciCo CEO Indra Nooyi’s “performance with purpose,” or Novo Nordisk’s approach to the triple bottom line. All of these new approaches seek to find a new and explicit nexus between financial performance and social impact. As an advisor to CGI, I witnessed the powerful way former President Clinton’s platform stimulated, guided, cajoled and excited companies to go beyond their quarterly earnings reports and bring about positive social change through their commitments to action.
The direct benefits to society have been most obvious in the myriad global health commitments that have been carried out since 2005. Because of the collective body of commitments made by the CGI community, more than 114 million people have increased access to maternal and child health and survival programs, and more than 33 million people have increased access to safe drinking water and sanitation. Because of these commitments, more than 36 million people received treatment for neglected tropical disease, and more than $318 million in research and development funds was spent on new vaccines, medicines and diagnostics.
Due to the CGI community’s embrace of “doing well by doing good,” many companies transformed their business models to place health gains as central to their work. Traditional corporate philanthropy was soon reframed to meet market failures, including research, human capacity and humanitarian crises.
In fact, many of the United Nations Global Compact’s (UNGC) member companies are also CGI members. From the start, the CGI Annual Meeting was held during the week of the United Nations General Assembly, in the hopes of spurring synergy between goals and visions discussed on the East and West sides of New York City. CGI companies brought their experiences into the U.N. system at a time of unprecedented support for new forms of private-public partnerships to complement the role of government in addressing the newly adopted Sustainable Development Goals. This could allow for CGI’s commitments to reach the scale needed to have true global impact. Health should be a major beneficiary.
To accelerate progress on health, the UNGC is collaborating with Discovery Vitality and Novo Nordisk to elevate health within business in other areas that have become the norm, including the environment, labor, human rights, and corruption. Discovery Vitality’s CEO, Adrian Gore, pledged to work with others to advance the integration of health metrics into corporate reporting in his plenary address at CGI 2013 in the presence of the Director General of the World Health Organization, Margaret Chan, and the session chair, Chelsea Clinton. This pledge is being advanced during the UNGC in 2016.
It has been a privilege to see how seemingly intractable health and social problems are being tackled in new ways that build on the joint expertise of companies, NGOs, academia and government. While I was at PepsiCo, our CGI commitments tackled undernutrition in Ethiopia and obesity in China, India, and Mexico. We also partnered with the Alliance for a Healthier Generation, the American Beverage Association, and private-sector peers to curb the marketing and sales of unhealthy foods and beverages in the United States. All of these commitments had profound implications for the future of business models of food companies.
At Discovery Vitality, we are now expanding our CGI Commitments to Action with a very sharp focus, as outlined in our just-released 2016 Sustainable Development report. Vitality Shared Value Insurance is leading our members around the world to live longer lives while also transforming one of the oldest business models – life insurance. Our plan is having impact on health in profitable ways. CGI’s leadership in supporting and steering companies to do this will have enduring impacts on peoples’ lives and on our planet’s survival.
Few global platforms can claim to have the direct and indirect impact of the Clinton Global Initiative. Even as CGI draws to a close, the important work and impact of our commitments will continue. Doing well by doing good – and valuing the integration of both business purpose and societal gains – is now an unstoppable force in best business practices and in modern philanthropy.
Derek Yach, MBChB, MPH is Chief Health Officer at Discovery Vitality. He has been a full time employee of PepsiCo and has been on the Advisory Committee for the Clinton Global Initiative since 2006.
Closing the gender equality gap is among the priorities of the United Nations Sustainable Development Goals (Goal 5), along with end ending poverty and hunger, and ensuring quality education. In short, it is, has been, and will continue to be one of the most tremendous challenges of our times. What precedes this article is a plethora of literature telling us “what” to do (provide more leadership and equal opportunities, offer gender-sensitive trainings and access to resources, ensure participation, reform policies). This article focuses not only on how to actually begin putting these “whats” into practice, but also on how to get closer to closing this gap.
One of the most important and effective ways to close the gender equality gap is through women’s economic empowerment. Countless women across the globe face insurmountable barriers to fully participate in and contribute to the economy; these range from discrimination in the workforce, unequal pay, inability to access credit, lack of land ownership, lack of community support, and restricted movement. Others are unable to engage in income-generating tasks as a result of family chores such as washing clothing by hand, fetching water, cooking, and cleaning–also known as “time poverty.” Empowering women economically can reverse all of these trends and help women gain agency and respect in their societies.
