Conscious Investing: Practitioners' views on holistic investing approaches that benefit people and the planet

Conscious Investing

Practitioners’ views on holistic investing approaches that benefit people and the planet

Edited by Christin ter Braak-Forstinger

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First published in Great Britain in 2017

Copyright © Christin ter Braak-Forstinger

The right of Christin ter Braak-Forstinger to be identified as the author has been asserted in accordance with the Copyright, Design and Patents Act 1988.

Hardback ISBN: 978-0-85719-617-0

eBook ISBN: 978-0-85719-618-7

British Library Cataloguing in Publication Data

A CIP catalogue record for this book can be obtained from the British Library.

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Whilst every effort has been made to ensure that information in this book is accurate, no liability can be accepted for any loss incurred in any way whatsoever by any person relying solely on the information contained herein.

No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading material in this book can be accepted by the Publisher, by the Author, by the Contributors, or by the employers of the Author or Contributors.

Contents

Foreword

Chapter 1. An Introduction to Conscious Investing: Why My Investments Can Save the Planet as well as My Soul

Chapter 2. Investing in a Regenerative Civilization

Chapter 3. Conscious Investing as Practiced by 100% Impact Investors

Chapter 4. The Next Generation of Conscious Investors: Values Redefined

Chapter 5. Experience of a Next-Gen Investor: Finding My Ground the Circular Way

Chapter 6. The Spiritual Dimension of Conscious Investing

Chapter 7. Foundations as Conscious Investors: A Case Study

Chapter 8. Money in Place: Catalyzing Local Impact Investing

Chapter 9. The Practices of Conscious Companies

Chapter 10. Conscious and Ethical Investing: Investor Life Cycle and Investment Process

Chapter 11. Money is a Means to Transform Society

Chapter 12. Save the Earth, It’s the Only Planet with Chocolate: Can a Chocolate Business Escape the Commodity Trap and Participate in Restoring Grace, Justice and Beauty to the World?

Acknowledgements

Foreword

By Uli Grabenwarter

In the light of the collateral damage caused by repeated financial crises which have been triggered by the individualistic (ab-)use of the financial system, associating the term ‘conscious’ with investing seems a brave concept. Acting consciously in awareness of the consequences for others isn’t an investment approach that goes well with the individualistic behaviour of return-driven investing. It certainly doesn’t bring to mind a great track record of financial market players in considering societal consequences when pursuing their own objectives.

The term ‘conscious’, in suggesting awareness of the consequences of our acts, refers to an intentional, deliberate act, which, with respect to the consequences for other individuals or the society as a whole, in turn suggests premeditation. Premeditation, in criminal law, qualifies as the highest degree of accountability of the author of a given act.

Indeed, taking responsibility is what conscious investing is all about: rather than delegating the societal and environmental impacts caused by us to a legal and regulatory framework that, in prescribing what is ‘allowed’ and what is not, discharges us of any liability, conscious investing internalises this responsibility into our own decision perimeter.

Why would you opt for that accountability? Isn’t it limiting your choices? Doesn’t it give others the option of taking a free ride on opportunities you disregard because of ethical, social or environmental concerns? Doesn’t it make other market players ‘rich’ while you forgo the ‘best opportunities’ to make money?

Morality in financial markets, and in business in general, will never be a voluntarily subscribed code of ethical standards. News in the media every day reminds us that the dream of Kant’s categorical imperative one day being internalised in financial market behaviours such that financial market regulation and supervision become redundant is a very distant scenario.

Yet, conscious investing is not a hobby of naïve daydreamers.

If this book brings together the contribution of pioneers in impact investing reflecting on conscious investing, it is in full awareness of, or even in response to, very concrete market realities.

They are based on the observation that the magnitude of negative societal spill-over effects of self-centric behaviour of market players in the financial system are creating tangible costs, not only to distant stakeholders in our societal system. These spill-over effects also increase individual investments’ risk and destroy economic value for investors; and in doing so, they erode the sustainability of a whole system on which we are basing our lifestyle, our concepts of social security, our retirement schemes, and every single dimension of our expectations on quality of life.

