The Veris Agenda: Five Impact Investing Themes for 2015

By Patricia Farrar-Rivas, CEO

As impact investors, Veris Wealth Partners directs capital to support the varied goals of our clients, while helping create a more just and sustainable world.  The process of aligning values with wealth through impact investing continues to revolutionize the capital markets in the U.S. and abroad.

Impact investing also does something else that’s very important: It delivers both positive social change and financial performance. Very few wealth management strategies can achieve both of these goals.

With such a broad mandate and so much opportunity, the question is how do we determine where to concentrate our efforts and yours?

High Five

At Veris, we are focused on five key impact investing themes.  These focus areas aren’t new for Veris; we have been working on them for many years.  All of these themes are highly interconnected, though different in terms of suitability and risk.

Our team is excited about these investing themes for good reason: Each one seeks to mitigate specific risks and identify promising investment opportunities that can deliver significant environmental and social impact.  In our blogs and white papers in 2015, you’ll hear more from us on these topics. Also expect that our point-of-view will evolve even further as new developments unfold.

1. Gender Lens Investing

Gender lens investing is one of the newest strategies for creating impact.  Gender lens investing includes investments that make capital accessible to female entrepreneurs and businesses; promotes gender equality in the workplace by supporting companies that are gender policy leaders; and invests in products and services that benefit women and girls.

The data shows that better companies and communities are created when wealth and leadership flow to women, whether the goal is to lift women and girls out of poverty or bolster women’s leadership and entrepreneurial success.

Put simply, investing in women is good for all of us. By focusing on some of us we all win.

2. Sustainable Agriculture and Food Systems

Agriculture is the most dominant human endeavor on the planet. Agriculture as it is practiced today threatens wild plant and animal species, as well as the natural ecosystem upon which humans and wildlife depend.  Today, over 70% of fresh water goes to crops, livestock grazing and forestry.

With the world population estimated to reach 9 billion by 2040, it is imperative that the management of agriculture systems be improved to increase productivity and preserve biodiversity.  Investment in sustainable agriculture seeks to demonstrate that environmentally progressive farming practices are scalable and are more economically viable than today’s chemical-dependent commodity agriculture.

Further to advance this new agriculture consumers are demanding food and agriculture systems that return closer to their communities and regions.  This too is a very positive trend, rebuilding a local food infrastructure which has been swallowed by Agribusiness and multinational food companies.  Many of our clients are already very engaged.

3. Climate Change and the Environment

Climate change continues to be one of the most critical issues of our time.  Global warming and the ongoing degradation of the environment pose growing risks to the planet and demand new solutions. As the effects of climate change accelerate, they are challenging corporate profitability and governments’ budgets on a global scale. The fallout from climate change is already beginning to create a ripple effect in equity markets.

As investors, we are constantly looking at the trade-off between risk and expected return. Incorporating climate change risk into portfolio management is vital to comprehensive risk analysis. One of the major financial risks we are following is the whole question of “Stranded Assets” being created as a world dominated by fossil fuels shifts to a renewable future.  Trillions of dollars of existing energy assets are likely to see their value greatly depreciated in the transition. The good news is that across financial sectors and industries, there are a rapidly growing number of investments driving environmentally positive solutions.

4. Community Wealth Building and Social Justice

Community Wealth Building is a fast-growing economic development movement intended to strengthen local communities. It aims to redirect the flow of assets back from Wall Street to Main Street. Community wealth building promotes democratic ownership and local control of businesses and jobs. It seeks to develop local talents, capacities, facilities, and capital. Community wealth builders are developing and strengthening locally-owned – and often community-owned – businesses, universities, hospitals and non-profits that are anchors of their local economies for the long term.

The Community Wealth Building field is comprised of a broad range of models that have been growing over the past 30 years. These include cooperatives, employee-owned companies, social enterprises, trusts, municipal enterprises, community development financial institutions, community banks, and more. The profound issues of Inequality are now clear to all.  Developing real strategies that work to rebuild communities for the “99% of Americans” are deemed essential by both the Right and the Left. The energy and ideas flowing from the community wealth movement will be exciting to watch in 2015.

5. Sustainability and Mindfulness

Sustainability is another emerging area of great opportunity and interest for both global and local companies who share a progressive sense of responsibility. At the most fundamental level, sustainability is a deep understanding that everything is seamlessly and beautifully interconnected.

Sustainability is about looking at the world holistically, and acting from this understanding. It’s also about connecting the dots – uniting different branches of knowledge to produce solutions that transcend an atomized world. Equally important, interconnectedness refuses to be blind to the negative impact that one group or industry working independently may have on the greater whole of society.

