People have been investing in change long before the term “impact investing” came on the scene. Still, most people do not know how to invest money for good – or if they do, whether they can also have a return on their investment that they can rely on, say, for retirement.
Steve Schueth of First Affirmative Financial Network says, “Every purchase decision you make and every investment decision you make every action you take with money has impact.”
The following “Investment for Change” panel discussion was part of the 2016 Best for the World Gathering and was moderated by Kellie McElhaney, adjunct professor at the University of California, Berkeley’s Haas School of Business. She shared the stage with Vince Siciliano, New Resource Bank CEO; Steve Schueth, First Affirmative Financial Network president; Patricia Farrar-Rivas, Veris Wealth Partners CEO; and Rehana Nathoo, Case Foundation vice president of social innovation.
To watch the other panels, interviews and presentations made as part of the gathering, head over to our Best for the World hub. You can also find the stories and details of all of the 2016 Best for the World honorees.
Invest Money for Good
Kellie McElhaney: … We have a four-fold mission. [with this panel]. They’re going to tell personal stories, and hopefully things that are really personal. Then we’re going to go into three areas in terms of what they do with their life and why you selected investment space writ large as impact area. How you do it and rules for the audience to walk out of here with. So I will start with you [Steve].
Steve Schueth: Thank you, Kellie. As Kellie said, I’m Steve Schueth. I’m President of First Affirmative Financial Network today. I’ve been in the financial-services industry in one capacity or another since 1977. Now those of you under 35, if that just turns you off entirely, come back, okay. There’s actually wisdom that we elders can pass on. I took a hiatus and stepped out of this space … between ’86 and ’89 and worked as director of development at the University of Pennsylvania’s Wharton School. I don’t know if you even knew that.
Where, by the way, I met Donald Trump. … Now he wouldn’t remember me today, but other than the hair’s a little lighter and he’s a little heavier, it’s the same guy, but that’s a whole different conversation.
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While I was at Wharton I also met two very interesting fellows. A fellow by the name of Wayne Silby and John Guffey who were the founders of Calvert Investments. A few months later, I left my job at Wharton and went to work at Calvert and spent the next eight years there and immersed myself in this concept and practice of responsible investing. That’s where I discovered not only responsible investing but also responsible business, because that’s the other side of the investment scenario … what companies do you invest in? In those days, Ben & Jerry’s … was one of those companies that really was cutting edge. Well, we were all bleeding edge in those days, and have been now for more than 27 years.
Today, First Affirmative Financial Network manages money for socially conscious investors. We primarily work in public markets. We produce a conference called the SRI Conference. Now SRI’s an acronym that, in the early days, meant socially responsible investing. Today it stands for Sustainable Responsible Impact Investment. The reason why those three words are important, at least to us, is because they very succinctly describe the motivations of our clients. These are people that want to put money to work to help create a truly sustainable future. We want to own the most responsible companies and we want to make the money, and at the same time have a positive impact with our money on the world.
So, it harkens back to actually something Ben Coen told me many years ago. He talked about capitalism being one … of the most powerful things on the planet … but we needed a much more caring form of capitalism. That’s what I’ve been working on for the last 27 years. I’m going to harken back to Wharton just for a second because … one of the previous panelists talked about ethics, business ethics. When I was at Wharton School, they had one course on ethics and the kids that took that course came out of it thinking, “Wow. Isn’t that cool?” Every other course they took, finance and management and marketing and everything else was like total anti-ethics in those days.
In fact … I remember vividly a little mini case study we were doing one day. This is the mid-’70s, folks. … The class was struggling with what are the most important factors in locating … a new manufacturing plant. To cut a long story short, the top factor was proximity to a railroad. Makes perfect sense in terms of shipping your raw product in, your finished goods out. The second factor was proximity to a river. Remember, some of you may have read about in those days the Cuyahoga River in Cleveland caught on fire a couple of times? Well that was the era … It was externalizing of those costs.
McElhaney: Great. Thank you, Steve. Vince.
Vince Siciliano: Hi, everybody. I’m Vince Siciliano, CEO of the New Resource Bank. I grew up in Washington, D.C., as a child of privilege, not because we had money but because my father worked directly for two Presidents in the White House and was tapped by others for advice from time to time. That’s a very heavy atmosphere to grow up, in to see all those people up close. To race down to the White House on the weekend for a visitor or to roll Easter eggs on the White House lawn. What that did for me, though, between my parents and my upbringing, was it made me think I was invincible and I could be and do anything I wanted.
