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In this in-depth interview from The Browser, Francis Fukuyama, author of The End ...
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By Malaika Maphalala
I recently had the pleasure of meeting Kat Taylor, co-found ...
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A recent segment on the CBS evening news highlighted the emergence of the Benefi ...
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In this in-depth interview from The Browser, Francis Fukuyama, author of The End of History, discusses five recent books that he feels offer a comprehensive look at the roots of the global financial crisis of 2008 and beyond, as well as the ways we’ve responded since then. At the same time, this dialogue itself offers a solid ten minute overview that’s well worth the time it takes to read.
The five books which serve as jumping off points for the conversation are This Time it’s Different, The Big Short, Fault Lines, 13 Bankers, and the report of the Financial Crisis Inquiry Commission. Some of the many themes explored here include the American proclivity to address income disparity through expanding access to credit, the enduring focus on social responsibility in Japanese business, and the ways that the smaller Asian and South American financial meltdowns of the past twenty years have more in common with the recent American and European experience than is generally recognized.
A recent segment on the CBS evening news highlighted the emergence of the Benefit Corporation, which provides a legal structure for companies that wish to pursue a social mission, rather than being legally constrained to always maximize shareholder value. As you may know, Natural Investments was one of the sixty or so founding members of B-Lab, which certifies B-Corporations, and was an early recipient of the B-Coporation certification.
The two-minute CBS segment is not available for embedding online, but can be viewed here on the CBS News site and here on YouTube (the clip starts with 20 seconds on Muhammed Ali, then moves into the B-Corp segment).
Natural Investments partner Michael Kramer was the recipient of an award announced at this year’s B-Corp Champion’s Retreat. Michael was one of several people bestowed with the “I’m Just a Bill” Award, in recognition of his key role in moving Hawaii’s B-Corporation designation through the state legislature (as covered in this recent NI Blog post.)
While surprised and honored by the award, Michael was especially excited that the kudo was named after a classic Schoohouse Rock segment that he clearly remembers from his childhood. For those of you a tad too old for this cultural reference, these were shorts presented in between the main Saturday morning cartoons, teaching kids various important lessons. In this case, as you might have guessed, the lesson was what it takes to move a bill from idea to law. Check it out yourself (3 fun and educational minutes!) on YouTube.
New York Federal District Court Judge Jed Rakoff triggered lots of headlines with his recent rejection of a settlement between the Securities and Exchange Commission (SEC) and Citigroup, in which the company admitted no wrongdoing and agreed to pay a fine the judge called “pocket change.” Matt Taibbi exulted at “one of the more severe judicial ass-whippings you’ll ever see,” detailing the sorry state of the SEC’s enforcement actions, in particular the repeated agreements by companies to “never do that again,” while all too often ending up back before the SEC on similar violations. Much of the day-after coverage had a similar focus on the wrist-slapping nature of most SEC settlement.
But as the dust settled, many commentators noted that the weak penalties doled out by the SEC may be attributed to its meager operating budget (which necessitates quick settlements over long, expensive trials), as well as to the challenges of proving malfeasance on the part of companies engaged in a business in which everyone recognizes that risks are part of the game. Both of these reflections suggest that if the SEC pushed harder, it may have to trade a few high-profile trials for dozens of small-potatoes settlements.
Judge Rakoff rejected a similarly paltry SEC deal with Bank of America in 2009, but reluctantly approved a revised deal that raised the fine from $33 million to $150 million, though he called the final settlement, “half-baked justice at best.”
The clear solution is to give the SEC the resources it needs to dig deeper and push harder, including following through on legal charges when necessary and appropriate; the SEC’s slim staff and budget leave it relatively toothless in the face of a continuing supply of potential violations needing investigation and prosecution.
 "We're not here to put corporations down,” says Sister Nora Nash. “We're here to improve their sense of responsibility.” Photo: Laura Pedrick for The New York Times A recent New York Times piece, The Nuns Who Won’t Stop Nudging, is a great profile of the Sisters of St. Francis of Philadelphia, who have been visiting corporate offices to push for more socially responsible and sustainable business practices for the past several years. The order of over 500 nuns has a Corporate Social Responsibility Committee, and, with the Interfaith Center on Corporate Responsibility, has engaged in constructive dialogue with Goldman Sachs, Kroger, McDonald’s, and Wells Fargo, among others.
Check out the story at the Times.
The Sisters’ shareholder activism is just what Jeffrey Sachs says is needed as citizens work to build on the Occupy movement:
The young people in Zuccotti Park and more than 1,000 cities have started America on a path to renewal. The movement, still in its first days, will have to expand in several strategic ways. Activists are needed among shareholders, consumers and students to hold corporations and politicians to account. Shareholders, for example, should pressure companies to get out of politics. Consumers should take their money and purchasing power away from companies that confuse business and political power. The whole range of other actions — shareholder and consumer activism, policy formulation, and running of candidates — will not happen in the park.
Read’s Sach’s Sunday Times opinion piece for more: The New Progressive Movement.
Natural Investment’s Michael Kramer was the go-to guy for Scott Cooney of Triple Pundit when Cooney wondered how SRI was weathering the current extended economic storm. Check out Michael’s comments in full on the Triple Pundit website; here’s a teaser:
Kramer said that the current interest in the impact investing was truly inspiring. “Having done this for 20 years, it’s remarkable how exponential the growth in this field is,” he said. Kramer cited that socially responsible investing is a $3 trillion marketplace. “We’re redefining what corporations are, and there are more and more assets flowing into this space,” said Kramer.