When we practice mindfulness, and are present with the choices we make every day, greater sustainability and greater innovation unfolds. Mindfulness recognizes that each of us, doing our own work in our own field, impacts others — even if we don’t see it or don’t realize it. At Veris, mindfulness is what we try to practice every day.

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We hope you share our enthusiasm for these particular issues, and we welcome any ideas to help us have greater impact.

 

 

 

Veris Guest Blog: What Is Community Wealth Building & Why Is It So Important?

By Ted Howard, Co-founder and Executive Director of The Democracy Collaborative

More than a decade ago, my colleagues and I at The Democracy Collaborative began using a term for a new kind of economic development – Community Wealth Building. For years, the term was so uncommon that it almost invariably appeared within quotation marks when used.

Today, a Google search identifies 124,000 entries and is growing daily.

In Richmond, VA, the Mayor recently established the first City-government Office of Community Wealth Building. Community wealth initiatives have been launched in cities as different as Cleveland, OH, Washington, DC, Atlanta, GA and Amarillo, TX. Regional Federal Reserve Banks are hosting video webinars and meetings. Even the extractive fracking industry — yes, you read that right — is now working to co-opt the term to improve its image.

Why Now?

So let us pause for a moment to ask: What is community wealth building and why is it important?

My colleague Marjorie Kelly, author of Owning Our Future: The Emerging Ownership Revolution, writes that:

When families possess assets — valuable skills, social networks, a home, some savings, an ownership stake in a business — they enjoy greater resilience, and are better able to withstand occasional shocks like unemployment or illness. They can plan for their future, send a child to college, feel secure in retirement. A job may start or stop. It is assets, of various kinds, that yield greater stability and security. As this is true of families, it is also true of communities. Jobs may be drawn into a community, but then leave without warning. And if attracting jobs means degrading community assets — through pollution, low-wage jobs, or the loss of tax income through excessive tax breaks — a seeming gain can in fact represent a net loss. 

If traditional economic development tends to be about attracting industry to a community, building wealth is instead about using under-utilized local assets to make a community more vibrant. It’s about developing assets in such a way that the wealth stays local. And the aim is helping families and communities control their own economic destiny.

Strengthening Communities

This is community wealth building: a fast-growing economic development movement that strengthens our communities through broader democratic ownership and control of business and jobs. It builds on local talents, capacities and institutions, rebuilding capital to strengthen and create locally-owned family and community owned businesses that are anchored in place, that aren’t moving.

The community wealth building field includes a broad range of models and innovations that have been steadily growing power over the past 30 years or more: cooperatives, employee-owned companies, social enterprise, land trusts, family businesses, community development financial institutions and banks, and more. One powerful team of local partners are anchor institutions, like hospitals and universities. They are often the largest economic drivers in their communities. Increasingly they see the synergy between restoring local health and wealth with their success.

These strategies reverse the focus on “chasing companies to relocate to my city.” All too often this includes greater tax breaks and lower wages for companies that may well relocate again for a better offer in another community. Community wealth, on the other hand, is tied to place. The people who own and control the businesses live there.

These structures and models are part of a growing system that aims at improving the ability of communities and individuals to:

  1. increase asset ownership;
  2. create anchor jobs locally by broadening ownership over capital;
  3. help achieve key environmental goals (including decreasing carbon emissions);
  4. expand the provision of public services by strengthening the municipal tax base; and
  5. ensure local economic stability.

Investing Locally

Significantly strengthening and growing local capital is critical.

Strategies include:

  1. building new, and strengthening existing, community-based financial institutions;
  2. preventing local financial resources from “leaking out” away;
  3. leveraging the use of procurement and investment from existing local anchor institutions such as  hospitals, universities, foundations, cultural institutions, and city government; and
  4. finally, working aligned impact investors and financial institutions to grow affordable capital committed to building local wealth.

Veris and other advisors play a critical role in furthering community-based impact investing.

The overall economic impact of place-based, community wealth building strategies is evident. More than 10 million employees own all or part of 10,900 companies through employee stock ownership plans (ESOPS) — firms that employees finance and increasingly own through pension contributions. These ESOPs have generated equity benefits of $870 billion for their employee-owners. Cooperatives, according to a 2009 University of Wisconsin study, now operate 73,000 places of business throughout the United States, own $3 trillion in assets, employ 857,000 people, and generate over $500 billion in revenue for their member-owners. The new “go local/sustainable” business and food movement is exploding.