I was raised to be a master of the universe. High expectations. When you hear somebody’s trying to be master of the universe, I think the universe conspires and so later in my life … I became a banker quite accidentally. … Actually my graduate degree was from here. Environmental planning. In no time, however, I was working for Bank of America, which I thought would be a one-year job, became a 10-year job, and 30-something years later I’m still a banker. That was an accidental phase, but as I was going through all that, twice I got fired, and I know people who are probably getting fired in the tech world, and say, “You fall forward and it’s a good thing.” It wasn’t such a good thing. It was really demolishing to my sense of self-worth, and the reason for that was that my self-worth was very much defined by the marketplace, by the world, by my accomplishments and the approval of others.
Therefore, when I don’t accomplish, when I fail, my sense of self-worth goes away. That really led to a period of rebuilding for me. If I’m not something in the marketplace, who am I? What am I? Where do I really coming from? I realize that it wasn’t so much about doing well. We have this expression of,“I want to do well, or I want to do good and do well but I don’t want too much trade-off between doing good and doing well.” It wasn’t so much about doing well, it was really about being well. So what does that mean?
Well, that means I have to root myself, my personality, my self-worth in nature, in community, in relationships, in spiritual matter, in a sense of purpose for life. Out of that, out of that sense of being well, go into the marketplace, work and use the marketplace, but don’t be used by the marketplace. Don’t be defined by the marketplace.
So that brings me to New Resource Bank. About seven, eight years ago, I was recruited to run this bank that was in a real time of crisis and we had to go through a restart, a redefinition. Why are we a “resource” bank? What is that all about? So, the why is that we believe that money and banking can be used to do good in the world. We believe it can help achieve well-being for the community, and I think that’s pretty unusual. The how is that we take other people’s money and we invest it in companies and nonprofits and projects that are being managed not only for a financial return but also a social and environmental return. …
We adhere to sort of principles of sustainable banking, which we can talk about some other time. So in the end, we’re a bank but we’re a Best for the World Bank. …
McElhaney: Excellent. I can relate to your being raised to be master of the universe. I was raised to be Wonder Woman. It didn’t work out.
Patricia Farrar-Rivas: I disagree. I think you’re Wonder Woman.
So, I’m Patricia Farrar-Rivas, CEO of Veris Wealth Partners. I also came from a sense of privilege. I was … My family wasn’t extremely wealthy and there was a part of my life where I wasn’t so privileged, but my father was an officer of the Air Force and I traveled around a lot. So, I always had a very strong basis of confidence, and being a white woman in the world, had the privilege associated with that, and being middle class most of my life, had the privilege of that as well. The other thing I would say, personally, that was really significant was due to some early Catholic schooling, between my mother and that, a very strong sense of equality and social justice was embedded in me. I was taught within the Catholic church during the time that liberation theology was very popular. I really grew up between my father who was part of the wonderful U.S. military and the Catholic church really believing that the United States was really a country that was really designed to meet the aspirations of everybody.
So in my life, when I got to a point where I started reading about Chile or what was going on in Central America, and the role that the United States played in issues of what didn’t seem to be democratization, but really was capital and building capital markets. I became really … disillusioned. … I’ve had four careers. This is my fourth. I’ve been doing sustainable and impact … for 24 years, but I started out as a psychiatric technician, and then … I really wanted to follow my heart and be a dancer.
So I started at the YMCA teaching kids to dance while I was working and then started a dance school and did that for six years. …[Then, later] I was recruited to do one of the first Give Peace a Dance, and in applying for that job I sent a head shot … but I was applying for an activist job …They thought that was really ridiculous, but they hired me, and that led me to do work with human-rights activists and revolutionaries in El Salvador.
It was really that work that brought me to come into the financial-services industry. … It was really wanting to move toward changing a system. So when we founded Veris as changing the financial system, and seeing that part of the issue was what was creating the great inequality and wealth and not just what we’re seeing today in the United States. We weren’t seeing it as much then, but certainly has seen it in other countries around the world. So when we founded Veris …in 2007, we had all been in the field of impact investing. We did impact investing 22 years ago, for many years.
We really founded it [with the idea that] success was making structural change. We still wanted to build a strong company because we believed that there’s a business case for sustainability, so that was very important. … Veris is … a growing group of families, foundations, institutions that really somewhat connected the dots with their assets or their wealth, and doing good, and how to make that transition. More and more people today want to do that, and so we founded Veris to help them do it. …
We do that by understanding three landscapes. Understanding the landscape of all of the investible opportunities that are out there that can be seen as “sustainable” as “impactful,” and the word that I really want to start using more and more, as “regenerative.” Understanding that and having deep, deep skills in wealth management and working with people to meet their financial needs. Third, really understanding the issues of all of our clients. So whether we’re working around women, sustainable agriculture, climate change, mindfulness, community-wealth development, we are entrenched in those issues and bringing those three together to help people not just only build a portfolio but a plan. A plan of action around their lives and around their wealth.
