This week we have a fantastic opinion post from Cara Macmillan, Co founder and Vice President of Sustainability at the Halcyon Consulting Group. Here she looks at the importance of responsible investing in being social responsible.
Capitalism is an economic model where private individuals have the right to own property and investments. With rights, comes responsibility. People don’t usually have issue with the right to own their homes, or to have a say in how they spend their money.
We take issue when we feel that we do not have power. We get angry or worse, we get quiet.
Social Responsibility is about empowerment. It is about the opportunity for each of us to responsibly own property; financial or real estate. With ownership comes accountability.
My neighbour has a compost pile in his backyard. He believes that he is acting responsibly. It is his right because it is on his property. The problem is he doesn’t know how to properly compost so now deer mice have come to my backyard and his. Deer mice carry hantavirus and that virus is deadly. He owns property but is he acting socially responsible? No.
“Social Responsibility is about empowerment.”
And while he is doing what he believes is right, my neighbour is lowering the asset values of all of us in our neighbourhood….oh and he is putting all our health at risk. Our legal system protects us from people who may have good intentions but are causing others harm. The legal responsibility we each have to provide for each other without causing harm which is called our Duty of Care; is obvious and we have a means to enforce the responsibility to compost without attracting animals carrying disease.
But what about companies?
Companies have become individuals under the law. When we took back ownership from the nobility and gave it to people and corporations, we didn’t think everything through. It is confusing – how can we hold a corporation accountable for wrongdoings like deer mice droppings that are infected with hantavirus? There is no real person with whom we can try to speak or educate. So what can we do?
We can demand Corporate Social Responsibility through tools like Socially Responsible Investing.
Corporate Social Responsibility and Socially Responsible Investing are working to clean up corporations’ backyards. Corporations have good intentions to make money and pay dividends to pensioners each month. Corporations employ people and their salaries provide shelter, food and education to the families. Yes the model works well. Or does it?
Regardless of your opinion, it is the only model that we follow right now. And it is not perfect. So how can we ennoble ourselves to monitor our neighbours, our corporations to step up and provide a higher Duty of Care? A higher responsibility?
If you believe that your pension should not be investing in a company that makes a mess and puts people’s health at risk – speak up!
When you speak up to investor relations and your pension manager why you want this improved…they will change. It will take time, but when we speak up, things change.
When you speak up because you know that eventually this will cause a lawsuit and that lawsuit will lower the profits and hence the ability to make monthly pension payments, then eventually things will change.
“We can demand Corporate Social Responsibility through tools like Socially Responsible Investing.”
Companies are judged to be big and impersonal. They seemed to have their own rules. They seemed to be above the law. Corporations seemed to be able to make money at the expense of society.
But those times have changed. The legal systems are beginning to demand a Duty of Care from our corporations. But what about each of us? How else can we demand more? Today, we speak up through social media and through our spending choices.
People often ask me why I even talk about making a difference. You simply can’t make money and make a big difference they say. Well my portfolio proves you wrong. For years now I have been following the Principles of Responsible Investment.
Principles for Responsible Investment integrate environment, social and good governance principles into investing.
One of the slogans of the financial world is:
“Follow the money”.
You see investing along the principles of our collective world is in fact following the money.
Let’s walk through this.
Our world has changed. We feel record heat waves. We feel record rain fall and torrential storms. With these shifts in our weather, we spend more money on repairs, maintenance and insurance. So when I see a change in my personal spending habits, I check with others and ask the same questions. We compare notes and then ask which companies are benefiting from our spending. Consistently I hear the same answer:
“We focus our spending on quality not quantity. In a time when people are saving and paying off all debts, the simpler joys are the most important.”
“Principles for Responsible Investment integrate environment, social and good governance principles into investing.”
So from my statistically inaccurate survey:
- Quality food that is healthy and tastes great. We focus on quality not quantity.
- Locally made so that it is fresher and I can support my neighbours. After all we all worked together to dig out after the storms and the floods.
- an online presence so I know that they have a smaller real estate footprint and those overhead costs are not passed along to me
- I am not buying from that store because they treat their employees terribly. Management is rude and condescending to the staff and are inflexible.
- I will not bank with that bank because they had a layoff last year in my town and 80% of the staff that was let go were in some way disabled. It was probably just a coincidence or was it?
So what does this really mean? Translated into an investment philosophy it means that many people invest responsibly and they do not even know it.
Responsible investment is the practice of involving your values into your investment decisions. That decision can be a consumer purchase, a place of employment or an actual investment choice.
For the people who choose quality over quantity, you represent the responsible investment tenet of investing for long term sustainable profit rather than the short term. You look for consistency and reliability. You don’t want to worry about surprises like dishonest accounting or serious environmental damage lawsuits against the company.
Companies that focus on paying a dividend to its shareholders and are committed to growth are usually committed to quality over quantity. But check the financial reports and do your due diligence. These are the types of solid companies that Responsible Investors choose.
When you choose to support your neighbours because they are there for you through the storms then you are investing your community which is another tenet of Responsible Investment. This builds local wealth which can be reinvested into schools, hospitals and services that maintain or raise the quality of life.
Labour practices are an important aspect of responsible investment. I never make a decision on an investment based on hearsay. There are many research firms that review labour practices. This information is available from many reputable charities and non-governmental agencies. Many research firms make this information publicly available. We just need to look.
Negative screening is another way to participate in Responsible Investment. If you lost someone to lung cancer, you can choose not to invest in tobacco. If you have a disabled family member that was laid off and you do not want to be associated with that company, then you have the right to make that choice. You can still have a balanced portfolio because there are many other solid choices in the same sector from which you can choose. The key to Responsible Investment is that it lets you put your money where your values are.
So how does one make Big Money and a Big Difference? You go with the flow. The flow of Big Money like pension funds, insurance companies and endowment funds are investing in Responsible Investment. They recognize that fiduciary responsibility means more than just making money and managing financial risk. It means making money with integrity and quality consistently over time.
Yours in Corporate Social Responsibility,
Cara MacMillan MBA, caramacmillan.com
“It Is Only Money: And It Grows on Trees” is a book written by Cara and is available on Amazon. 10% of the gross proceeds are donated to Development and Peace (devp.org).
“The worst impacts of climate change are being felt by the Global South, yet they contribute the least to the warming of our common home. It is time to act and create a climate of change!”