Key Messages
How Sustainable Investment Can Help Make the World a Better Place
In 21st Century Investing, you can learn how to invest in a way that will help – not hurt – the world.
No longer is the rallying cry of investors just “Greed is good.” We now understand how unchecked greed can have social and environmental implications, so the cultural and literal climate has changed.
The book contains sections that provide a how-to guide for those investors who want to make and see real change.
Simply divesting from fossil fuels or investing in a few “socially conscious companies” isn’t enough; these sections teach us how to address our issues as systems, rather than piecemeal.
You’ll also learn why sustainable investment still doesn’t go far enough, and how divestment actually helped to end apartheid in South Africa.
With this knowledge, you can choose to invest in ways that are truly beneficial for people and the planet!
What Is System-Level Investing and How Does It Strengthen Essential Systems?
System-level investing, particularly in the 21st century, is geared towards making social, financial, and environmental systems stronger and more resilient.
This type of investing seeks to go beyond the traditional focus of simply making a quick profit, instead aiming to invest in ways that result in positive long-term change for society.
This proactive approach to achieving lasting results involves campaigning for policies that align corporate behaviour with social objectives and actively advocating for industry standards that ensure fairness, quality health care and consumer safety as well as sustainability.
System-level investors also collaborate with like-minded individuals in order to bring about real change.
In addition, system-level investors are not solely limited to fund managers or CEOs; any potential investor can take up this strategy if they have the interest and determination to make a difference.
Ultimately, by ensuring we invest our money in companies that prioritize social progress over short-term gains, we are both strengthening our fundamental systems while contributing towards a better future.
Three Criteria to Guide Your Systemic Investment Decisions: Consensus, Relevance, and Effectiveness
When it comes to investing, it’s important to ensure that you’re targeting the right areas and putting your money into issues that will make the most difference.
21st Century Investing spells out three key criteria that can help you decide where your investments should go: consensus, relevance, and effectiveness.
First, look for issues that have gained widespread agreement as being legitimate and important—in other words consensus.
Next, find out which issues have the potential to affect a wide range of areas and assets—this is relevance.
Lastly, consider how likely you are to be able to create change by investing in an issue—effectiveness.
With these principles in mind, you’ll be better equipped to determine which systemic issues you should focus your investments on and make the greatest impact with your hard-earned dollars.
System-Level Investing: How Bonds Help Foster Systemic Change
Bonds are an incredible tool that can be used to help fund systemic improvements.
We’ve seen this in the form of green bonds that have been issued since 2007, which finance various environmentally-friendly projects such as sustainable transport, water treatment and renewable energy.
More recently, there have been so-called ‘COVID bonds’, which are a unique type of bond dedicated specifically to helping nations cope with the negative economic effects from the pandemic.
The key message here is that bonds can be utilized to support important systems and help keep them resilient in the face of changing conditions.
They’re also a great way for investors to balance their portfolio by allocating some funds towards a low risk investment that can still do real good for societal systems, making it an attractive option for both traditional and sustainable investors alike.
How System-Level Investors Can Use Traditional Investing Tools to Drive Change
Portfolio construction and investment beliefs statements are important tools for any investor, but they’re especially critical for system-level investors.
That’s because these two concepts can help a system-level investor make investment decisions that align with their values and create positive systemic changes.
When it comes to portfolio construction, system-level investors should be aware of the systemic risks associated with their investments, as well as the more traditional risks involved.
And as far as Investment Beliefs Statements (IBS) go, these documents provide a clear indication of an institute’s investment philosophy in plain language – meaning that you know exactly what you’re investing in.
An IBS can also help an individual investor decide whether her values align with the investment decisions the financial institution is likely to make.
For example, California’s retirement fund CalPERS has invested in energy sources that adhere to sustainable standards, showing its commitment to addressing systemic risks such as climate change.
This is the kind of information that a system-level investor should carefully consider before investing their money.
At the end of the day, portfolio construction and investment beliefs statements are two essential elements in any wise decision made by a system-level investor – and they should be closely analyzed before any final decision is reached.
System-Level Investors Can Work Together to Make Systemic Change Through Standards Setting
Investors have the power to make changes in our world, but they can’t do it themselves.
To bring about systemic change, they need to band together and create a plan of action.
One of the most effective tools for doing this is something called standards setting.
Standards setting involves withdrawing capital from companies that pursue policies that are detrimental or dangerous.
The goal is to deprive them of resources, which will eventually force them to change their ways in order to remain viable.
Reverend Leon Sullivan is a great example of how this approach works.
In the 1970s, he used standards setting – specifically his Sullivan Principles – to tackle discrimination against Black South Africans during apartheid.
He urged investors not to do business with any companies that didn’t adhere to the principles, and his campaign ultimately had a hand in ending apartheid laws in South Africa.
Always Question the Intentions of Financial Managers for Sustainable Investing: Look for Clear, Actionable Commitment with a Record of Success
When it comes to investing, it’s important to always be aware of the motivations and objectives of the financial managers you are working with.
Doing proper due diligence is a key part of any investment process.
It can be too easy for people to jump on board with the most popular causes, buzzing industries, and trendy investments based solely on popularity rather than truly understanding their implications or intentions.
This is why it’s essential to question the conduct of financial managers in order to ensure that their commitment to any systemic change is sincere and has a clear plan for execution – and not just yielding lip service without taking action.
Make sure you ask yourself these questions before investing: Does the manager have an explicit, straightforward policy regarding systemic challenges? Do they track and report on the impact of their organization? If not, it might be wise to be wary of their intentions.
Additionally, has this manager previously been successful in influencing positive changes? Have they worked with multiple stakeholders to develop solutions? These are all important things to consider before investing.
Wrap Up
The final message of 21st Century Investing is clear: gone are the days when making and investing money is done at the expense of people and nature.
Now we must have a different approach—one that works toward strengthening these vital systems by using principles such as identifying worthwhile issues to tackle, choosing the right assets, utilizing portfolio construction and investment beliefs statements, and setting standards to encourage industries to adopt responsible financial practices.
With this in mind, we can all make choices that not only lead to profitable investments but also take responsibility for our own place in protecting a sustainable future.
