Viewpoint: Investment Tips for a Regenerative Future
By Michael Kramer, M.Ed, AIF®, Managing Partner & Director of Social Research, Natural Investments LLC
With climate change and peak oil now widely accepted, in the past few years we have witnessed the proliferation of investment opportunities under the green, sustainable and socially responsible umbrella. As the public considers issues in making purchasing decisions, socially responsible investment (SRI) funds and managers have responded to these preferences in the design of their programs. As there aren’t universal social and environmental criteria used by managers to select the underlying holdings, there are “many shades of green.”
For some, SRI involves screening out those sectors they may find objectionable: tobacco, alcohol, firearms and gambling are common exclusions, followed by nuclear power and military contractors. Business practices across all industries are also evaluated as part of environmental, social and governance analysis by many managers. They may look at issues such as EPA violations and major contributors to global warming, child labor, sweatshop conditions, workplace diversity, corporate disclosure, human rights, community relations, product safety, unnecessary animal testing, offensive and deceptive marketing, and executive compensation.
While most fund companies apply exclusionary screens, some differentiate their approach to social research by looking proactively for companies with specific sustainability programs and other exceptional policies and practices. While no major corporation has achieved sustainability, many are taking it seriously by examining their supply chains, focusing on renewable energy and efficiency, and implementing “care of people” policies. Yes, greenwashing does exist, but we are now able to distinguish the pretenders from the committed. Visit naturalinvesting.com to see the NI Social RatingSM, the nation’s only social and environmental rating of socially responsible mutual funds.
The recent popularity of renewable energy and other green sectors has led to the emergence of many new mutual and exchange-traded funds in these areas. Green investments, however, may have nothing to do with social responsibility, which is an important distinction. For example, if a company that makes a green product happens to treat its employees and communities poorly, is it worth owning? Manufacturers of green products can also cause toxic pollution through the production process, so there are many levels of behaviors to evaluate.
Given the lack of public companies in Hawaii, there are few investment opportunities here for retail investors, but accredited investors have funded dozens of start-up companies in emerging green sectors such as biofuels, aquaculture, biotechnology, and wind, solar, and hydrogen power. Two of these – Hoku Scientific and Napo Pharmaceuticals – went on to become public companies; while the likes of Sopogy, which recently installed a facility at NELHA; Kona Blue (also at NELHA); Ocean Network (digital channel 349); Honolulu Seawater Air Conditioning; and deep-ocean ahi farm Hawai‘i Oceanic Technologies remain privately held.
Community investing is also gaining in popularity, given the recent challenges of the conventional banking and financial services industry. Community Development Financial Institutions (CDFIs) operate lending programs in communities of need that continue to address access-to-capital issues for marginalized domestic populations and low-income communities worldwide. By directly addressing economic empowerment and ecological preservation, CDFIs are considered high-impact but low-risk investments that act as suitable replacement for money market or other cash equivalents positions within mutual funds. Community banks, credit unions and loan funds, as well as international microfinance programs, offer investors modest returns, in some cases with federal insurance, while making a difference in people’s lives.
For more information on ethical investing, visit:
To find green businesses, visit:
Here in Hawaii, green businesses can be found at:
- Kuleana Green Business Program at www.kona-kohala.com
- Sustainability Association of Hawaii www.sahawaii.org
- www.hawaiihealthguide.com
- www.hawaiigreenpages.com
- www.manifestaloha.com
- www.sustainhawaii.org is launching an array of green business initiatives called Walk Story and Ainability as a chapter of the Business Alliance of Local Living Economies
- Unified Field Bank, a sustainability-focused lending institution, is also in its formative stage here on Hawai‘i Island: www.unifiedfieldbank.com)
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Michael Kramer is a Managing Partner and Director of Social Research at Natural Investments LLC, an investment advisor with offices in Kona and four other states, exclusively managing portfolios of socially responsible investments for individuals and institutions. He founded the Kuleana Green Business Program of the Kona-Kohala Chamber of Commerce. Michael can be reached at 331-0910, Michael@NaturalInvesting.com, and www.NaturalInvesting.com.