McElhaney: Excellent. Rehana.
Rehana Nathoo: Sure. So as Kellie said I’m the baby. Besides the obvious reasons. This is my fourth week on the job at Case Foundation so, I’ve got colleagues in the audience that are going to [keep me honest]. I am the Vice President of Social Innovation with an eye towards our impact-investing portfolio, and since graduating grad school have almost exclusively been in the impact-investing world. I lack any of the cool stories about exploration you’ve sort of heard here, but do have some experience in professional schizophrenia.
Started off at the UN. Figured out pretty quickly that was not for me. Moved over to the Rockefeller Foundation where I worked on our impact-investing portfolio, which was a great time to be with that organization. Impact investing had been formalized for a lot of great work for foundations to do. Restlessness kicked in, and then I went to work for Bank of New York Mellon for two years trying to design their impact-investment fund and do a little bit of research. Finally found my home at Case Foundation, and Kellie was asking, “Why the investment space and why do you do it?”
The Case Foundation is the family foundation of Jean and Steve Case. It was founded in 1997 and, as Patricia was saying, they were advocates of impact investing before it was even a thing. Since the days of AOL, they have been doing impact investing before we knew what to call it. As individuals and particularly through the leadership of Jean … The why impact investing is because it absolutely makes sense for our DNA and the how is on the movement-catalyzation side. The role of the Case Foundation has really been to build the ecosystem for folks, present company included, to really have a groove and space to make the kind of investments and support the kind of work that we’re talking about today.
It’s in many different ways. As connectors to the investor community, we’ve done a lot of education around investors. Those of you that are familiar with us have probably seen our Short Guide to Impact Investing, which was really written as a welcome to the investor universe, and we’re ready to start talking in a way that you will understand about what this opportunity is. So that was one such example. We’re co-founders of The ImPact and so really seeing a totally phenomenal trend, not just in the United States but globally, about the power of millennials and the power of millennial high-net-worth individuals. The sort of the role and responsibility they will have as socially minded citizens, so much more than I think any generation of the past, and [they are] the group of people that need to be educated on what impact investment means.
So our work with The ImPact has really been around continuing to build the ecosystem for that specific group of wealth holders, and then a lot on the entrepreneurial side. We have a great movement that’s cranking up right now around inclusive entrepreneurship. The work there has really been about changing the definition of “entrepreneur.” Making sure that it includes women and people of color who are equally responsible for some of the best ideas for the hardest problems. It’s really great work for the impact-investing team because we kind of get to work on all of this cool and funky stuff …
McElhaney: So I’m going to pick on just a few themes that I hear coming out, and one that I think you’ve had some side conversations about here is: I’ve often thought that, or worry that, this space is for the privileged, the highly educated. … Could you speak to the implications of that and what you might be doing to diversify the space? You’ve talked about it a little bit, but I’d like to hear more and anybody can go in any order.
Farrer-Rivas: The democratization of the space. I think people are looking at it. It’s very interesting and a good question because … some of the business dynamics are set up so that, to be most profitable, you’re wanting to work with people who have high net worth so it makes the margins better. One of the ways that we’re working in that space is that we … are part of building this space, moving and doing field-building.
One thing in particular that we’re doing is we collaborate with other firms, and there’s one large firm called Envestnet Asset Management that we’re collaborating with. For them to be able to deliver more and more impact-investing opportunities and options to thousands and thousands of investment advisers across the country that are not all working with a high-net-worth individual. That are working with individuals that maybe have … $50,000 versus having $1 million or $2 million.
I think that the other aspects of it is using that as a platform for bringing in other opportunities so that you’re introducing ways where people can use $1,000 to invest in an impact with all of that we’re looking at. If you look at impact assess or you look at RSF, opportunities where people can grow with smaller amounts of money that are going to go to very impactful opportunities. It still has a ways to go.
Siciliano: I can add to that. I think a key thing is that think about your money. I guess the question that I like to ask is, “Do you know where your money spends the night?”
Is it in your mattress? Okay. It’s not in your mattress. So it’s in a bank, but it’s not in a vault, I assure you of that. So, where is it? Where is it in the world? If you could imagine a dollar bill as a little magic carpet, and you could fly all around the world to see where your money is spending the night, would you be pleased? Would you be proud to see to see that you’re engaged in strip mining in West Virginia or some kind of deforestation in Brazil?
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We think about organic food. Why not an organic bank? Why not see your money as an expression of your values? … Money is a store of value and a medium of exchange, but I think it’s a store of your values. It’s not neutral, how you spend it. Every time you spend it, there’s an implication. You’re making a choice for a new economy or an old economy. Money can be your agent of change as opposed to just a medium of exchange.
