While discussing the use of blockchain technology for social impact at the recent Triple Bottom Line Investing (TBLI) conference in Stockholm, it became clear that there is significant under-explored proximity between the disperate worlds of modern investing and modern slavery.
Slavefreetrade’s Investor Forum will bridge the distance between the two communities, improving communication, fostering understanding and, crucially, incubating joint action.
A clear message from the Robert Rubinstein-inspired conference was that irrespective of the issues, whether climate change, supply chains, human rights or corruption, investors increasingly seek to better understand the impact that their investments are having. And, they want to know more about what impact their investing can have.
This is where our issues converge and interests collide.
The scene in the investing world is shifting.
Robert has been running his TBLI Conference for 20 years this year; an anniversary of significant note. He started as an outlier. A visionary. He is now deeply appreciated and closing in on mainstream thinking.
A recent Bank of America press release states that three-quarters of investors want to work with an advisor who offers investment strategies that result in competitive returns and positive impact. An even higher percentage of millennials want to connect financial and societal outcomes — as high as 86 percent, according to a recent Morgan Stanley analysis.
But can investors really have a positive impact with their investment dollars while also maximising financial returns? This is no small matter. It is more than a trillion-dollar opportunity. The Bank of America alone has a client base representing over $2 trillion in assets. Investors globally have something like USD 270 trillion in collective assets; a significant force for change if directed shrewdly.
Enter the field of impact investing.
Ostensibly, impact investors are those who seek a triple bottom line which is good for the client, the world and its people. While many calling themselves impact investors are not genuinely concerned with its core values, many are. Those that are genuine – the ones that social impact actors like slavefreetrade can engage; are (happily) the types that attend the TBLI Conference.
What makes the impact investing question difficult, however, is that when it comes to maximising impact, the right questions have not always been asked. As the terrifically engaging Sony Kapoor eloquently outlined in his keynote, what’s really needed is a paradigm shift across markets. Impact cannot and won’t be maximised if impact investing remains siloed to high-net-worth individuals and foundations. Impact investing needs to factor in all asset classes to maximise its potential.
In the US, for example, the 2017 Impact Investor Survey by the Global Impact Investing Networkcalculates that approximately $110 billion is deployed in impact investing, a minute fraction of the $70 trillion value among public companies. Unless impact investing becomes more inclusive and more accessible to everyday investors, we will continue to miss out on 99 percent of the impact that investing can have by affecting existing companies and markets. Engaging mutual and pension funds where the bulk of corporate ownership sits would be a good place to start.
For public companies, ownership and ESG data aren’t close to the entire impact story. It is not only about what companies are owned by whom. Nor is it about what ESG policies a company might have on the books.
Shareholders are a missing piece from the equation in many cases. Shareholders can also move companies in positive directions through increased shareholder engagement. As a result of simply considering all impact categories, including taking a mobilised shareholding into account, a better way emerges to understand how your investment dollars can have the most impact possible.
At slavefreetrade, our approach to the slavefreetrade Investor Forum starts from the proposition that impact investors, although a small proportion of overall investing, can generate maximum impact through levels of ESG integration strategy and execution, as well as through shareholder engagement and public-sector advocacy.
It is our idea, and not a new one, of course, that we need to get beyond the marketing spin often couched simply in terms of what companies a fund owns and examine, report, and understand, what investment funds actually do.
Rather than restricting an investable universe through screening, which is an outdated paradigm, investors can amplify performance when they add ESG data and questions to fundamental analysis. Albeit nascent, this is already starting to trend. Investment dollars ARE moving rapidly towards values investors, and, crucially, values investors have been outperforming benchmarks at a time when most active fund managers do not.
Soon, the highest impact funds will be the ones that successfully track the returns of their benchmarks, meaning individual investors have had positive impact through their investment choices without sacrificing financial returns.
This is the future for impact investing.
A takeaway from the TBLI Conference was also that there is a noticeable mismatch of low levels of assets in high-impact funds. This tells us something pretty important: higher impact investing is not mainstream. It also tells us the time is still very much ‘toe in the water’ for the managers of larger funds.
It is important for the world’s investors to understand, arguably for the first time, how they can maximise their own positive impact — and that maximising positive impact doesn’t mean sacrificing financial performance at all. It is also crucial for the world’s investors to do as Robert does with TBLI: build bridges between the investing community and the social impact community. To be fair, we do really speak different languages.
But we have common goals, whether it is saving the planet or its people. The money investors hold can speak volumes about how much people give a damn about a subject.
Investors are the world’s largest factor within corporate ownership, making very clear the potential for a positive dynamic to develop from sustainable investing. 90% of slavery occurs in the private sector. And 77% of companies admit slavery is in their supply chains.
Presently, investors are, like it or not, investing in slavery.
Companies in all sectors must pay heed to their complicity in malfeasance: at the end of the day, what investors demand, companies will need to provide.
That is, the future of investing can be sustainable by choice. The future of investing can be slave-free. And in turn, can be a force for liberation and human dignity.