Putting the Impact in Investing
The Monday morning analysis of Super Bowl commercials has come and gone, but I’m still struck by what I saw—many of the ads were not about products or services but rather about the company’s commitment to social responsibility. It seems that businesses want consumers to know that even if the Federal government is cutting back on social programs and consumer protection, the corporate world is stepping up to do good. Budweiser cans water instead of beer for hurricane relief; T-Mobile uses Kerry Washington to do a diversity voiceover, and Toyota tells the story of skier Lauren Woolstencroft to showcase its commitment to the Paralympic Games.
More companies are using impact advertising to distinguish themselves to the growing number of consumers who passionately support progressive practices. This kind of marketing is even extending into unexpected verticals like finance. Black Rock, the investment firm that manages roughly $6 trillion in client assets, uses ESG (environment, social and governance) scores to filter out companies that don’t meet its ethical standards. Laurence Fink, Black Rock’s chief executive officer, announced in an end-of-year letter to CEOs that being profitable isn’t the only reason for Black Rock to invest its clients’ money. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” he wrote. Even with stellar share values and fat dividends, that is not enough for Black Rock to invest in your company anymore. It has to be a good corporate citizen in every aspect, from customer care to employee recruitment and compensation to supply chain management. Fink emphasized the importance of women and minorities on boards of directors as well.
Diversity has also been the rallying cause of Ken Chenault, the former CEO of American Express and a prominent African-American chief executive. Now chairman and managing director of General Catalyst Partners as well a new board member of Facebook, he’s tackling the lack of diversity in the digital and venture capital worlds. Chenault told the New York Times that he views firms like his as “catalytic agents of change,” not just in business development but in helping change the culture in the tech and finance sectors “so there is a greater focus on the responsibilities they have.”
Other companies are making it easy for individual investors, even those of modest means, to find the right companies to invest in. In January, Yahoo Finance added a social responsibility filter so users can track the ESG scores of 2,000+ publicly traded companies. And a fairly new online financial services company, Aspiration Bank, has developed a green fund that is fossil-fuel free and only requires a $100.00 minimum commitment so that smaller investors can participate.
Whether companies are stepping up because it is the right thing to do or whether it is because consumers are demanding it, it is clear that impact investing is having a moment and that’s a really good thing. Hopefully, this is not just a trend but a movement that is here to stay.