Political economist and historian Gar Alperovitz, a co-founder of The Democracy Collaborative, often asks audiences this question when he lectures: “If you don’t like state socialism and you don’t like corporate capitalism, what kind of system do you want?” Community wealth building begins to point to some of the essential elements of a more just, equitable and sustainable system.

To learn more about community wealth building innovations across the country, visit www.community-wealth.org

Ted Howard is the co-founder and Executive Director of The Democracy Collaborative.

How Community Foundations Can Accelerate Social Change

By Patricia Farrar-Rivas, CEO

 “The world has changed, and so must we.”  – Clara Miller of The F.B. Heron Foundation

Clara’s right.

The time is now for community foundations to embrace a new vision that accelerates social progress and rebuilds local wealth.

The good news is that a new roadmap for community foundations is contained in a just-published report by The Democracy Collaborative,  A New Anchor Mission for a New Century: Community Foundations Deploying All Resources to Build Community Wealth.

The report is recommended for anyone interested in making their community stronger, especially those encouraging social change through impact investing. Why? Impact investing is growing more rapidly among community foundations than other foundation sectors.

The 52-page report highlights how community foundations are innovating to build community wealth and profiles 30 innovative foundations across the country. The report describes how each of these forward-thinking organizations is rethinking its mission to have an even greater impact.

The Opportunity

Ted Howard, Executive Director of The Democracy Collaborative, explains that community foundations are evolving to play a lead role among major local “anchor institutions” including major universities, hospitals and non-profits. These institutions represent more than $1 trillion annually in economic activity and are grounded in their region.

The report showcases community foundations that are adopting this new anchor mission by deploying all of their resources—financial, human, social, intellectual—to create shared prosperity. This mission uses their twin financial resources, grants and investments, to help develop a locally rooted economy that is inclusive and sustainable.

“America’s more than 760 place-based community foundations can be a tremendous force for community economic revitalization,” Howard said. “Combined, their endowments total $65 billion and their annual grantmaking roughly $5 billion.

Community foundations are today at a tipping point, said Ronn Richard, president of the Cleveland Foundation. “Our field’s next century will be radically different from the first.”

In particular, community foundations are facing growing competition from a growing group of national donor advised funds, many of which are affiliated with commercial institutions such as Fidelity, Schwab, Vanguard, Citibank, and Goldman Sachs. Donor advised fund (DAF) assets at those institutions now surpass the DAF assets at community foundations, the report found.

Clara Miller of The F.B Heron Foundation noted that local foundations can provide new leadership in their communities. Most philanthropic approaches were designed for a world in which a small segment of the population lived in poverty. Today, Miller says poverty is structural and the urgency and size of the problems require that we work differently. “Everything at our disposal is now a mission-critical resource.”

Progress On Many Fronts

The report profiles a wide range of foundations, but three examples show how foundations are evolving to become anchor institutions.

  • The Cleveland Foundation catalyzed the creation of three employee-owned Evergreen Cooperatives, including Evergreen Energy Solutions, a solar installation and energy solutions company launched in large part with the support of large contracts from local anchor institutions. The three cooperatives employ workers drawn from Cleveland’s inner city neighborhoods, where unemployment exceeds 25 percent and median household income is under $18,500 a year. Inspired by this model, a number of other community foundations have begun adapting this approach for their own communities.
  • Vermont Community Foundation, based in Middlebury, VT, for the last decade has had a policy of devoting five percent of all assets—including donor advised funds—for investments that benefit Vermont. And through its Food and Farm Initiative, the foundation has deployed many other resources to build community wealth in the food and agriculture sector. The foundation supported legislation that created the Farm to Plate Initiative and funded the Initiative’s ten-year plan to increase economic development. It also helped launch the Vermont Farm to School Network, which seeks to create local food-buying programs at all Vermont schools by 2020.
  • Incourage Community Foundation of Wisconsin Rapids, WI, this year made a new commitment to invest 100% percent of its resources for mission. Everything the foundation does—grants, investments, vendor relations, and hiring—will be re-examined with a focus on creating a community that works for all.  Incourage made a commitment to invest all its financial assets for mission, making it the first community foundation to take such a pledge.

The Democracy Collaborative is doing great work helping foundations shift their mindset from poverty reduction to wealth creation. This is the kind of inspired thinking that benefits all of us.

Patricia Farrar-Rivas is CEO of Veris Wealth Partners.

 

The Time is Now for Mutual Understanding

By Casey Verbeck, Director, Business Development

Living in lovely Boulder, Colorado with my wife and two kids is an amazing and wonderful experience, but I will never forget where I came from: the other side of the tracks outside of St. Louis.

