The power of small investors – like us
Is our money helping or hurting Cape Breton and the planet?
Responsible investing. Investing in mission. Impact investing. Divesting. Shareholder engagement.
These words are entering the mainstream. A growing number of individuals, organizations and institutions want their investments – stocks, bonds, interest-generating funds that get lent out to others for a return – to align with their values or the missions of their organizations.
Are our pension funds, longterm savings accounts and endowments actively helping the worst polluters and humanrights abusers? Can we direct some of our investments to things we care about while still generating a healthy return? Can some of the money stay in Cape Breton?
Through recent research and meetings, I have come into contact with people immersed in the world of “mission-aligned investing.” These are organizations, foundations and institutions that have small or medium-sized endowments. They need the endowments to generate a return each year to help run their programs.
But they don’t want the endowments to be invested just anywhere.
Take Trinity-St. Paul’s United Church in Toronto. It has an endowment fund of $600,000 that has been collected over time. Over the course of a few years, the church examined its own values, studied the United Nations Principles of Responsible Investing and started talking to other organizations.
The church decided to get out of the 200 worst fossil-fuel companies and write other policies on where the money should go and should not go.
Following the money can be hard. Rating companies for social impact can be just as hard, but there are increasingly sophisticated advisory services that do objective ratings. They use the rights of shareholders to get data and answers about how and where companies do business.
In this vein, I recently had the opportunity to hear deeply informative presentations by Sustainalytics, SHARE (Shareholder Association for Research and Education), Genus Capital Management as well as Trinity St. Paul’s itself.
Once Trinity-St. Paul’s developed expertise in this area, it became part of a successful effort for similar policies at the national level by the United Church of Canada.
So far, Trinity- St. Paul’s has found that its instructions about where its money should go have not hurt its bottom line.
Their spokespeople were corroborated by Desmond Wilson, chief financial officer for the Catherine Donnelly Foundation, at a recent workshop that I attended at the Mary Ward Centre in Toronto. The Donnelly Foundation has longer experience managing its $40-million endowment through responsible-investing lenses.
These practitioners use expressions like “stranded assets” to refer to investments that are fuelling what they consider problematic companies. As more investors become socially conscious, some of the high-polluting, unhealthy or war-profiting companies may become bad bets.
But this movement is not just about divesting. It’s about finding viable, safe investments that align with the changes we might want to see in the world. So, for example, some of Trinity St. Paul’s investment money is in the Canadian Alternative Investment Cooperative that helps community businesses get off the ground.
Nova Scotia has a very attractive tax incentive for investing your money in CEDIFs (community economic development investment funds). You can transfer your RRSPs there without penalty. CEDIFs fuel community businesses like parts of New Dawn Enterprises, developers of affordable housing, wind energy initiatives and more.
As an experiment in “mission-based investing” the Ottawa Community Foundation put 10 per cent of its endowment into the Community Forward Fund, which makes repayable (with interest) loans to credible community development businesses, like cooperative groceries, Indigenous housing developers and cooperative funeral homes. The fund managers examine the business plans and check for viability beforehand
Meanwhile, benefactors who donate endowment funds to charities, or leave money in their wills, are starting to demand responsible investments. Shortly after the Jesuits of English Canada adopted progressive policies on responsible investing, they started promoting these policies to potential major donors. They were effectively saying, “We practice what we preach.”
Harnessing our own power as investors takes attention. There are grey areas, for sure. Defining our principles and interests takes time too. But just saying that we want our money to generate a return no matter where and no matter how is not good enough anymore.
The tools and data to do better are becoming more effective. Small investors, like many of us, can be agents of change.