Aligning one's investments with one's values is always a challenge. Nonetheless, an ever growing number of people, pension plans, and institutions are doing just that, albeit in several different ways. Some invest in any old thing, but use the fact of being invested to leverage pointed conversations with management on a host of subjects. Others invest only in venture capital for bottom-of-the-pyramid schemes that will benefit the poorest of the poor. The approach I have become most associated with is this: restrict what you will buy, then leverage that ownership for conversation; meanwhile invest in non-traditional ways (whether venture capital or deposits with credit unions or a loan to a local farmer) to support emerging people or ideas. Now a new approach is emerging: purpose.
But first, why invest with values? Mostly it is about consistency. One of the earliest documents related to responsibility in investing was John Wesley's sermon on Money. Written in this early Methodist sermon was argument that if you were a Methodist, you had to be mindful about making money. If it was wrong to drink, it was wrong to invest in the manufacture of drink. If tanneries pollute rivers, making fishing impossible for those downstream, they were wrong to invest in. If a company bribes officials to gain advantage, it would be wrong to invest with them. For John Wesley the definition of a person, a Methodist, lies in what they will invest in.
The debate over the role of American companies in South Africa ushered in a broader meaning of consistency. The early 1980s saw a global campaign to ostracize the government in South Africa for the continuation of a separate state for Blacks, one which essential enforced abject poverty. For the university or local library that divested, the argument that the divestment movement could be a lever to force change in South Africa was motivation enough.
By the time I launched my mutual funds the motivation for socially responsible investing had moved from 'consistent with my own values' to 'consistent with the values of human dignity and ecological sustainability.' We have done many surveys on investors and it always comes down to these twin concerns: people and the planet. Our value proposition is this: Do you believe that finance, that is investments in companies or agencies, equity or debt, domestic or abroad, has real world consequences? If you do, then will you idly stand by and let finance without ethics reign?
Domini Social Investments was once one of a tiny handful offering products to investors. Today thousands of firms globally, compete in the space. And they do it well, with keen attention paid to the ultimate goal.
Yet in all of this there remains a quiet voice. Couldn't we find a way to do what some attempt in private ventures? Couldn't we invest only in companies that solve intractable problems? For me, venture capital disappoints in this regard. For the venture capitalist, the best result comes by selling the start up to a larger company. We see in the debate over disclosure of GMOs in food that many GMO-free companies fight disclosure initiatives. This is because they are no longer independent. They were sold to a big conventional food company. Couldn't the purchase of public stocks, rather than venture capital, meet the solution orientation without this tragic outcome? We call this approach 'investing with purpose.'
Again it is consistency that motivates. There are investors who want to hold up for public viewing the technologies and products that solve tough problems and do it as a core business function. Nia Global Solutions, a division of Domini, was formed to do just this. It has been a challenging process. Of the roughly 2,700 companies we started with, our research led us to only three. We were looking for companies that solved a tough problem and that had at least one female on the board or in top management. To repeat, we found three. This was pretty discouraging, but we continued the search and sought out smaller companies in countries we hadn't looked into before. After months of work we found a pool of forty companies and began investing, so far, only for ourselves.
Investing with purpose may well remain a niche. There are too few companies to invest in, for starters. But I am excited about the potential that this new contribution to the field can serve as a demonstration model. I believe Nia Global Solutions marks the beginning of the next phase for my field.
What are the intractable problems that our investing-with-purpose initiative has found solutions to? They are sometimes tough to talk about. Most new cases of AIDS in women are the result of marital sex. Most HIV cases are not caught early because people are embarrassed to test for it. Clean energy is technologically difficult in many installations. People want a home with a yard, and it is awful from an energy-saving perspective. Some cancers are so rare no one bothers with the market. Some wounds cannot heal with conventional bandages, like those in the stomach or eye, or burn wounds. Small community oriented credit unions need deposits to do the social mission of serving the low income, but cannot compete with big banks to get those deposits.
Each of these problems has a solution, and that solution is up and running, making money for investors in a company that is focused on problem solving. It isn't easy to find examples like this but it is what the ethical investor seeks. There is a company that manufactures affordable housing neighborhoods on otherwise unusable land and does it with the newest energy saving technologies. There is one that produces a low-cost at home HIV test; there are companies seeking cures for cancers that others ignore. And there is a company that gives credit unions the competitive edge they need to survive.
Wow. Investing with purpose. Watch this space; it's coming at you.