Even amid this Rocky Mountain splendor, I’m reminded that not everyone is living the dream. We live in a time when 33 million people in the U.S. do not know how they will get their next meal.

Right here in Boulder we have too many people of all ethnic backgrounds living below the poverty line – 14% of the population. The equality gap is further dividing us from one another, dimming the hope of millions of people who long for change for their families and children and the opportunity to make the world a better place.

What Can We Do?

My modest upbringing motivated me to work hard, and it helped me succeed. But not everyone is as fortunate, and the institutions that are supposed to benefit all of us are fraying faster than we can repair them.

We have public school systems with limited resources and packed classrooms; teachers who are underpaid, in stressed communities and trying to do the job of three; healthy foods that are simply not affordable to many; and rationed healthcare because of the serious limitations of our system.

We need a new formula and a new set of principles that elevates the conversation about equality for all. Collectively, we should aspire to a standard of living that is more than simply getting by.

Start Locally

Systemic change comes with deep understanding, and it should start in our backyard. By visiting local neighborhoods we normally don’t go to, or participating in local nonprofits, we connect with our community and begin creating systemic change.

I’ve experienced this firsthand as an advisory board member of Accion and my work with like-minded Community Investment institutions. Community Development Financial Institutions (CDFIs) were just beginning to have significant presence ten years ago with $14 Billion in assets. Today, CDFIs have grown to $61.4 Billion in assets to meet growing U.S. demand. It’s not just about the loans made available to those who would never qualify for a loan. It’s also about the importance of understanding the culture and belief systems of those who benefit from these programs.

Nothing is more rewarding than helping people in our community build their knowledge and skills, so they can achieve financial security and begin accumulating wealth for themselves and future generations. Through impact investing Veris works closely with other leaders in the rapidly growing Community Wealth Building movement to support lasting change.

By working together in our own communities, we can provide those most in need with the guidance, support network and capital to help them succeed. The first step is to begin a dialogue with those who come from the other side of the tracks to see how we can do something great together.

Veris is committed to investing in our community investment partners throughout the nation to bring this vision into reality. It’s more about the “we” and less about the “I.”

What An Impact Investor Knows

By Luisamaria Ruiz Carlile, Wealth Manager

As impact investing gains momentum, a common question we hear is: “What does the new breed of impact investors know that traditional investors don’t?” What insights have transformed these impact investors’ approach?

Here are three insights to consider:

  1. Collectively, we have always been impact investors. Whether we know it or not, we have been shaping and transforming economies and ecosystems through our capital allocations for centuries. What we choose to finance – and what we don’t – has significant consequences for everyone. For instance, for decades we have been subsidizing oil and coal companies with hundreds of billions of dollars, while drastically underfunding renewable energy and conservation. As a result, we’re now scrambling to reverse environmental damage, create new sustainable industries, and assure that we have a dependable energy supply for our collective future.
  2. We can own the impact created by our portfolios. Impact investors are saying “yes” to actively directing their investment dollars toward social and environmental goals, and “no” to the negative impact their portfolios have on society. In applying their financial muscle to innovative opportunities and challenges, impact investors are finding solutions. Whatever their goals – poverty alleviation, sustainable agriculture, environmental solutions, economic diversity and inclusion, among many others – impact investors know they can incorporate sustainability and impact across the many asset classes that make up their portfolios.
  3. Investing for impact does not mean sacrificing investment performance. For years, investors have been told that impact and sustainable investments underperform their peers, that investing for social benefits means lower financial returns. The data solidly refutes this assertion. For example, the MSCI KLD 400 Social Index, launched in May 1990, tracks companies with high ESG* ratings. The MSCI KLD 400 had a 9.95% annualized return over 20 years, slightly outperforming the S&P 500 Index, which had a 20 year annualized return of 9.78%. A second excellent data point is the Dow Jones Sustainability World Index, which tracks global companies in the top ten percent for ESG criteria.

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As impact investing goes mainstream, it is upending the long-standing assumptions about “Passive” vs. “Active” investing. For some time now, the accepted wisdom of “Passive” investing has been to pick an asset allocation and populate it with low-cost, traditional index funds. Hand over the investing keys. Await returns.

Active” impact investors, on the other hand, are not settling. Energized by embedding their values and passions into personalized portfolios, they expect multiple returns on their invested capital. Earning competitive financial returns is just the starting baseline. From there, it’s the additional benefits of investing for impact that are crucial: a healthy planet, thriving communities, diverse and inclusive workplaces.