The trade-off between individualistic maximisation of profit and societal well-being is at the roots of capitalism. This fact is not about to change. However, the global financial crisis in 2008 has brought about the emergence of a widespread resistance from a large spectrum of stakeholders of economic life to the collateral damage that the traditional pursuit of personal wealth at the expense of others entails.

Amongst the claims of this matured stakeholder community is the call for a more conscious way of using the power of capital to serve societal needs, not at the detriment of individual well-being, but as a prerequisite for the sustainability of personal wealth.

In this book, practitioners of the impact investing industry debate various concepts for combining individual and societal prosperity in a wide spectrum of investment approaches. They reverse engineer and dismantle concepts that made us procrastinate in obsolete, wrong-proven financial market logic to guide you to ways of creating personal wealth that do not come at the expense of others.

This being said, conscious investing is not about inventing a new drug that makes you feel happy about the way you earn money. However important our awareness of the societal impact we create may be to put our own conscience at peace, it is only the starting point in a systemic change required to secure the sustainability of our society.

The need to reflect on how we can carry the essence of such investment approaches to the increasing number of stakeholders that are marginalised by our economic system has become indispensible. Again, this is not a concept of charity, but a matter of systemic interaction: the increased interconnectivity of our world no longer allows us to confine social, environmental, demographic and political threats inside boundaries defined by our own comfort. If we are unable to deal with these challenges at distance, they will come to us: in the form of refugee streams, natural disaster patterns, war activity, epidemic diseases, terrorist activity… news stories in the media tell it all.

Whatever conviction we gain of the importance of holistic investment approaches, impact-minded investing and moral standards we want to apply, this book is an invitation to think beyond the microcosmos of our own prosperity. You may take up this innovation for many reasons: because of your good heart, or because of fear – based on sheer logic – about where we are headed to; you may be part of those who look at increasing business risks because of social tensions, modified consumer behaviour, limited natural resources, natural disaster risk and similar; or you may be part of those who, based on humanitarian values, care about this planet.

Whatever reason you choose, they all are valid and share the same degree of urgency. And they will lead to the same result.

Happy reading and safe travels on your journey!

About Uli Grabenwarter

Uli Grabenwarter, is Deputy Director – Equity Investments at European Investment Fund (EIF). In this capacity he oversees EIF’s activities in Impact Investing, Technology Transfer and Venture Capital, with EIF being Europe’s biggest Fund-of-Funds Investment platform in that space. Previously he was responsible for EIF’s strategic development in the equity space and in this context has led the build-up of the Social Impact Accelerator, the first pan-European social impact investing fund-of-funds. From 2010 to 2012 he conducted a 20-month research project on impact investing in collaboration with IESE University of Navarra in Barcelona and the Family Office Circle Foundation based in Switzerland, analysing best-market-practices for impact investing in the private equity and venture capital space. He is a visiting Professor for Private Equity and Venture Capital at IESE University. He regularly publishes articles and white papers on venture capital and impact investing. Uli is also chair of the European Impact Investing Luxembourg think-tank platform (www.eill.lu) and member of several expert groups on impact investing and impact metrics across Europe. Uli holds a Master’s degree in Business and Finance of the University of Graz.

Chapter 1. An Introduction to Conscious Investing: Why My Investments Can Save the Planet as well as My Soul

By Christin ter Braak-Forstinger

1. Why my money can save the planet: become a double hero

Let’s assume you want your investments to contribute to make our world a better place, save our planet’s resources and uplift the life of marginalized people, but you don’t have a lot of faith in politicians, protest rallies or even your private banker. You might also think your investments are anyway too small to make any difference.

Let me comfort you: you can do something and you don’t have to be a millionaire to make a lasting change with your investments. Every one of us can become a double hero: an active steward of his money and an active steward of our planet. We all can become aware of the specific direction(s) in which we want our money to flow and what impact we would like it to have.

