Affirmative Impact - Fall 2016

Posted on Monday, October 17, 2016

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Honored to be Named 'Best for the World'

AI- Best For The World LogoFirst Affirmative is proud to have been recognized among certified B Corps as a Best for the World company. We ranked in the top tenth percentile of all certified B Corps in the "Best for Customers" category.

One might wonder what sort of criteria are applied in the  customer portion of the assessment process. The first question is this: "Does our product/service address a social or economic problem for or through your customers?" Well, the whole point of SRI is to address those problems - and more!

Other questions address impact investing, having ESG screens, and participating in shareowner advocacy efforts.

The assessment also asks companies to clarify their level of commitment to each of these areas and provide supporting evidence such as written guidelines (yes, we do!) and a dedicated team member (we have several!).

Finally, it asks if we are educating our customers about our work? Having just read this, we think you might agree that yes, we are!

First Affirmative is proud to be a certified B Corp since 2011.

Rising Tide of Chief Sustainability Officers

By William Linkenheil

Over the past 20 years, incorporating sustainability practices into business strategies and operations has become widely prevalent. With the increased focus on sustainability, many companies have created a new position dedicated to the cause: Chief Sustainability Officer (CSO). These executives focus on their company's sustainability strategies and run the internal sustainability committees. They usually report to the CEO, and sometimes to the Board of Directors.

The first CSO in the United States was appointed at DuPont in 2014. Today, dozens of Fortune 500 companies have a senior person in charge of sustainability including AT&T, Coca Cola, and Dow Chemical. There are also plenty of smaller public companies such as Keurig Green Mountain, Inc. and Tiffany & Co., municipalities like the City of Denver, Colorado, and universities including UCLA now have the equivalent of a Chief Sustainability Officer.

Today, CSOs are not merely EHS Officers ( Environmental, Health, and Safety), where this role was once pigeon-holed, but an innovative force for incorporating sustainability into operations, business practices, and even board decision-making. An effective CSO can successfully implement a variety of improvements including: resource efficiency, a reduction in the ecological footprint of the company, or a shift of focus from compliance to creating a positive impact on society and the environment.

In addition to preventative care, the "CSO not only monitors but also improves performance," according to Harvard Business School professor, George Serafeim, who researches the financial implications of sustainability in companies.

Numerous stakeholders are driving the shift of focus from compliance to sustainability. The majority of people are starting to expect more from a business than merely providing a product at an affordable price. Meanwhile, investors have become more likely to finance a business that is socially and environmentally sustainable.

Not only is sustainability a priority for external stakeholders, but also for employees. Sustainability priorities are becoming important to attract top talent.

In fact, the What Workers Want study by Net Impact found that 45% of graduate and undergraduate students would take a 15% pay cut for "a job that makes a social or environmental impact." A recent Deloitte survey of millennials found that 87% believe that "the success of a business should be measured in terms of more than just its financial performance."

Why Investors Care

Sustainability is about the long-term. One responsibility of the CSO is to instill a system that values long-term business strategies and generates revenues and profits over time - well beyond the quarterly earnings calls that most public companies host for analysts.

BlackRock CEO, Larry Fink (head of the largest asset manager in the world), sent a letter earlier this year to the CEOs of Fortune 500 companies urging them to resist "the powerful forces of short-termism." He believes that the current concentration on short term-earnings is detrimental to long-term growth. Unilever and Coca Cola, for example, have stopped providing quarterly earnings report guidance in an effort to encourage stakeholders to focus less on short-term financials.

Investors value the presence of a CSO in a company because they foster a strong sustainability strategy and culture. Through preparation and foresight, CSOs can help reduce risk, differentiate the company, and improve financial health.

According to a Harvard Business School study, companies with a strong commitment to sustainability offer higher average returns while creating less damaging effects on society and the environment.

The CSO of Skanska USA, one of the largest construction companies in the United States, reported that "during the Great Recession, the construction companies that were leaders in green building were the only ones to continue to grow," which supports the idea that sustainability efforts lead by effective CSOs can provide some financial insulation during turbulent periods.

Ikea's CSO, Steve Howard, noted that the "role of the CSO is evolving as companies' sustainability strategies are evolving." Because the position is still maturing, every CSO has unique and dynamic responsibilities.

The CEO and Chief Financial Officer (CFO) often look to the CSO for long-term guidance on threats, risks, and prospects. This requires reviewing management risk assessments, policies on risk, advising on sustainability targets, and monitoring environmental and social performance.

Ceres' View from the Top report recommends implementing a system that "enables cross-pollination of sustainability-related discussions across committees accountable for strategy, compensation, and risk management."

Through this technique, any decision or fruitful conclusion to a discussion can have an organization wide impact, rather than being limited to a specific committee or department.

Genderfluenced' Strategies Stepping Into the Spotlight

By Laura Isanuk

Genderfluenced investing is an area of portfolio management that uses gender analysis in the due diligence process (no, it's not a typo). Conceptually, viewing potential investments through a gender lens can offer a more unreserved and affectionate look at investment value.

That is not to say that it is gender limiting nor seeking to exclude half the population; but rather, a more expansive look at the true story. Genderfluenced investment strategies are an increasingly viable way for investors to think about the impact of their investments on the future we would like our children and grandchildren to enjoy.

AI- Gender ImageThe first step in the implementation of a genderfluenced investment strategy is to ascertain what gender-based data is available. Currently, metrics like the number of women on a company's board or the gender equity/pay ratio inside of the organization are often available. Another very worthy approach is to look at the impact of the goods and services the company is providing to women.