Impact investors embrace a broad universe, including supporting micro-finance, shareholder-advocacy and community development. Impact investors are financing leading sustainable businesses and forward-thinking enterprises.

Compared to the personal, social, environmental and financial returns that “Active” impact investors are creating with their portfolios it now appears that “Passive” traditional investing is giving up much more. What a transformative moment in the history of investing.

*ESG (Environmental, Social and Governance) criteria used to rate the sustainability of companies

The Dalai Lama, Science, Learning and the Sustainable Mind

By Anders Ferguson, Partner

On May 12 I attended a private meeting led by the Dalai Lama and walked away heartened.

The Education of the Heart symposium at Erasmus University in Rotterdam brought together experts from education, science and business, including the Dalai Lama, to explore new ways of learning and knowing essential to creating a flourishing society and a sustainable economy. It was the fourth in a series of meetings about sustainability, mindfulness, learning and leadership with the Dalai Lama that I have had the honor of helping create since 1999.

The key takeaway of the event for me – which is aligned with the Dalai Lama’s thinking for the past 50 years – is that science is confirming the benefits of meditation and mindfulness. Neuroscience is also confirming that our minds connect deeply with our emotional and social intelligence. We now know that as we talk with a colleague, our “two mind’s energies” are interconnecting.

Thinking Differently

Mindfulness and meditative practice give us the opportunity to think more deeply and creatively about both opportunities and problems.

What was fascinating to learn at the symposium was new research about how meditative practice can literally rewire our neural networks, allowing our mind to consider possibilities and innovations. We were reminded that while our brains may be like computers, our minds are literally integrators of energy and information. They are not constrained by the bones of our skulls.

Rather than defaulting to the same tired answers, meditative practice enables us to think differently. The Dalai Lama said:

“I feel this growing enthusiasm based on realizing that something is not satisfactory, wanting something to change. I think this is very good. We usually take things for granted and go on according to tradition, in spite of drawbacks. This is a real failure preventing progress. But this enthusiasm, saying something is wrong, is the first step toward transformation or some positive change. Then we need more discussions, more research, more experimentation. Then we will find new answers.”¹

Speakers cited numerous examples of how mindfulness was changing education in Europe and the U.S. The breadth of the successful experiments in schools in Holland was remarkable. For instance, Project MindLab: Understanding the Mind, Educating the Heart awakens young peoples’ compassion through mindfulness. It also inspires teachers to relearn the nature of teaching. As teachers learn to relax their minds and bodies, learning is better and the whole school is calmer.

Leaders from business, government and educational organizations attending the symposium agreed not only about the importance of approaching problems holistically, but also that we must up our game significantly.

They acknowledged that the approach we have been using isn’t working. In fact, our whole understanding of the mind, learning and hence education is basically incorrect to the point of being not grounded in modern science.

What It Means For Impact Investing

Our desire for a new approach to understanding ourselves is also an opportunity for sustainable and impact investing.

The Dalai Lama said our external world is a mirror image of our internal life. Impact investing is growing because inspired individuals are creating new solutions that deal with global problems, from climate change to clean water to gender equality.

The mindfulness of investors and their ability to understand their inner knowing and values inspires investors to finance original and enlightened ways to advance the human condition. This is the emergent and thrilling intersection of mindfulness and impact investing. Its transformative.

We clearly have a long way to go before mindfulness – let alone mindful investing – is a mainstream concept, but we’re headed down the right path.

In the meantime, mindfulness is unfolding alongside impact investing and nothing but positive social change is likely to occur as a result. As we come to understand and cultivate the “Sustainable Mind,” we really engage and manifest impact investing.


¹His Holiness the Dalai Lama, Designing an Economy that Works for Everyone. Irvine California, 2004. 2nd Spirit in Business Dialog (2nd of 4)

 

Sustainable Transparency for Prosperity

By Anders Ferguson, Partner

Over the past 20 years, businesses and their investors have made serious efforts to be sustainably responsible and transparent.

The good news:  We’re finally making real progress.

Everywhere we turn the focus on sustainability and transparency is gaining momentum. The reason is that sustainable business and investing has become a key driver of innovation and market leadership in the U.S. and internationally.

Concrete Evidence

Today, Sustainable and Impact investing makes up 12% of total U.S. assets – almost $4 trillion in wealth. Every day, companies large and small are integrating sustainable strategies into their business models.  We see this in innovative new products created to meet growing demand from consumers who want to cast their dollar votes in favor of ideas that preserve Mother Earth or increase personal and community wellness.

