Impact Finance for Millennials: Key Lessons Learned!

On Wednesday, November 16th, three experienced leaders in their field came together at the New Resource Bank (NRB) in San Francisco, to teach attendees how they as millennials, and any community member for that matter, can take immediate steps to make their hard-earned dollars more impactful through sustainable banking and investments. 

This evening started with a brief networking session, with food and drinks, as attendees settled in throughout one of the main conference rooms at NRB.

1. Sustainable Banking: The Wholehearted Approach

First up was Mr. Vincent Siciliano, the President and CEO of the New Resource Bank himself! Vincent started with a key analogy to impact finance, which he said you can think about as follows:

  • The Head: this is where Thinking, thoughts, and intellect dominates our decisions
  • The Heart: revolves around Feelings and our personal relationship to money
  • The Hands: put into Practice what we are thinking and feeling for our financial life

Usually, there is a gap that we see in the communities we live in, and the links are broken between the above such that we forget to be wholehearted in our money investments and to have a more values-based approach in our decision making.

With our banking, big change can happen with small transactions. By #BankingonValues, best explained by Ralph, the Kid Banker at https://www.youtube.com/watch?v=yx9vcsTI-0A, we can multiply the impact of money for things we need and the Planet and community need too, just by normal people pooling money together to do great things.

The mission of organizations like the New Resource Bank is to achieve well-being for people and the Planet through banking, through initiatives like offering loans to organic food clients and solar energy organizations, so that you know where your money spends the night such that when you spend it, it can be an agent for change - cumulatively. 

NRB serves values-driven companies to transform the banking industry into an agent of positive social, environmental and financial change, and as a founding member of the Global Alliance for Banking on Values, New Resource Bank champions a community of values to transform banking, advancing sustainability through every aspect of its operations, from the loans it makes to its commitment to using deposits for good, to help create a better world.

So to see your money as a store of your values, it all starts with you and your wholeheartedness approach!

2. ESG and SRI Investing: Smarter Portfolio Management

Next up, we had Mr. Thomas Van Dyck, Managing Director and Financial Advisor at RBC Wealth Management, to delve into the importance of Environmental, Social and Governance (ESG) investing and Socially-Responsible Investing (SRI) to everyone.

To start, if we were to put our CEO cap on, we would need to not only solve problems and be responsible to shareholders, but also manage risk every day, and keep our people inspired to be productive in a job that compensates through salary and benefits. But how do you incentivize your workforce and keep them happy?

The number one cost to business is job turnover, as companies need to keep retraining people all the time in their jobs. Instead, why don't companies just help their employees feel inspired and motivated through values so they feel committed to help make things happen through their roles?

On a day-to-day basis, Thomas and his team work to evaluate SRI and ESG initiatives to reduce risk and increase returns for companies. In the example of investments toward a low carbon economy, he noted that in the free markets, pollution is a subsidy, and companies externalize the cost of pollution off of their balance sheets. Companies should not be passing the healthcare cost associated with coal-burning to the public, but actively work to embed that into the cost of the product.

The MSCI KLD 400 Social Index, which is a capitalization weighted index of 400 US securities that provide exposure to companies with outstanding Environmental, Social and Governance (ESG) ratings, excludes companies whose products have negative social or environmental impacts - more information at https://www.msci.com/documents/10199/90492e6-527e-4d64-9904-c710bf1533c6. This index, formerly known as the Domini index, has outperformed the S&P 500 for a period of 26 years, as Thomas has seen through running an ESG fossil-free portfolio for an entire decade.

A few additional resources suggested around educating ourselves was taking a look at the US SIF (www.ussif.org) and Intentional Endowments Network (www.intentionalendowments.org). By doing market research, from sustainable products to the assets of pension funds in which our community, teachers and government employees invest in, we need to be asking questions and using the power of our shares to actually hold management teams accountable to the public through shareholder engagement and dialogue.

3. The Power of Money: Using Investments to Make Positive Change

Our third speaker for the day was the one and only Danielle Fugere, President and Chief Counsel of As You Sow, who brought it home with more actionable next steps we can take today to create an impact through our investments (& divestments!).

First, we need to align investments with value and invest to support not only profit, but people and planet as well. As most people have 401k plans, stocks or equities, there are a few actions you can take, including talking to your organization about sustainable 401k options:

  1. Avoid Harm - Screen for the likes of tobacco, gambling, and carbon intense companies
  2. Positive Investing - Choosing sustainable companies
  3. Impact Invest - Micro finance, venture capital
  4. Divestment - more at divestinvest.org

As You Sow is a non-profit foundation chartered to promote corporate social responsibility (for example on human rights) through shareholder advocacy, coalition building, and legal strategies. Danielle believes in the theory or change, and that to make change we need to change corporations. But how do we do that?

Through corporate engagement activities, each of us as a shareholder has the power to directly engage with companies, vote on or file shareholder resolutions, or even attend annual meetings and make public statements. If you own equities, you can cast a vote and use a proxy voting service, have your manager vote for you, or vote online so that you have a direct way of communicating with your board.

A few successful case studies of As You Sow exemplifying these include:

  • McDonald's 2011 resolution (29% vote) led to no Styrofoam at 14,000 stores
  • Coke, Pepsi, Nestle Water, and Starbucks agreed to recycle 20 billion plastic bottles/year after 5 years of resolutions
  • 3.4 billion Starbucks paper cups at 1,500 stores recycled after 8% vote
  • HP, Dell, Apple, Best Buy now recycle 500,000 tons of e-waste after 6 years
  • IDACORP closed coal-fired plant and replaced with wind after 51% vote
  • Exxon agreed to produce first Carbon Asset Risk Report and received worldwide press
  • In health and nanomaterial, the first resolution for use of nano in food, seeking preventive industry action

A highlight of the presentation was the Fossil Free Funds tool (fossilfreefunds.org) which was a program created by As You Sow to help anyone take a look inside their 401k plan. In the tool, you can search for mutual funds by name, ticker or fund family, and as the default is The Carbon Underground 200 as a base, you can see how many companies of this is in that fund. Another base used for comparison is the Filthy 15, so that you can have a clear understanding of the carbon footprint and carbon intensity of each company in that fund.

Corporations have an enormous amount of power and face reputational risk when they are not responsible to all pillars of CSR: people, profit, and planet. By asking the right questions and telling leadership teams that we, for example, do not want to buy slave labor cotton, that sentiment is pushed down the supply chain and works in changing practices through shareholder engagement. If funds received 20 calls per month demanding a change in practices, they would more than likely start to make a difference! So let's all do our part to positively impact our world. :)

For more insights into Impact Investing, you can visit more Net Impact resources through their portal, where through membership, you can find an online resource that provides you with a job board, advice on turning various background into an Impact Investing career, and video interviews with industry leaders. More at: https://www.netimpact.org/impact-investing