AJF Financial Services Summary of The 26th Annual Conference on Sustainable, Responsible and Impact Investing.

The Conference

This past week we attended the 26th annual SRI Conference in Colorado Springs. The Sustainable, Responsible, Impact Investing conference is the longest running annual gathering of investors and investment professionals in the world centered on the exchange of ideas to further flow of investment capital for positive impact. The conference incorporates numerous ideas, strategies, and concepts concentric to sustainable, responsible and impact investing; the common denominator between the various moving parts was ENGAGEMENT!!! Conference attendees were encouraged to be an advocate for our clients and communicate concerns with management to effect change in corporate decision making and behavior.

One of the keynote speeches of the conference was delivered by SRI/ESG Industry Pioneer and Founder of Domini Funds, Amy Domini. Amy presented tangible data highlighting the aggregate impact of numerous engagements made by individuals; her thought provoking presentation reminds us that we can make a difference. In her presentation she highlights the following pertaining to ESG adaption over the past few years:

  • 7,500: The number of companies publishing corporate social responsibility reports globally.
  • -77,544,000: Estimated reduction of laboring children globally from 2000-2012.
  • 33 and 20: Countries and stock exchanges worldwide that have environmental, social and governance programs.
  • $2,759,152,949/28,000/926: In FY 2014, nearly $3 billion was invested or lent through more than 28,000 transactions made by 926 community development resources across the US.
  • 320,000/120/5,000: Number of Bloomberg terminals worldwide –each containing 120 ESG data points- For approximately 5,000 public companies.

Call To Action for Advisors: Educate, Step Up and Engage!

I am reminded of the Master Game by Robert de Ropp. “Seek, above all, for a game worth playing. Such is the advice of the oracle to modern man. Having found the game, play it with intensity- play as if your life and sanity depend on it (they do depend on it)”.

I don’t see that we have much choice but to engage. After sitting in on conference topics such as “Eradicating Modern Day Slavery in Global Supply Chains”, “Investing for Justice Reform”, and “Climate Change and Investor Risk: The Known Unknowns” my belief that we need to do more to correct the problems caused by corporate bad decision making and actions was only confirmed. It is our responsibility to provide the transparency and empower our clients as owners of corporations to vote with their money. Anything less, which includes business as usual, contributes to the trust gap that exists between clients and advisors. The onus is on us to educate ourselves and our clients about the power they possess as shareholders.

The revolutionary changes observed within businesses in the past decade alone weren’t instituted by insular corporate boards and passive shareholders; they occurred when shareholders unified their voices and aligned their interests with other stakeholders to effect meaningful reform. Efforts to demand transparency around carbon emissions, resource consumption, environmental impact, and instituting stronger corporate governance measures are samples of various real time examples highlighting the leverage shareholders possess. Corporations change when shareholders speak up and apply pressure to demand that the corporation do the right things.

One Action that Spurred Change

Amy Domini reminded us that Timothy Smith, an advisor and currently the Director of ESG Shareholder Engagement for Walden Asset Management, played a significant role in leading corporate divestiture, as a last resort of engagement, from investment in South Africa out of opposition to Apartheid; The pressure placed on corporations through engagement is what ultimately led to South Africa sitting down at the table to discuss the end of Apartheid. Advisors and our clients should call to mind this poignant moment in history when paired with Amy Domini’s assertion that you the investor can make the difference!

Last year I wrote about upon our learning of slavery in the supply chain of major retailers, we divested from our ownership of shares of Costco. Slavery still exists in that supply chain. There are many other advisors and organizations that are working alongside with Costco and the Thai government to make the necessary changes to end the confiscation of ID’s, the withholding of wages, and the onerous charges and work conditions, among other things, that lead to the slavery conditions that exist today. My take away from the conference is that divestiture is a tool for engagement, perhaps to be used as a last resort.

This Is Our Responsibility!

It is our responsibility as investment professionals to ensure our clients are empowered to make decisions that align with their values and provide them with the encouragement to engage with others to do the same. Advisors and brokerage firms who negate the importance of environmental, social, and corporate governance issues within the context of making investment recommendations are doing a great disservice to their clients. It is no longer acceptable to sit by and pretend that social, environmental, and governance issues are in some way separated from the flows of capital. We all need to do our part by engaging in this process, hold corporations responsible for their decisions and actions that affect all stakeholders. This is a game that all of our lives and the lives of the next generation depend on.

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