Schueth: So I’m going to pick up on the concept, which is the concept of impact. I’m going to state, I want you all to hear this, every purchase decision you make and every investment decision you make, every action you take with money has impact. The question is, are you paying attention? The question is, are you consciously directing those purchases and those investments with positive impact? That’s kind of where we start the conversation with all of our clients, or they come to us with that already embedded, kind of the forefront, tattooed on their forehead in a sense. Then we help them do it. We help them live in the real world.
You don’t have to have a lot of money to do this. In fact, how many in this room do not have a retirement plan? Do not have an IRA account? Okay. There’s like one hand up. My point is everybody’s retirement account can and should be invested in this way. Now, we’re fortunate. My company offers managed mutual fund portfolios that just work really, really well in retirement plans. We have a 16-1/2-year track record now running these things and they’ve done really well. Which brings me to a point I want … If you don’t mind, I’m going to throw a little bit of a misdirection, or another direction, in here, because we heard a lot this morning about healthy food, about tastiness, about the … kind of the … forget about sustainability. Forget about positive impact but rather, food’s got to be good. The product’s got to be good. Well, from the investor perspective and a banking perspective, the performance has got to be good, too. So we’ve got to deliver won the real world, practical reality that people need to make money, have enough money to retire comfortably, achieve certain financial goals, and that’s what we do.
Nathoo: I just wanted to add one more dimension to what Steve said, and that is that for impact investing specifically, I think that the number one [problem] is a level of opaqueness that is really, really hard to break through. So we talk about democratization in terms of who can play, so is it just institutional investors or should the individual have a role, which is absolutely something we’re thinking about. I think the other element to that, too, is even within those groups, there’s no transfer of information. There’s no transparency. There’s limited measurement. So also being responsible to ourselves and our own peer groups, that even when we do have activity or track record or lessons learned or missteps, specifically missteps, there is not a sharing sort of ecosystem built into the field.
One of the things that the Case Foundation is working on that I would be remiss not to mention is something called the Impact Investing Network Map, which is our attempt not at all to be duplicative of some great measurement platforms that are out there, but an opportunity to show where relationships are. So where is the flow of money, and even if it’s not money, where is the flow of connection, and really meant to be a complement to so much great data that is out there, and for this exact reason. Whether you are an individual or the largest asset manager in the world, whatever the case may be, you have an opportunity to see where the activity is. So, I think democratization for us is equally who gets access, but, how open are we are with who gets access?
McElhaney: Is that that hook?
Nathoo: That’s the hook … You heard it here.
McElhaney: … If you had one piece of advice for folks in the audience? Really quickly because we’re going to get the music playing.
Schueth: Put your retirement money to work in a responsible manner. …
Siciliano: I think it would have to do with perspective. It’s really hard to take a long-term perspective. We’re so caught up in the now, but it really has to do with perspective. Sometimes I’ve asked this question, “If I gave you $1,000 today or $5 million in 100 years, which would you choose?” I can’t see you all because of the lights but usually when I ask that question 90 percent of people say, “I’ll take that $1,000 today because I won’t be alive in a hundred years.” So it’s very hard for people to take a long-term perspective. You may not be alive in 100 years, but future generations will be. Your grandchildren will be alive or your great-grandchildren.
So if I asked you what’s the value of the life of your great-grandchild, you’ll say it’s priceless, and yet when I offered you $5 million, you didn’t want it. So the idea is that the present value of $5 million is only a thousand bucks. What’s the present value of your grandchildren? Is it only a few dollars? The future has no seat at the table. It has no seat at the table. So if you could take a longer-term perspective with how you live your life, I think that would be a great contribution.
McElhaney: Patricia. That’s great.
Farrer-Rivas: So I would say, feeding off of this discussion, one is know what you own and own what you own. Then, the other aspect that is very dear to my heart, is that we’re all responsible and can change the narrative. That the predominant narrative today does not represent us and the people in the room, and joyfulness and love and all of the solutions-oriented. Even if you look at the situations when we think about one of the [2016 Presidential candidates], I refuse to mention the name. Speaking to African-American communities and talking about all of the issues that they are facing that then further serves to define that population versus talk about the percentage of people in African-American communities that are successful, that are providing solutions, that are very additive and necessary to our society. It’s all about changing that … Change the narrative.
McElhaney: Excellent. Rehana.
Nathoo: I’ll say that the ethos of our organization is something that I aspire to personally. It’s something we call “Be Fearless,” and it is basically a manifesto to the message of incremental change is not enough. There is a level of ambition in failing forward and taking big risks and trying to make a real change. So, for those of you who find yourself drawn to this space, the only piece of advice, my only takeaway would be, be ready for those big changes, big moves, because I think that’s what we need to sort of see that level of progress.