There are many places to start, but the question is not “where,” it is “how.” Oxfam America identified a growing, underserved number of women entrepreneurs in Latin America whose businesses had credit needs ($5,000-$50,000) that exceeded traditional microfinance loan sizes (typically no more than $1,000), but were at the same time unattractive for larger commercial banks. They therefore formed a so-called “Missing Middle” of women unable to grow their businesses further.
In Guatemala, this missing middle faced significant constraints in accessing finance: They typically have no collateral to back their loans (only 15% of land is owned by women), interest rates can reach as high as 40% annually, and banks can require up to a 240% guarantee coverage. Banks may also require women to obtain their husbands’ permission to acquire a loan, and oftentimes fail to provide them with a copy of their contract.
Oxfam America proceeded to launch its first impact investing fund, the Women in Small Enterprise (WISE) Fund in Guatemala, with an eye to women’s economic empowerment. The WISE Fund provides a 50% guaranty to local financial institutions in exchange for better loan terms for women. In our most recent partnership with a savings and credit cooperative in Alta Verapaz, we have reduced interest rates from 30% to their lowest rate, 18% (in effect transferring women entrepreneurs to their lowest-risk customer segment), reduced collateral requirements from up to 140% to no more than 100%, and allowed for mixed guarantees.
How this program gets closer to closing the gender gap is by recognizing and accounting for the fact that true empowerment requires more than simply increasing access to finance. Opening up space for women to play a larger role in their surrounding economy can carry a number of implications and unexpected side effects, such as backlash from society or male family members unwilling to question gender roles. These unexpected results may disrupt or completely thwart well-intentioned efforts. Another way to frame this is that a holistic approach to women’s economic empowerment ensures that years of planning, fundraising, and investing translate into real change instead of an experiment gone wrong.
The WISE program couples access to finance with business skills training that includes hard and soft skills (such as how to negotiate business and household affairs) and, with the support of gender specialists, incorporates male family members so as to reduce negative repercussions as a result of participating in the program. Through evidence generated from fund and portfolio performance and changes observed within the financial partner, WISE advocates for the country’s highest institutions to enact policy changes that will bring about permanency to this work.
Each country, program, and approach faces varying demands and opportunities. What remains clear is that without a holistic approach grounded in the specific context in which women are living, the result will be disappointing. Irrespective of the path chosen, any strategy meant to close this gap should:
- Place other women in leadership roles in the development and implementation of these programs;
- Empower women to build negotiation skills; and
- Be able to generate reliable and persuasive evidence to legitimize advocacy strategies.
Alicia Robinson is Chief Investment Officer at Oxfam America’s pilot Women in Small Enterprise, based in Guatemala, where she lived for ten years. Alicia holds a B.A. from Stanford University and a J.D. from Harvard Law School. Her interests are in the fields of business and human rights in Latin America and human rights-based approaches to economic development.
Cornerstone Capital recently analyzed environmental and social issues facing extractive and mining companies in a new report entitled Extractive Company Values: Attention to Environmental & Social Issues as an Indicator of Companies’ Strategy Execution Potential. The authors argue that environmental and social issues require “longer term operational planning because they require proactive engagement with local, global and contextual stakeholders to assure passage”. The same came be true for investments across a spectrum of issues, especially when the investments are designed to create socially equitable outcomes.
In a recent report that I co-authored with Sarah L. Thomas, In Pursuit of Deeper Impact: Mobilizing Capital for Social Equity, we analyzed how the process of making investments that are designed to achieve social equity can be improved. In a critical area, our research affirms what many in the international development field and others have learned the hard way: there are financial and social costs to excluding the ultimate beneficiaries of investments. Not only is the process of engaging beneficiaries helpful in its ability to assure passage of regulatory hurdles, it also mitigates against costly mistakes that can be avoided by bringing beneficiaries into the impact investing process early and often.
