Capitalist Conundrum
So-called values-based investing goes by many names including different takes on SRI, ESG (environmental, social and governance), impact investing and others. But whatever you call it, the overall sector in recent years has transcended its fringe status as both retail and institutional investors have funneled more money into the space.
According to US SIF—the Forum for Sustainable and Responsible Investment, assets under its definition of SRI (sustainable, responsible and impact investing) zoomed 76% from the start of 2012 to the start of 2014, to $6.57 trillion. That accounted for more than one out of every six dollars under professional management in the U.S., the group says.
Regarding performance of SRI-type investments, there are a number of studies showing that incorporating environmental and social factors into investment portfolios doesn’t negatively impact financial returns. Meanwhile, the number of SRI-related investment funds and other products is growing, but like with any sector the track record is mixed. Nonetheless, proponents such as NI believe SRI can provide comparable ROI versus conventional investment vehicles.
Despite SRI’s growing acceptance, it still carries a stigma that it’s not “real” investing. “There’s a little bit of weird sexism about it where like it’s not sufficiently macho to care about other people and you should just power through and make a lot of money, and then in a show of patriarchal magnanimity you give a little bit to the poor,” Peck says.
A lot of what drives NI is its clients, many of whom aren’t fans of go-for-the-jugular capitalism.
“A lot of our clients are reluctantly wealthy, in a way,” Peck explains. “A common profile is they’re inheritors and not entrepreneurs; they work at a nonprofit or are artists or do some kind of activism. There’s a little bit of a rebellious streak there, certainly against the broader Wall Street message.”
And that informs NI’s investment and philosophical approach. On its website, NI addresses the “corporate agenda” and its potential negative consequences for social justice and the global environment, while acknowledging that corporations also provide us with a lot of good things. “Each of us, as investors, consumers and citizens, must be conscious of how we interact with corporations,” the website says.
For its part, NI says it devotes “a great amount of research and soul-searching to finding ways that investment capital can be best used to achieve our client’s financial goals while encouraging greater corporate responsibility.”
In some ways, this soul-searching represents an inner tension the company has with its very livelihood. “We feel it because we’re in this industry where standard Wall Street thought has, in my opinion, defined capitalism in an extreme way,” says Susan Taylor, an NI advisor in Louisville, Ky. “And we have lots of clients who are longtime activists and social critics who question whether they should even be in the stock market. We live between those two perspectives.
“I think extreme capitalism, where profit is the only thing that matters, isn’t the way capitalism was intended,” she continues. “Our planet and social structure can’t survive with that version of capitalism. That’s not sustainable in the long run on a social or mental health model, or any way you look at it. How do we take what works with capitalism and make it better, and make sure human and environmental health have a priority that supersedes profits? Yes, profits matter, but it can’t matter exclusively.”
That might sound like Hippie Economics 101, but Taylor has a PhD in economics from the University of Maryland, formerly worked as a corporate economist at Bank of America and describes herself and her firm as “unapologetic capitalists.” She and her husband, Andy Loving, an ordained Baptist minister, operate their practice called Just Money Advisors, which they affiliated with the NI network in 2011. They saw NI as a good fit because it was open to the type of less-traditional, community-oriented impact investments they like to make.