At the same time, companies are scrutinizing their supply chains and prioritizing changes that enhance sustainability. Driving these efforts is the growing awareness that we’re all interconnected – as individuals and companies. None of us exist in a vacuum. We influence one another – positively or negatively. The choice is ours.  The greening of the supply chain is helping build this critical mass and save money at the same time.

The Catalyst: Sustainable Investing Practices

The emerging interconnection between sustainable finance/investing and sustainable business practices is the catalyst for change.

Unlike the past, when investing themes such as commodities or small cap companies captivated investors, emerging sustainable business models are creating new and exciting investing themes that deliver both financial return and positive social benefit.

The savviest investors are starting to realize the upside. They understand that business models that promote sustainability are highly transformative across industries, societies and borders.

As a result, the investment opportunities are enormous. Sustainable business models are fundamentally reinventing global commerce. The hot investing themes aren’t about a single product, but rather systemic, positive change.

What’s Going on?

Investors are searching for a merger of their values and their worldview that’s based on a more holistic view of investment risk.

Progressive businesses are moving away from blindly placing profit ahead of everything else. Increasingly, businesses are considering the prosperity of workers and communities, as well as the bottom line.

They are creating new operating principles, including willingly reporting to shareholders the impacts they are having on the environment and communities. They are embracing new metrics and accounting systems to report and drive change.

Structural Change

The clearest indication that businesses are reinventing themselves is the creation of SASB – the Sustainable Accounting Standards Board. Even more positive, is how SASB is evolving in prestige and visibility. The appointments of Michael Bloomberg as Chair and Mary Shapiro as Vice-Chair are very welcome additions to the Board.

SASB_Logo_rgb

In business, we say that if you can’t measure it, you can’t improve it.  In a few years new sustainable accounting standards will emerge that identify real impacts and hidden risks produced in the course of business. These standards create the baseline for US publicly traded companies to report material non-financial data pertinent to investors.  Costs traditionally ignored as “externalities” – arising from dumping carbon, polluting oceans, draining watersheds or tolerating communities of vast poverty – will be more clearly reported on corporate balance sheets for all to analyze and measure.

Europe As Leader

Europe is a good example of how momentum is building for Sustainable and Impact investing.

In April, the European Parliament made history by passing a new law requiring its biggest companies to include sustainability factors in their annual financial reports.  With a lopsided margin of 599-55, the Parliament voted to require the law to apply to publicly traded companies with more than 500 employees.

european union_2014 05 30

In their annual reports, these companies must address “policies, risks and results” in relation to “social, environmental and human rights impact, diversity and anti-corruption policies.” That’s another big step forward in promoting transparency and identifying the real costs of any business enterprise.

The Bottom Line

Where does all of this leave us?  Why is it critical that we have a new financial accounting system to better report the risks and opportunities facing companies?

Comprehensive reporting is the new connective tissue between investors and business operations, creating a united front for delivering badly needed transformative change. For the first time, risks will be more accurately priced in, innovation will receive greater recognition and distortive subsidies will become more apparent.  Much has been accomplished. We still have significant work to do.

In this environment, investors are actively encouraging transparency and positive change.  They want to partner with progressive businesses that are creating a future of more sustainable abundance and much less destruction and waste of our societies and the environment.

Creating sustainable change takes radical transparency.

How Do Domestic Public Equity Impact Investments Perform?

By Michael Lent, Chief Investment Officer

One of the questions we hear often is whether there is a financial performance trade-off to impact investing. So, how does the domestic public equity segment of impact investing stack up?

The short answer: Very well compared to relevant traditional benchmarks.

At Veris Wealth Partners, we practice impact investing each and every day. We manage our clients’ portfolios to generate financial returns with positive social and/or environmental results. We believe you can achieve impact across all asset classes, including domestic public equity. Domestic public equity is a tremendous opportunity to invest in forward-thinking corporations leading in governance practices. They are also leaders in board diversity, and operational excellence in utilizing renewable energy and greener supply chains. These corporate innovators are creating scalable solutions to global challenges. They are positively impacting the lives of key stakeholders – employees, customers, communities, and the environment we all share.

A Good Yardstick

One of the best sustainable proxies for a domestic public equity allocation is the MSCI KLD 400 Social Index. It takes a broad market index, the MSCI USA, and selects only those companies that meet best-in-class environmental, social and governance (ESG) criteria.

In 2013, the annual performance of the MSCI KLD 400 Social Index was +36.2%. That was better than traditional (non-impact) indices, such as the MSCI USA Index, which returned +32.6% and the S&P 500 Index returning +32.3% over the same period. Companies with higher positive environmental and social impacts outperformed both traditional indices by more than 350 basis points.