For instance, the renewable energy industry is replete with examples of foreign investments gone awry due to negative community response. With early and authentic engagement of local communities, investors can better understand the true issues that communities face and thus the actual costs – financial and otherwise – that are involved in complex investments. One expert in the field, Chinesom Ejiasa, former managing director at the Overseas Private Investment Corporation (OPIC) puts it this way:
“It’s tough with investors who require a certain return and they don’t spend enough time thinking about the broader implications of the investment, particularly for the local community. For example, in terms of moving populations from ancestral land to clear ground for a renewable energy project, the investors don’t fully appreciate that the local residents will probably have to move from government-owned land, where they don’t have to pay rent, to privately-owned land where they will have to pay for rent they often cannot sustain. Better community engagement that uncovers the motivations and desires of a community would further mitigate the commercial risks of these sorts of investments and more importantly produce more broad-based benefits. To effect ideal change in a community, one has to consider the make-up of the community, otherwise one will employ an investment thesis that will benefit some, but generate unintended consequences that are adverse to the community meant to benefit the most.”
To understand how inequality works and how investment capital can help address the effects of inequality, it is critical that we do not just look at data. It is also essential to learn from people who are living with the effects of inequality in their daily lives. In other words, we have to develop more strategies to bridge the gap – or create greater proximity – between investors and those in whom they invest. When we acknowledge that the great majority of investment professionals (78 percent of whom are white and 65 percent of whom are male) do not come from the communities in which impact investments are made, we can also acknowledge the need for intentional engagement of communities. By engaging beneficiaries in the investment process, we can gain insights into key factors that drive impact investing success and increase our understanding of:
- The real social and economic issues and opportunities affecting people and communities;
- Contextual factors that may influence the ability to make social and economic change an understanding of the real risks involved with an investment;
- Whether their investments are actually resulting in the intended impacts that they were designed to achieve.
Impact investors spend a lot of time trying to determine how to measure impact. Perhaps one of the inputs we could consider alongside our determined effort to quantify impact is the perspective of those who know best what matters most: the beneficiaries of investments.
Katherine Pease is the principal of KP Advisors, a Colorado-based firm working with foundations, nonprofits and investors. She has worked with foundations, investors and nonprofit organizations for more than 20 years.
Interest in impact investing concepts that combine financial returns with a positive social or environmental impact have been growing in appeal. What seems to be lacking is a model to encourage broad-based place-based impact investing across all asset classes. For fiduciaries of place-based organizations’ funds, like those at community foundations, pension plans, endowments and many family wealth pools, the HOW of regional impact investing is challenging: The due diligence requirements for what would be a small portion of a portfolio are as stringent as in global investing, but resources are often too constrained to allocate the necessary time and effort to seeking these smaller investments and finding enough of them for diversification, as well as measuring the impact and outcomes of these investments.
A central, regional virtual and physical intermediary could perform these due diligence duties, act as a clearinghouse for regional impact investments and be the platform for a broad array of local investment options, connecting capital seekers with capital providers. Picture a family of five separate multi-manager funds, as proposed for the Bay Area Impact Investing Initiative (BAIII): public equity, fixed income, real estate, infrastructure and private equity. Each fund is designed to offer benchmark- or market- like returns for each asset class and a positive local impact in the San Francisco Bay Area.
Place-based public equities: Designed to be a small part of a globally diversified portfolio, this place-based public equity strategy was a case study for the United Way of the Bay Area that developed an investment process and model portfolio for the small endowment fund at the UWBA, whose mission is to “reduce poverty in the Bay Area”. The model portfolio has these characteristics:
- overweights Bay Area headquartered companies — the model portfolio has a 4X overweighting of Bay Area headquartered companies (75% of this custom universe is based in the Bay Area vs. 19% for the S&P 500);
- optimizes the construction of the portfolio to maintain market weights for each sector similar to the Russell 3000 or S&P 500, not the cap-weighted Bloomberg Bay Area Index, BBACAX, which is tech heavy;
- incorporates ESG criteria that emphasize strong corporate governance, employee policies and environmental stewardship;
- predicted a tracking error to the Russell 3000 of less than 2%;
- 5-year model performance (2011-2015) is 13.95% vs. the Russell 3000 of 12.14% vs. the BBACAX at 12.64%; and
- would also include active corporate engagement and proxy voting.
Place-based fixed income investments are another financial tool that has impact. Investing in a diversified portfolio of local corporate bonds, direct lending pools for local businesses, local SBA loans, and federal agency housing securities can provide market -like returns and be tracked to local impact. The recent study for the Urban Sustainability Directors Network provides dozens of examples of traditional financing tools, like municipal bonds, industrial revenue bonds, and partnerships that can be used by our cities to finance sustainability and climate action plans that reduce GHG emissions. Intentionally investing in our cities is another way to invest locally for impact and new platforms are being developed for local fixed income investing, like Neighborly.com.
