The Moral Investor: A growing tide of investors are looking for socially responsible ways to make money
“One thing sustainable investing stands for,” Keefe says, “is empowering shareholders and I don’t know how anyone who believes in capitalism could not believe in that.”
In 1970, a year before Pax World launched the first SRI fund, economist Milton Friedman published his landmark essay, The Social Responsibility of Business is to Increase its Profits. Friedman won a Nobel Prize in 1976 and critics of SRI often cite his essay to point out that business executives’ responsibility is to the shareholders who’ve entrusted them with capital, not to outside special interests.
But what if shareholders themselves decide that profits aren’t the only thing that matters?
It is this sentiment that Keefe latches onto. “You can’t say on one hand that the sole duty of the corporation is to its shareholders and then oppose the right of those shareholders to weigh in on the direction of the corporation. You can’t have it both ways.
“You have all these emerging economies with growing middle classes that want to have higher standards of living and you cannot have infinite growth on a finite planet. We’re going to need to find more sustainable ways of doing business. If we don’t, frankly, we’re in a lot of trouble.”
Making an impact
Patrick Mullen is one of those working to find more sustainable ways of doing business. Mullen is a principal with the University of Utah’s University Impact Fund, one of the first student-run impact venture capital funds in the U.S. He has worked on multiple micro-finance projects in India, China and Tanzania. He’s also just 24 years old.
Mullen is part of a rising generation of social entrepreneurs, impact venture capitalists, and triple-bottom line private equity investors looking to do well by doing good. Like socially responsible mutual funds, they are looking for a healthy return, but not at all costs.
“In our space of impact investing,” Mullen says, “what we try to say is that regardless of the type of organization you run you need to be efficient and you need to be sustainable.”
For one recent project, Mullen and some student associates helped a group of women in a rural Indian village expand their handicraft business by providing them with small, working capital loans. With these loans, the women went from making a dozen banana-rope bags and baskets each month to making thousands. Seeing these women significantly increase their income and the effect that it had on the community was a rewarding experience for Mullen.
“Four billion people in developing markets live on less than two dollars a day and lack access to basic goods and services," Mullen says. "So the ability to build a socially responsible business that meets the needs of those consumers in a very responsible way not only presents an attractive impact opportunity, but it also presents a very, very attractive investment opportunity as well.”
A world apart?
Traffic crawls forward and Gerald Sullivan’s Jeep Patriot inches along the turnpike toward New York City. Tomorrow he’s flying to England for a brewery tour. He’s thinking about the term “sustainable investing” in the context of global population growth. In 2050, the world will have nine billion people, half-a-world more than there was in 2000.
“Population growth of that magnitude,” Sullivan muses. “It’s going be difficult for various parts of the world to feed those people and provide clean water. It’s hard to be negative on that.”
When discussing the ethics of investing, it’s virtually impossible to draw one common line. It’s only natural. Politics and religion enter the equation and the question inevitably arises, “Whose ethics, whose morals?” Yet, just about everyone can see that sustainable investing, in some shape or form, does have a future. Even a vice investor.
Sullivan sees it this way: “Anything that an entity can do to put itself in position to hopefully, theoretically make more money and solve those problems is beneficial. Can a Monsanto make a genetically engineered grain that can resist certain kinds of blight? I would say that’s good business. Is that sustainability? I would guess so.”
David Ward can be reached at email@example.com