While there is no magical answer to the question of how a public company can help make women's lives better - inside the company or among its customer base - there are things the responsible investment industry is doing to move the needle.

Shareowner advocacy is often the best way to engage with public companies. It is important to note that such engagement does not immediately create the desired outcome. Often, simply helping company management realize that a behavior change is important to investors can lead to a deeper understanding of the long-term value to the company.

At the recent Investing for Impact event in Boston, First Affirmative hosted a panel on impact in the public markets. Naturally, the power of gender lens investing and how companies are responding came up. Jackie VanderBrug from US Trust said that she is optimistic about this momentum, particularly with C-suite level conversations.

Executives are asking where they stand in various gender indexes and what steps they can take to become better positioned. From there, track records begin to build and a new layer of reporting begins to form. In fact, reporting on gender equality is up "40% in last two years," according to VanderBrug.

Natasha Lamb from Arjuna Capital said that companies are not always broadcasting what they are doing, especially when they are management dominated. Still, she has no doubt that companies are paying attention to what is "going on at peer companies, governmentally, and what proxy advisory firms are telling them to vote for." Arjuna has asked nine companies to close gender pay gaps, six have done so, and more are taking note.

Yet, there is still much to be done. The data we have is not enough to fully understand the underlying infrastructure of an organization and how they are impacting women. New data needs to be introduced and biases need to be removed from what we currently have. We need to be better about pointing out data gaps and figure out how to avoid them. As the lens become more focused on gender issues and impacts on women, the data and analysis can only get better.

'Genderfluenced' (definition):
The transformative process of viewing and analyzing investment opportunities through
a gender lens.

Learn More By Reading the Following Reports:

Criterion Institute: Our Gender Work

Veris Wealth Partners: Women, Wealth & Impact

Trillium Asset Management: Investing for Positive Impact on Women

Pax World Investments: Thought Leadership on Gender

USAID: Advancing Gender Lens Investing in Asia 

The New Grand Strategy

AI- Book Cover - Grand StrategyThe New Grand Strategy: Restoring America's Prosperity, Security, and Sustainability in the 21st Century is the
product of an unlikely partnership between thought leaders with very different backgrounds: military, political, and sustainable business.

This powerful new book is the result of a collaboration between Joel Makower, Berkeley-educated journalist, author of over two dozen books on the green evolution, and conscientious objector; Mark Mykleby a retired Marine Corps aviator who flew bombing missions over Bosnia and Iraq; and Patrick Doherty, a foreign policy and macroeconomics expert who worked for more than a decade in conflict zones from the Middle East to sub-Saharan Africa.

"Sustainability must be the organizing logic for a new growth scenario for America, one that can make us economically stronger, more secure and resilient, improve our standing in the world while addressing climate change and other critical environmental and resource issues," Makower said. "Grand strategy involves aligning our economy with our foreign policy and governance structures to take on big, existential threats."

The primary existential threat is "global unsustainability." Specifically, combination of four strategic antagonists that threaten quality of life on planet earth: Rapid Economic Inclusion, Ecosystem Depletion, Contained Depression, and Resilience Deficit.

"Taken together, these four fused and interlocking issues compose the global challenge of our time," according to Makower. "It will require focused and determined leadership - and new forms of partnership - if we are to survive and thrive."

This book shows us how to move beyond the playbook that has guided the United States since WWII and helped win the Cold War. It lays out a plan - a grand strategy for the 21st century - that can address these challenges and lift America's economy and standing in the world.

The New Grand Strategy provides a roadmap and shows us how American business, not politicians, would lead the way. 

Shareholder Action Guide

AI- Book Cover - Shareholder Action GuideThe Shareholder Action Guide by Andrew Behar, CEO of As You Sow, is an excellent book for any advisor to give to a client who wants to actively align their investments with their values. It's a How-To Guide and tells the inspiring stories of pioneering shareholders that have catalyzed real change.

Do you know about the priest who got Joe Camel to stop selling cigarettes to kids? Or why Steve Jobs created "a greener apple" and started recycling electronic waste? It was all because of investors exerting their influence as shareholders.

Ninety-one million Americans own shares of stock or are invested in mutual funds that own stocks, and the vast majority abdicate their power as shareowners to hold corporations accountable. But any shareholder that owns $2,000 worth of shares can file a resolution that all shareholders in the company will vote up or down.

Think about the power corporations hold over issues that impact your life: a living wage, deforestation, climate change, animal rights, toxic chemicals in our products and foods, GMOs, diversity, human trafficking, and slavery, to name just a few.

As shareowners of public companies, we have the right, the responsibility and the power to help guide companies to be more responsible corporate citizens. The Shareholder Action Guide clearly shows how to be an impact investor in the public markets. 


Affirmative Impact is a publication of First Affirmative Financial Network, LLC (Registered Investment Advisor, SEC File #801-56587). The opinions and concepts presented are based on data believed to be reliable; however, no assurance can be made as to their accuracy. Mention of a specific company or security is not a recommendation to buy or sell that security. Past performance is never a guarantee of future results. For information regarding the suitability of any investment for your portfolio, please contact your financial advisor.

The views expressed herein are those of First Affirmative and may not be consistent with the views of individual investment advisors or Broker-Dealers or RIA firms doing business with First Affirmative. Network Advisors may offer securities through various Broker-Dealers and Registered Investment Advisory firms. These affiliations, and all fees charged to clients, are clearly disclosed.