Responsible investing is still growing, but it’s already much more mainstream than it was. Investors are becoming more conscious of environmental, social, and governance (ESG) criteria when they look into where to put their money. Companies are also starting to learn that it literally and figuratively pays to give the people what they want and work to be as responsible as possible. This focus on stakeholders rather than profits is something that Falcons Rock Impact Investments looks at as part of our criteria for considering funds.
Why Companies Should Consider Stakeholders It makes very good business sense to do so. More investors want their companies to disclose their environmental impact, the steps that they’re taking toward taking care of their employees and human rights at large, and what’s going on in board rooms in terms of diversity, pay, and transparency. All of these are positive changes that not only help companies run more smoothly, but make them more appealing to the informed investor.
What’s more is that there are a lot of people who rely on companies and stand to gain from positive relationships. Stockholders, employees, customers, suppliers, and creditors will naturally feel the effects of a company’s actions as primary stakeholders. However, society at large, including the community, environment, government, and even competitors all feel the effects of a company’s decisions.
Why it Hasn’t Caught On A stakeholder-centric philosophy has been slow to catch on in the United States, because of the way that our economy works. Stock options and ownership programs often focus on maximizing the kind of value that can be measured simply because numbers are easier to work with than more abstract concepts like diversity and responsible treatment. However, many other countries believe that corporations, particularly large ones, are responsible for more than just making shareholders wealthy. Although social responsibility is harder to incentivize, corporations are held accountable for their impact on people and the world.
Companies that Do It Right It might be a tough philosophy for some companies to embrace, but below are three that do it right.
1. Mondelez International Inc., formerly known as Kraft Foods Inc., has taken steps toward making their operations more sustainable and have less of a negative environmental impact. Despite the volatile price and availability of cocoa, they have worked to help local farmers become efficient. Their measures have improved crop yields as well as worker salaries.
2. Target proves that even local efforts yield big changes, and that everyone from an employee to a company can have an impact. They donate 5% of their profits to local communities and encourage a culture of responsibility. Team members are encouraged to volunteer their time for local service organizations, and Target establishes goals to embrace volunteerism, sustainability, education, and the well-being of its employees.
3. American Express makes sure that their relationships are as positive as possible in the business world. They know that customers want value in their products and services, so they strive to provide that for their stakeholders. American Express tries to be a good community member above a money-making enterprise, and this mentality keeps them personally accountable for their promises and commitments and makes them want to succeed not for themselves, but for the people that depend on them.
Impact Investing is a Viable Financial Plan As companies realize that they get more out of being responsible than not, more responsible mutual funds and investment opportunities start appearing. Contrary to what some people think, investors are not limiting their options or their returns by choosing to go in a more responsible direction. In the past, responsible funds were about screening out companies for particular ethical concerns, but there are opportunities to reward companies for their positive steps rather than punishing them for negative ones. Furthermore, the returns from responsible funds are generally consistent with other strategies, and there are options for nearly everyone regardless of their timeline, risk tolerance, or other preferences.
Falcons Rock Impact Investments Believes in Stakeholders Falcons Rock Impact Investments wants to help create and sustain a future that benefits the world and the people in it. We recognize that good can create more good as long as it’s applied in the right ways, and we know that you think that, too. Our funds are screened to make sure that they have the highest positive impact on the world and the potential to create high returns for you. If putting your money where it counts is in your future, then learn more about our process, today.