DISCUSSION 20 solutions for 2020: a better capitalism with stronger governance

Panel II of the conference brought me side by side with some real American pioneers.

I have attached their biographical details below because they tell their own story of ground breaking work.

What the conference told me was that change is on the move. People with serious credentials have left Wall Street behind them, and deployed their know-how to build really powerful and effective investment firms in which the investment is clearly aligned to social purposes.

In our early conversations these people had been throwing around the phrase “social capital”. I wanted to know what they meant. Did they mean that the capital was derived socially – or deployed socially?

After this panel I think I understood how much we have in common. Think of it s a spectrum. At one end are people primarily interested in social impact, with commercial return somewhere behind.  At the other those only interested in commercial return, with a minimum level of social responsibility thrown in.

Tomorrow’s Company is concentrating on the latter group, and on moving that latter group of motivations towards a more ambitious view of the impact they can have as investors.

We have been pointing out how much risk people are taking by seeking commercial return without regard to the form of commercial activity through which they obtain it. Mainstream investors do have a choice. They can demand that the intermediaries who act for them behave more like the owners of a family business.

These social capitalists alongside me at the conference are starting with the former group. Social impact is central to their cutsomers –  and their innovation is showing how it is also profitable. A focus on having a positive impact is, in the right hands, a winning strategy.

Benchmark and Portfolio 21 are both taking investors’ money and investing it selectively in companies that will make a positive impact. For example Benchmark’s Global impact fund says it will “focus commercial expertise and capital on specific opportunities around the world that are ..characterised by being predominantly located in poor and developing countries, commercial operations utilizing private sector best practices

And are progressive enterprises that make a sustained, measurable impact on society” .

This is a way of thinking that brings them very close to Tomorrow’s Company thinking, in our tomorrow’s Global Company report.  That report by business leaders asks – How can we get mainstream business more closely aligned to making money from meeting the needs of society. How can we optimise social impact and achieve commercial returns?

The Tomorrow’s Company stewardship campaign meets these investors from the other end of the spectrum. How can we get those who act as fiduciaries for the mass of savers to start behaving towards this wide portfolio of investments with more regard for the stewardship of the money – how can we get long term money automatically managed with the same standards of care and stewardship that any family would exercise over its money?

The rich detail of experience from all these perspectives is what is needed to answer the sense of emptiness that I was left with after hearing the discussion on Robert Johnson’s talk. The solutions for the new capitalism are being worked out at the micro level. If only we could communicate them well, they would be far more in demand by a public sick to death of the self-seeking of Wall street and the myopic commercialism of bankers.

The task now is to join up the anger at Wall Street with the positive potential of the new investors, and to start creating rules and frameworks that generate real choice in the market place.

My paper – which I summarise as 20 solutions for Corporation 2020 – focuses on the standard of stewardship;

Leslie Christian

Leslie Christian, a former investment banker who, she tells me, figured in Liar’s Poker (Michael Lewis’s classic expose of Wall Street in the late 80s).

Here are her more formal biographical details

President and Chief Investment Officer of Portfolio 21 Investments (www.portfolio21.com), a Northwest investment firm that specializes in socially and environmentally responsible investing. Ms. Christian has more than 30 years of experience in the investment field, including nine years in New York as a Director with Salomon Brothers Inc. In addition to her ongoing responsibilities as President of Portfolio 21 Investments, Ms. Christian was its co-founder. Portfolio 21 Investments is a global mutual fund committed to investing in companies that are incorporating environmental sustainability strategies into their businesses. Ms. Christian has also been instrumental in the startup of Upstream 21 (www.upstream21.com), a regional holding company dedicated to building local living economies, and serves as the Chair of its Board of Directors but who went on to set up

Benjamin Bingham

Ben Bingham is Managing Director of Benchmark Asset Managers, which was re-founded in January 2007 as a preeminent player in the management of 100% socially responsible or ESG (Environmental, Social and Governance) screened and high impact global/public and local/private portfolios for High Net Worth and Institutional Investors. Educated at Yale and Emerson College in England, in other lives he has been a visionary artist, biodynamic farmer, founder of a Camphill Community and Waldorf teacher as well as an entrepreneur and social investor. Beginning his career in money management 8 years ago, his focus is to find and invest in undervalued, non-correlated global stocks of companies that contribute vital solutions for a sustainable world. With experienced colleagues, he builds portfolios that provide top decile performance in down markets and market returns in up markets through sophisticated asset allocation and hedging strategies (see www.benchmarkam.com).

Andrew Kassoy

Andrew Kassoy is a co-founder of B Lab, the non-profit organization that certifies and promotes B CorporationsTM, as well as capital markets and policy initiatives to accelerate growth of this emerging sector of the economy. B CorporationsTM are a new type of corporation which use the power of business to create public benefit, meeting comprehensive and transparent social and environmental performance standards. Prior to co-founding B Lab, Mr. Kassoy spent 16 years in the private equity business: as a Partner at MSD Real Estate Capital, an affiliate of MSD Capital, the $12 billion investment vehicle for Michael Dell, and as Managing Director in Credit Suisse First Boston’s Private Equity Department, a founding partner of DLJ Real Estate Capital Partners, and President of its international business. He is a Board Member of the Freelancers Union and the Freelancers Union Insurance Company, a Board Member of Echoing Green, an Advisory Board member of Wall St. Without Walls, a member of the investment committee of the Patient Capital Collaborative, and an Advisor to the NYU Reynolds Fellows Program

Timothy Smith

Timothy Smith joined Walden Asset Management in October 2000, and is currently the Senior Vice President of its Environment, Social and Governance Group. His primary responsibilities include overseeing shareholder advocacy, public policy, assisting in client services and acting as the spokesperson for Walden on social issues. Walden Asset Management manages approximately $1.7 billion for individual and institutional clients. Walden Asset Management is the socially responsible investment division of Boston Trust & Investment Management, an employee owned firm based in Boston. Walden has been a national leader in responsible investing for over 35 years working on dozens of issues like the environment, sweatshops and climate change, Apartheid in South Africa, executive compensation, corporate governance and equal employment opportunity in the U.S. among others. Previously, Mr. Smith served as Executive Director of the Interfaith Center on Corporate Responsibility (ICCR) for 24 years. Mr. Smith is immediate past Chair of the Board of Social Investment Forum, the industry association for socially concerned investors where he served for 5 years. He serves on the boards of Shared Interest, a South Africa Development Fund, World Neighbors, an international development organization, and is a member of the newly created Kimberly-Clark Sustainability Advisory Board. In December 2007, Mr. Smith was named by Ethisphere Institute as one of top 100 most influential people in Business Ethics.