Before that, we need to find out what our inner and very dear values, motives and preferences are, and if our investments are aligned with this core set of personal passions and beliefs. Do you actually really know what you are currently invested in and what titles or shares your investment portfolio is comprised of? Or does your money rest in a savings account, neither creating financial – nor any other – added value?

If you have an investment portfolio, do you know: does it include listed stocks of oil or gas businesses? These stocks might be offered as blue chips today, but at a closer look turn out as financial products with an inherent long-term massive risk exposure – for both your portfolio as well as the environment. This is what the most recent Mercer study on the impact of climate change revealed:¹ the coal sector, for example, is likely to fall between 18–74% in the next 30 years.

Every one of us can channel our investments towards sectors and themes we care about and become a catalyst for positive impact at the same time as achieving solid financial returns. Why aren’t our accounts spilling over then and our planet’s ecosystems all intact, diverse and flourishing? Too often we simply don’t care. We take things for granted and do not take responsibility for the outcomes we would like to see. We blame others, cite globalism as a curse for everything, and in the worst case become indifferent free riders.

This may, however, only be a cheap moral option in the short run. When ecosystems are further destroyed, the impact will be felt by everyone and everything. For example, a new report predicts that in 2050 – if no fundamental transformation takes place – more plastic will be in the sea than fish.² This may seem quite some years away. However, already today it is a reality that much of the plastic in the oceans ends up in the guts of fish and ultimately on our dinner tables.

It’s an inconvenient truth – as Al Gore referred to it more than ten years ago – that our personal approaches to our lives and investing will determine what our future on this planet will look like. So, what does it change to eat organic lobster on the Titanic³? Hand on heart, not a whole lot. Such an act may satisfy one’s conscious in eating sustainably farmed lobster but, at the same time, travelling on a large vessel like this causes great pollution to the oceans.

In particular, consider that one cruise ship emits as many air pollutants as five million cars⁴ going the same distance. These large ships use heavy fuel that on land would have to be disposed of as hazardous waste. Cruising has become one of the fastest growing sectors of the mass tourism industry and cruising companies create a picture of a clean and environmentally friendly tourism sector. The opposite is true, however. Cruise ships, in addition, contribute their fair share to the enlargement of the big garbage patch in the Pacific Ocean.

Probably nobody would want to spend his next holiday in the vast plastic territory that UNESCO has recognized officially as a new state. Its population is comprised of several thousand tons of garbage. An estimated 20%⁵ of the plastic in the oceans comes from ships or offshore platforms. The rest is blown, washed or deliberately dumped from the land.

It’s not only the massive plastic vortex in the Pacific Ocean, however. Throughout the world’s oceans, there are numerous other regions known as ‘garbage patches’ and more islands and coastal areas filled with plastic waste and debris. Henderson Island for example, originally a tropical island gem with one of the world’s most remarkable elevated coral atoll ecosystems in the eastern South Pacific, is dumped with almost 4,000 pieces of trash washing up daily. According to a study of May 2017⁶, Henderson Island is likely to have the highest density of plastic debris reported anywhere in the world. Thirty-seven million pieces of trash cover the remote island and turn it into a plastic junkyard.

So how can we rethink global growth for long-term prosperity and how can we transform our global financial system into a force for good? It’s a fundamental question that points towards both a regenerative economy as well as a regenerative form of investing. In terms of the above example of the alarming ocean pollution, we need to prevent plastic from entering into the oceans in the first place and think about plastic alternatives. Consciously reflecting and consciously acting upon one’s own personal and financial choices will definitely be part of the solution.

While motivations for investing are diverse and typically deeply personal, conscious investors are part of a growing movement who believe they can do better things with their money when they deeply connect with their money and when they allow themselves to also see the big picture: the wider systemic impact that their investment decisions entail.

Traditional investing today is largely intangible, impersonal and often linked with negative social and/or environmental impact. Usually we do not know what our money is doing in terms of impact when it is sitting in our savings account. It’s much more rewarding and impactful to choose a resilient path, prudently consider one’s own destiny, take control of one’s own financial future, and take conscious and focused action to attain it.