2013 was clearly a good year, but in some years, the MSCI KLD 400 underperformed the MSCI USA and the S&P 500. At Veris, we prefer to look at performance over the longer term. Since January 1992 the MSCI KLD 400 has produced an annualized return of +9.58%, compared to the MSCI USA Index which returned +9.29%. Over this same period, the S&P 500 Index returned +9.19%. Results show higher positive-impact domestic companies outperform their traditional competitors over the long-term — this is evident in the chart below which exhibits the growth of $100 over time. MSCI KLD 400 is the blue line outpacing the others.

Growth Over Time

Impact Performance

In addition to financial performance, Veris looks for investments that create measurable positive social and/or environmental impact such as lower reliance on carbon intensive energy, product innovation, employee empowerment, efficient water usage and more. Investors have growing access to sophisticated Environmental, Social and Governance (ESG) data for public corporations through organizations like Sustainalytics and MSCI. As the quality of ESG data improves, asset managers get better at incorporating ESG data at a company level.

By integrating impact into performance, we measure total integrated return of client’s investments to include financial externalities. We believe that integrating financial and non-financial returns may allow our portfolios to outperform traditional portfolios given their ability to respond to increasing natural resource constraints, innovation, and ability to target growing demand by customers for products and services that solve problems instead of creating more.

Shareholder Engagement

Public equity impact investing also provides the ability for shareholders to engage corporate management and boards in dialogue around key issues for ESG improvement. Increasingly shareholders are winning interventions on issues from climate change to human slavery. Rather than a “nice to have,” impact investors demand using their company ownership to direct votes for corporate change.

What Veris Looks For

Veris utilizes a proprietary due diligence process to evaluate investments from both a risk-adjusted and impact performance perspective that compares investments to impact and traditional indices. For public equity, we look for managers that integrate ESG criteria into their investment management process.

Opportunity Abounds

In the past there were many fewer ways to achieve positive financial and impact return. As impact investing moves from niche to mainstream, we see a significant increase in available investments. Opportunities exist across all asset classes, empowering visitors to build diversified portfolios to achieve their total performance objectives. The growing number of quality management teams producing admirable performance directly results from increased demand from individuals and foundations putting their wealth to work with purpose.

Veris is pleased to work with clients committed to maximizing their total impact investment performance – financial, environmental and social.

 

Become a B Corp – It’s Well Worth The Effort

By Patricia Farrar-Rivas, CEO

Veris is very proud to again be named Best For The World by B Corp.

This is the second year in a row we’ve been recognized with this honor, which is given only to those B Corps that rank in the top 10% of all B Corps.

For those companies not yet a B Corp, we highly recommend careful consideration.

What is a B Corp?

Benefit Corporations are a unique form of corporate governance designed to create public benefit, which is defined as a material positive impact on society, the environment and community.

B Corps are certified by B Lab “to meet rigorous standards of social and environmental performance, accountability, and transparency.” According to B Lab, there are nearly 1,000 certified B Corps from 32 countries and 60 industries. The number is growing.

The Benefit of B Corp Status

For Veris, being a B Corp has many benefits.

First, it reinforces our values and our business practices, which are to promote positive social and environmental engagement through impact investing. Second, B Corp certification demonstrates to clients, investment managers, vendor partners and others our deep commitment to sustainability. Third, our employees love it. They want to work for  a progressive company and play an active role in continuously improving Veris’ sustainability practices.

As a firm specializing in impact investing, our B Corp status synchs perfectly what we do: aligning wealth with values to create positive social benefit while focused on strong investment performance and profitability. Veris and B Lab share the same strategic mission.

For consumers, B Corp status is like a big, neon seal-of-approval. It empowers people to identify and engage with companies dedicated to sustainable business practices, including treating workers and communities with great respect.

Consumers can tell if a company is focused on impact by looking for the B Corp logo. It, along with the Best For The World logo, is viewable on Veris’ home page.

Continuous Improvement

B Corp certification is a great sustainability road map and ongoing opportunity to become a more thoughtful company.

There are more than 200 evaluation points in any B Corp certification. We are audited to be recertified. This process motivates us to keep B Corp standards top-of-mind and integrate sustainability into every facet of our business.

B Corp certification makes us better in ways we couldn’t imagine.

To encourage community service we added 20 hours of paid Volunteer Time Off for all employees.

Reducing our carbon footprint, another goal to B Corp certification, led us down two productive paths.