Real Estate is clearly place-based (location, location, location), and if your mission includes place, then real estate as an asset class offers investment opportunities ranging from single- and multi-family homes, office spaces, and industrial spaces to community space and open space. Sustainable and mixed-use neighborhoods can develop with the tools of finance we have today and generate the multiplier effect of the positive impacts across the region.
Long-term financing for infrastructure investment and public private partnerships is needed to address regional issues like congestion and transit-oriented development, access to the internet, education, health, and food security. Building cross-disciplinary partnerships can leverage our investments in sustainable infrastructure.
Private equity and venture capital have been the impact investment of choice for mission investors seeking job creation or specific ‘bottom of the pyramid’ solutions globally. Private equity investments, particularly when located in local low- to moderate-income neighborhoods provide much-needed jobs, skills training and a positive community impact. We are seeing innovation in financing these opportunities through incubators and crowdfunding platforms as well. As the business model itself evolves to include themes like ‘profits with purpose’ and ‘doing good while doing well’, social entrepreneurs will need access to capital and private capital needs and wants to find these impactful solutions to our community challenges.
When place-based fiduciaries in the Bay Area allocate a small portion (1-10%) of assets to some or all of these local portfolios, the intermediary would manage those portfolios and build deal flow, investment opportunities and partnerships across the capital stack. Delegating the due diligence and management of the funds to a central intermediary and collaborating with other investors for collective impact reduces the costs of managing and monitoring these impact and location-specific portfolios and compounds the impact.
For community development investments that are dependent on philanthropic and public grants, private capital could be included in the ‘below-market-return’ portion of the capital stack through tools like loan loss reserves and guarantees, social impact bonds, flexible lines of credit, or low interest rate loans through CDFIs. A collaborative, flexible, collective neighborhood impact pool could aid neighborhood organizations that rely on grants to serve their missions. San Francisco’s Tenderloin neighborhood is home to over 30,000 residents in a ten-block area and has the help of 150 non-profit service providers who work to improve the lives of the residents. Access to capital could leverage the work being done in the Tenderloin for more impact.
Understanding and connecting capital providers (fiduciary/market rate return funds, MRIs and PRIs, grants, subsidies, tax credits, etc.) with capital seekers across thematic regional challenges, like housing, can make that capital more productive and diversified. Further research into housing will reveal the continuum we see through a wide impact investing lens:
- non-profit organizations like Mercy Housing
- the social impact bond for housing blight offered by the Richmond Community Foundation
- sustainable, affordable multi-family buildings like Healthy Buildings in Napa
- homeownership options like Verbhouse, a private fund that offers an alternative path to homeownership for renters who want to be homeowners
- the Mayor’s office for down payment assistance,
- public policy on building and developer requirements, and
- the multi-year partnerships for the renovation and renewal of entire neighborhoods like Bay Meadows in San Mateo or “Candlestick Village”, where private and public companies like Stockbridge and Lennar partner with public and philanthropic resources to build new communities in a more sustainable fashion.
The San Francisco Bay Area has the talent, wealth pools and robust economy to offer a wide variety of attractive impact investing opportunities to promote sustainability in our region. Collaborating across the financial continuum, across themes like housing, water, jobs, and transportation, and with a focus on our own regional backyard could provide the resources to move the needle on the sustainability and resilience of the Bay Area. Other regions and missions could adapt this BAIII model of financial collaboration and collective impact by developing portfolios and a regional/local platform based on their unique resources and needs. It makes sense that regional resources collaborating to address regional challenges can speed the development of the solutions we need to become and remain a sustainable, prosperous, and resilient community.
Lauryn Agnew is Founder of the Bay Area Impact Investing Initiative (www.baiii.org), which develops customized model portfolios across all asset classes for mission alignment under fiduciary standards of due diligence and performance expectations.
 The research paper describing the BAIII was published in the Routledge Handbook of Sustainable and Social Finance with Oxford University: “Regional Impact Investing for Institutional Investors: The Bay Area Impact Investing Initiative,” July 2016
 The Federal Reserve Bank of San Francisco encouraged and published the research working paper: “Impact Investing for Small Place-Based Fiduciaries: The Case Study of the United Way of the Bay Area”. http://www.frbsf.org/community-development/files/wp2012-05.pdf
 Financing Sustainable Cities Scan and Toolkit, October 2016, in partnership with HIP Investor: to download the paper: http://usdn.org/public/page/32/Government-Operations