This week, the Investor Network on Climate Risk joined similar groups from around the world in releasing a comprehensive call for energy policies at the national and international level that will encourage increased investment in renewable energy solutions. The Global Investors Statement on Climate Change includes proposals and criteria for designing useful and forward-looking regulations and incentives that will support “investment-grade” climate change policy.
The 4-page Statement, signed by 285 investment advisors institutional investors representing more than $20 trillion in assets, and a detailed 44-page report have been sent by the sponsoring investor networks to the G20 and other governments in anticipation of the UN conference on climate change in Durban. The investor networks will use the statement and report as a central resource in their ongoing engagements with national governments.
The Statement says, in part:
Climate change presents major long-term risks to the global economy and to the assets in which we invest. At the same time, well designed and effectively implemented long-term climate change and clean energy policy (“investment-grade policies”) will not only present significant opportunities for investors in areas such as cleaner and renewable energy, energy efficiency and decarbonisation, but will also yield substantial economic benefits including creating new jobs and businesses, stimulating technological innovation, and providing a robust foundation for economic recovery and sustainable long-term economic growth…..With data from the IEA indicating that global energy-related emissions of carbon dioxide (CO2) in 2010 were the highest on record, it is clear that the need for action is urgent. However, current levels of investment in low-carbon technologies fall far short of what is needed. Private investment will only flow at the scale and pace necessary if it is supported by clear, credible and long-term policy frameworks that incentivise investments in low-carbon technologies rather than continuing to favour carbon-intensive energy sources.
Natural Investments, LLC, is pleased to be one of the signatories, on your behalf. For more, see the links above, or investorsonclimatechange.com.
A growing movement to recognize social and environmental benefits as a legitimate purpose of corporate activity, alongside making money, has added two new states to the growing roster of those adding “Benefit Corporation” as a state-recognized legal designation. Both Hawaii and California recently passed Benefit Corporation statutes, joining four other states with such laws on the books; legislation has been introduced in five others as well.
According to B Lab, which both certifies companies as “B Corporations” (a formal process that is not state-recognized) and promotes the adoption of legal “Benefit Corporation” structure and mandates at the state level, state-registered Benefit Corporations “are legally required to pursue the creation of material positive impact on society and the environment, while meeting higher standards of accountability and transparency. Current law requires corporations to prioritize the financial interests of shareholders over the interests of workers, communities, and the environment.”
Natural Investments, LLC is one of the founding members of B Lab, and an early recipient of the B-Corporation certification. The company’s home state of Colorado has yet to enact a Benefit Corporation option.
Andy Loving has once again received national recognition for his compelling approach to investing and investment advising. This time, the kudos came from Financial Planning magazine, which just named the winners of its second annual Influencer Awards. The editors of Financial Planning chose Influencers in four categories, and, as they note, “we felt compelled to name several notables alongside the winners given how strong some nominees were.”
Andy was named the Notable advisor for the Practice Management Influencer Award, based on “his work incorporating community impact investments in portfolios.” As you may know, Andy’s been recognized for years for his work with issues of justice, money, and faith; last spring he was featured in a USA Today column on Christianity and capitalism.
By Scott Secrest
Among our goals in managing client accounts is to maintain broad diversification among investment types, since each is expected to perform well during different stages of economic and business cycles. In investment terms, we say it’s good to include a variety of investments with a “low correlation” to the others. Utility industries are known to have a fairly low correlation with the broader stock market, so are especially useful in this regard.
Utility industries include water, telecommunications, industrial materials, and energy. The ways we produce energy have come into painful focus recently as Japan and the world deal with the consequences of the nuclear disaster at the Fukushima Daiichi nuclear plant on Japan’s northeastern coast.
At Natural Investments, we have long eschewed any investment in the nuclear energy and weapons industries. The risks to human and ecological welfare in this industry are enormous. Further, we believe that no reasonable business case can be made for investment in nuclear facilities due to the expenses involved in building and maintaining them. And with so many alternative energy sources gaining in accessibility and efficiency, nuclear simply makes no sense (see Hal’s recent post for more on this).
Fortunately, there is an excellent investment vehicle that allows us to provide our clients with exposure to the mainstream Utilities sector with no nuclear investments at all – the Flex Utilities and Infrastructure Fund (until a name change in early 2011, it was called the Flex Total Return Utilities Fund). The fund has outperformed the Russell 3000 Utilities Index over the last 1, 3, 5 and 10 years.
Many Natural Investing clients have investments in one or more alternative or renewable energy funds.
The Flex UI Fund gives clients a stake in more established utilities, such as water systems and electric utilities, as well as its high proportion (about 30%) of holdings in the growing telecommunications and internet infrastructure sector. While like many mutual funds, it’s not totally “pure,” with smaller holdings in oil and gas pipelines and exploration, we feel that it serves a valuable purpose in diversification.
The Flex Utilities and Infrastructure Fund is an example of how we as investors can direct our capital away from dangerous and dated energy technologies such as nuclear, while taking responsible steps to balance our portfolios with a mix of innovative and established industries.
For more info, follow these links to the Flex Funds family of funds and an info sheet on the UI Fund
This article first appeared in the Spring 2011 Natural Investments News
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