Investing for Environmental Impact by Wendy Nadherny Fachon
In principle, ESG investing prioritizes environmental, social and corporate governance issues. In practice, companies use ESG marketing strategies to build a positive brand image with customers and shareholders who prioritize sustainability and ethical practices. Unfortunately, companies can promote operational practices that are environmentally friendly, while distributing products that harm the environment. For example, a snack manufacturer can tout the fact that its factories operate using 100 percent renewable energy, while its single-use plastic packaging ends up as ocean pollution or goes into a landfill. Likewise, a cereal manufacturer can emphasize the 100 percent recycled content of its paper packaging, while its key ingredients (grains and sugars) are grown using toxic pesticides and herbicides. These inconsistencies undermine the integrity of ESG branding.
Investing, whether profit-focused or socially-conscientious, is a complicated topic. At the highest levels, it requires a deep knowledge of markets, the constant weighing of risks and rewards, and the ability to adjust to interest rates changes and other economic fluctuations. It is so complex that most people avoid getting into the weeds of investing. Those who can afford to invest in the stock and bond markets of Wall Street tend to hand responsibility for their investment decisions over to professional investment advisors, who earn their living through commissions made by distributing that money into exchange traded funds (ETFs). Investors expressing a specific interest in environmentally-conscious investing are steered into funds marketed or branded as ESG.
Ultimately, investing in Wall Street is about circulating one’s money through transactions that feed a global market. The money can be invested almost anywhere in the world, and the individual investor has no input into how that money is spent and whether it is truly spent for ethical and meaningful purposes. The priorities for large corporations are profit, value (monetary) and growth, which often neglects environmental responsibility.
Historically, large cap stocks tend to provide the lowest risks and highest returns. So, most people invest savings and reinvest earnings into the largest corporations, and the large corporations get larger and expand their impact, be it a net positive or a net negative. Again, it’s complicated.
There is a new ESG investment alternative called a diversified community investment fund (DCIF), which pools investor money into a local fund. Investing money in local projects and businesses, keeps the local money circulating within the local community and allows investors to help build local wealth and quality of life. Local investors are able to see and experience the visible results of their investing, and, as voting members, they can help hold the fund managers accountable to the impacts of the investments.
So, what if people could improve their immediate environment and local economy by shifting some of their investing away from Wall Street toward Main Street? What if instead of investing in big box stores full of stuff made in China, people purchased products from local artisans? What if instead of investing in agrichemical companies, people invest in the growth of regional regenerative farming? What if instead of investing in global real estate, people invest in local real estate? What are the potential risks versus the possible returns of investing in small local ventures? Can the risks be managed through sound local engagement? Could local investment funds be a new paradigm that leads to greater economic independence and a healthier environment?
Community wealth and environmental health are directly correlated. How often do people consider the character of their surrounding neighborhood or town and where it stands on the continuum of both environmental health and community wealth? These questions provide good food for thought.
The Story Walking Radio Hour explores these questions with Jessica David, co-founder of Local Return, the organization establishing Rhode Island’s first-ever community investment fund by raising $3.5 million to build community wealth through neighborhood revitalization. What is the difference between investing in Wall Street versus investing in Main Street, and why is this distinction important? How might local investment vehicles be structured and governed? Download the podcast – https://dreamvisions7radio.com/local-return/
Listen to Story Walking Radio Hour with Wendy Fachon every Monday 9am & 9pmET on global syndicated Dreamvisions 7 Radio Network. Listen Live: http://bit.ly/Dreamvisions7Radio_Network or Get our Apps Listen online, mobile, in cars and by asking “Alexa play Dreamvisions 7 Radio ”
