Companies We Love: Socially Responsible Investing by Jurriann Kamp from The Intelligent Optimist at www.theoptimist.com
There’s a strange contradiction in the world of doing good. Nonprofit philanthropic foundations with large resources give grants and donations to support the common good in a variety of ways. But to maintain their resources, they invest in the stock exchange, which means their funds quite often contribute to the very problems the foundation is committed to solving. In a black-and-white summary: Nonprofits make bad money to give away good money–which kind of cancels out their positive impact.
For many years, this painful contradiction has been the topic of lengthy conversations within boards of directors in the nonprofit world, but so far without any real solution. That is, until now. Domini Social Investments (a paid advertiser in The Intelligent Optimist) plans to launch a separately managed account program called Nia Global Solutions, in the fall of 2013. Nia Global Solutions will invest only in companies “people can love,” as Kristin Hull–who approached Domini with the idea for developing the initiative–puts it. The portfolio is expected to target investment in companies focused on contributing solutions to the world’s problems. “Nia means ‘purpose’ in Swahili,” says Hull. That’s probably the first time the name for a financial advisory product has come from Swahili, but she accidentally came upon it and subsequently discovered its meaning.
The past decade has seen a surge in socially responsible investing (SRI). But SRI mostly means excluding the worst practices. Ever since Amy Domini (see her regular column on page 79 of The Intelligent Optimist, September/October) launched the Domini 400 Social Index in 1990–today called the MSCI KLD 400 Social Index–many SRI portfolios only invest in companies doing more good than others. There are funds that steer clear of tobacco, nuclear energy, child labor or weapons, for instance, but that doesn’t mean their overall activities are directed toward making the world a better place. Nia Global Solutions, however, is about finding and investing in the best, most solutions-oriented publicly traded companies.
As Kristin Hull explains, Nia shifts investing from “taking out the things we don’t want” to “putting in the things we do like.” Firms are chosen with questions like “What’s the product or service of a company? Is it part of a solution that society really needs? Is management ethical?” Hull says one example might be a company that offers day care for children or the elderly. “These are huge problems,” she says, “that are missing adequate solutions.” Or perhaps a company produces meeting software that makes greenhouse-gas-producing travel unnecessary. Sustainable, organic, fair-trade, non-GMO, affordable food is another selected category. Or a company that builds sustainable and eco-friendly housing.
Hull stresses that the chosen companies need to be “moving in the right direction.” Maybe they produce a good product but the environmental impact of their packaging or distribution leaves room for improvement. In such a case, Nia Global Solutions wants to inspire and influence the company to go further. That’s why the strategy of the fund will be “buy and hold,” meaning long-term investment. Nia initially expects to invest in 30 to 40 companies of all sizes, without more than a 5 percent share in any company. The goal is to launch with about $25 million from accredited private funders and institutional investors from the U.S., Canada and overseas. The ultimate goal is to make the investment strategy available to small private investors as well, according to Hull.
Nia Global Solutions is also being designed to support women and diversity. Its leadership looks at the composition of company management. Are women working in the company? How many of them, and what are they doing? Are they in key positions? Says Hull: “I wish to see several names I cannot pronounce. That’s my first check when I look at a company.”