Working around the Big Short

Jay Owen SRI/ESG News

MakingMoneyMatter300RGB (3)

Prospecta Press, April 2015

Making Money Matter

By G. Benjamin Bingham
Founder and CEO, 3Sisters Sustainable Management LLC

Watch these videos as Ben Bingham explains in his own words how we can all participate in finance in a positive manner.

About the book

About 3Sisters

What difference does my money make when I invest or divest? You might be conservative and want nature to remain beautiful forever. You might be liberal and want to undo environmental injustices. The same investment strategies may serve the goals of both. Arguing about the definition of “responsibility” will only lead to more division. “Every dollar is an impact dollar,” said Tasha Seitz of Impact Engine at the January 23rd TBLI conference in Chicago .

Let’s consider the XL pipeline as a potential investment. Any conservative who loves nature and hates risk would agree that oil sands dredging is an expensive and messy business. It is exposing and polluting a large area in canada and pipeline leaks or accidents on the way to the Gulf of Mexico will very likely occur over time if the pipeline goes through. On top of this it costs so much to eek oil out of this muck that at a certain price per barrel it is no longer  worth the trouble. The burning of the stuff is not pretty either.  Along with screaming environmentalists, any type of person may agree that this does not look like a smart investment going forward, despite the Wild West style boom experienced in canada. Ghost towns might follow as the price of oil drops and the whole enterprise collapses. Some say this is the plan of the big oil reserve nations.

 On the other hand, there are more and more opportunities in clean solutions that both serve the financial goals of investors and conserve nature. The Cleantech Open, Green Alpha Advisors and others at TBLI were proclaiming the proliferation of alternatives. For example, the retrofitting of underserved communities, cutting energy costs while cleaning the air, water and soil is just at its beginning. The inherent beauty of a solution that utilizes free wind or sun-power or smart building materials that reduce the cost of energy is naturally appealing to conservatives and liberals alike. Saving a fortune over time while respecting forests and providing all citizens, whether rich or poor, with a cleaner environment makes sense. So why is there any question? Divestment from oil and investment in clean solutions seems an obvious smart choice.

 Again, it is hard to leave the status quo behind. We are propelled in cars, trains, buses and jets by this black stuff and we know it will take some time to transition, but we don’t know how long. We know there are more solutions than we can imagine, but we aren’t sure which will be the winners. And to clinch the deal governments around the world are subsidizing oil and not so much the green solutions.

 Nevertheless, for those like Irene Pritzker of the IDP Foundation, who seem to define responsible investing as a way to make a personal statement, the divest/invest movement is important. So far it is focused mostly on the divestment side: in other words more and more investors are starting to unload from their portfolios the worst companies in the world, particularly in relation to pollution and fossil fuels.

 The largest sovereign wealth fund in the world, Norway’s, is primarily funded by the offshore drilling of fossil fuels and for many years they spent most of their research dollars to find out which were the worst companies in the world. They had a list of eight thousand or so public companies owned by the fund and only a few standard corporations were avoided. This was a passive approach to divestment; it was not an active approach to invest in solutions. More recently they have begun investing in renewable energy ventures.

 Many progressive investors may do their own angel investing or venture investing… what I call: one-off investing, in projects they love.  They may get hurt. Foundations can do this within their 5% required to be given away charitably. This is PRI or program related investing that does not need to make money but could. Debra Schwartz of the MacArthur Foundation described how they use this IRS loophole to invest in potentially big money making investments as well. Why not do this in the 95% of their endowment? It is one charitable organization.

 Couldn’t they be innovative and replace the quality, from a financial perspective, of dirty companies with companies that have similar attributes…that will act similarly in their portfolio? To do this in an organized way it helps to have clear goals for every industry. while choosing replacements . So, for example, if you are cutting fossil fuel based energy companies that distribute big dividends you might find renewable energy companies and other companies with big dividends as a combination to replace that position.

 As renewables take over from the dinosaur age of fossil fuels they would be well positioned for growth, while replacing the dividends from Big Oil. That’s just one example and one industry. If we are going to follow this model of divest/invest, you can begin to look into each industry for a key idea or strategy to replace any currently antiquated approach. The way we invest is a personal statement, and when we think of what we love we might truly end up in a better world!