This book aims to share with you approaches to conscious investing that are valid for both someone with a full-time job and a family to take care of, as well as for dedicated impact investing enthusiasts. Throughout, you will find personal stories about investments that have created real-life outcomes, that you can touch and feel, and that have created positive impact in multiple ways.

The co-authors of this book have become passionate advocates for action and positive change who deeply align their investment approaches with their values and beliefs. They can stand behind their investment decisions and may even see their portfolios as expressions of who they really are. Isn’t that something we all would like to achieve with our money: relate with our money in a much more personal way, make peace with it and let it positively shape our planet – in addition to achieving a financial return?

2. It’s all connected – with my investments

Today, more and more investors are committed to understanding the full consequences of their investment decisions. They want to become aware of the actual imprint that their money causes and they realize that their investments can have potential implications and an impact on the larger systemic level.

Conscious investing is a new regenerative and enlightened form of capital and investing. A conscious investor is per se holistically oriented and is aware that his investment decisions are interconnected. His personal intention is to create multiple kinds of values through investing, such as financial, ecological, social, physical, emotional, ethical and/or spiritual value. From a personal perspective, it becomes evident to a conscious investor that his money has massive potential as a positive life force. He uses his money to become a proactive re-shaper of positive change. From a systemic perspective, it becomes evident to the investor that everything is not only connected in the web of life, but also that it co-evolves.

2.1 See the big picture – and the whole system

Starting from this eagle-perspective, let us shift our focus to the big picture: the systemic interconnectedness that our investment decisions have. In order to do so, let us first try to understand the hidden dynamism of our planet. Let us think out of our daily routine. Just imagine yourself sitting silently and fully present on a rock above the ocean and observing the sunset in its stunning beauty before you. Probably you remember well a situation similar to this. Allow yourself to reconnect with the feelings you experienced in that situation. Was it like the heartbeat of a planetary sense? Maybe the feeling of the grand simultaneity of it all? It may also be quite likely that you recollect a feeling of deep joy, but also one of empathy and responsibility.

In our interconnected world, systems are linked and their complexity is only partially visible. A change in one system often has severe impact on other systems. To deal with one issue at a time is not really sustainable anymore. We rather need a holistic approach to better understand and react to the interplay between the atmosphere, land-based ecosystems and the oceans. Scientists speak of ‘planetary boundaries’ and ‘planetary stewardship’ in that regard.

But why is it so hard for us to implement this planetary stewardship in our everyday lives? Is it because it is burdensome or is it more because it is out of our perceived focus? It’s probably a combination of both, in particular with the latter making it easy for us to fade it out from our perspectives. Albert Einstein once said: a human being is part of a whole…(yet) he experiences himself as something separated from the rest…

Walking down the street, we can easily sense the changes that occur around us. Why are we so bad then at sensing changes that unfold significantly faster – or slower – than our preferred speed? Our planet is much more complex than our ability to comprehend. It moves with speeds and interdependences that do not conform to our everyday modes of thinking. Considering the connected whole (holism) works to our advantage. When we do so, efforts we undertake in one part of a system can unlock greater resilience in another. When in a complex system – the resilience of only one part is bolstered, this can (unintentionally) introduce a fragility in another, which in turn can doom the whole. Andrew Zolli speaks about our need to work and think in more than one mode or scale at a time in that regard.⁷

For humans, it’s hard to accept that the way natural ecosystems work is exemplary. Trees are a wonderful example to show how everything is connected in the web of life. In the process of photosynthesis they filter air. They also extract toxins such as heavy metals and other pollutants (released by humans) and they take out carbon dioxide. Trees protect the soil from erosion. They keep the groundwater table up. They release oxygen. On a global scale, forests simulate cloud formation and so bring moisture to otherwise dry areas and help cool the Earth. What is less known is that trees and fungi engage in an amazing network of cooperation in forests to support each other’s growth. In that regard trees actively communicate to protect and benefit the community in the woods. Suzanne Simard has undertaken vast research on the social community of forests and her research shows the existence of mycorrhizal networks, which are underground webs of