First, we purchase carbon offsets. In 2013, we financed a tree-planting initiative in the Amazon Rainforest. To accomplish this, we worked with the Amazon Conservation Team (ACT), which helps conserve indigenous lands in this critical rainforest.

Second, we’re thinking more carefully about when we need to travel to a meeting. Increasingly we are using technology for face-to-face conversations, making us more efficient and effective.

Improving Vendor Partner Relationships

B Corp status extends beyond our office.

It also improves the way we manage relationships with our vendor partners. Under B Corp guidelines, for example, the purchase of office equipment should balance durability, quality/image, cost and sustainability.

The sustainability component of the office equipment purchases resulted in our switching from a national chain to Give Something Back, a Bay Area organization that donates 50% of its profits to organizations of our choice.

Similarly, if Veris holds a corporate event or party, we work with restaurants and caterers who are committed to sustainable farming practices.

Evaluating Impact Investment Managers

Finally, a B Corp status helps us choose and work with top impact investment managers – which is critical to our business.

Many investment managers say they follow Environmental, Social and Governance (ESG) practices, but our B Corp status gives us the insight to look more deeply and ask better questions.

We are now vigilant in our manager evaluations, and have deeper, hands-on experience in what it really takes to build successful high-impact companies.

The B Corp journey simply makes Veris better.

Why not start the process of becoming a B Corp today?

 

Impact Investing: A Smarter Way to Invest

By Patricia Farrar-Rivas, CEO

When we founded Veris six years ago, we were among the very few who believed in the power of impact investing to create wealth and improve the world.

Today, with the planet’s long term viability at risk, we can no longer ignore the connection between global issues and individual choices. In their scale and complexity, today’s problems are unlike any we have ever encountered.

And yet, big challenges create big opportunities.

We are convinced that 21st century investing must see sustainability as a primary driver of growth and innovation.

Deeper and Better Answers

At Veris, our mission is to manage wealth in a sustainable manner, and in so doing, participate in fundamentally transforming our capital markets.

The differentiator for impact investing is how it integrates business, social, environmental and economic factors into investment analyses. The differentiator for impact investors is their commitment to using capital markets to drive the positive change that governments and philanthropy cannot realize alone.

With more variables in play and redefined measures of “return” and “value,” impact investors are looking for deeper and better answers.

In asking questions about environmental impact, they are quantifying risks that were previously ignored. In assessing gender inclusion, they are challenging how financial markets value women and girls. And in committing to positive impact, these investors see “stakeholders” — workers, consumers, communities, the environment and shareholders — as the ultimate beneficiaries of invested capital.

We always knew that impact investing would one day catch fire. That day is here.

Consider the following:

  • One out of every nine dollars under professional management in the U.S. is now invested in impact/socially responsible investing strategies. SRI assets have grown from $639 billion in 1995 to $3.74 trillion in 2012.

US SIF

 

  • Today’s impact investors have opportunities for change not possible 10 years ago. Do you want to help save a key watershed? Improve organic farmland? Help business creation in the poorest developing countries? Or build a really functional toilet, yes toilet, for people who have none? Impact investing goes deep for change.
  • Impact investing has gone mainstream. This past fall, the largest brokerages in the country, Merrill Lynch and Morgan Stanley, made high profile commitments to impact investing. Others who have traditionally ignored the field are now doing the same. Establishment institutions can no longer afford to stand idle during one of the most profound shifts in investor sentiment in our lifetime.
  • The industry infrastructure is expanding to support impact investing. Wealth advisors now have no reason not to put their clients’ money in impact investments. Envestnet’s Sustainability Platform makes it easy for wealth advisors to invest with impact across all asset classes. In fact, impact assets have risen 260% to $625 million over the past two years. Veris is proud to power Envestnet’s impact investing platform.

Competitive Performance

The good news: it’s abundantly clear that investors don’t have to sacrifice performance to achieve positive social impact. Numerous, credible academic and industry studies demonstrate that investing in companies that follow Environmental, Social and Governance (ESG) criteria can deliver investment performance competitive with traditional approaches.

Strong Investment Performance

 

The possibility of achieving both financial and social/environmental returns is why we say impact investing is a smarter way to invest.

Broadening the Debate

The success of impact investing is enlightening the debate about many social issues. Two timely ones are Climate Change and Gender Lens Investing. In 2013, the dialogue around these issues exploded. We’re excited to be part of the global conversation reshaping how investors think about the social implications of capital allocation.

As we begin 2014, we see tremendous opportunity ahead.

Impact investing is a powerful tool for delivering maximum benefit for everyone on the planet. Working together, we can find innovative solutions that address intractable problems.

We invite you to join us.

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