I don’t believe that money is the root of all evil. I am an investment advisor, after all. But, in observing the financial world, I’ve seen how the temptation of short-term profit can lead people astray. My observations parallel the findings of various studies: the current focus on short-term profits is not sustainable, and it’s not serving anyone very well in the long run.
You would think that after the financial crisis of 2008, we would have learned something. The U.S. economy suffered losses estimated at somewhere above $10 trillion, largely because of unsustainable practices that chased unrealistic profits.
Yet, six years after the crash, business leaders felt increased pressure for short-term gains, and studies revealed a growing concern that a short-term focus was a barrier for creating long-term value and sustainable profits. CEOs identified environmental, social and corporate governance (ESG) factors as critical to future success, but hesitated to invest in sustainable practices because they felt unable to show a link to immediate financial return.
Meanwhile, academic research was proving that sustainability and long-term capital were a better deal all around. Socially responsible investing (SRI) was growing by leaps and bounds as people uncovered the correlation between ESG practices and financial performance. In other words, people realized they could make a competitive return on their investments while staying true to their values.
It’s time to come to our senses. Taking a long-term view can benefit businesses, investors, and society in general — and the financial markets offer an outstanding opportunity for investors to influence that change. But, we need financial services that can help those investors move beyond quarterly earnings statements and understand the companies they own. Tools that empower investors with information, and help them connect their money with their values.
The wall between you and your money
Think about your investment accounts: Do you know what’s in them? If you own shares in a fund (and you probably do), you are a part-owner of hundreds, possibly thousands of companies. Do you feel like an owner? Do you have a sense of pride in their accomplishments? Responsibility for their shortcomings? Do you even know which companies they are?
Don’t feel too bad if you don’t know the answer to that. Because, as I see it, Wall Street has built a wall between you and your money.
It’s easy to feel tangible responsibility for what we purchase — when you’re holding something in your hand, wearing it, using it, eating it... when you swipe your card at the checkout counter, you feel the weight of your ownership.
But when you turn on a monthly auto-deposit for an investment account that’s managed by someone else and seems to consist of a list of mysterious acronyms, it’s different, isn’t it? You don’t feel the same responsibility. You don’t have that sense of ownership and influence.
It doesn’t have to be that way
Business can be a force for good in the world — and you can help set the bar.
It’s already happening at the consumer level. People are voting with their dollars to support companies and products that fit their values. Organic foods. Ethically sourced materials. American-made products...
And companies are responding. Even three years ago, 81 percent of CEOs saw their sustainability reputation as an important factor in consumer purchasing decisions. Today, more than half view consumers as key influencers of their sustainability practices. CEOs no longer cite short-term financial return as a reason to hesitate on sustainability. Eighty-five percent have embedded it into their businesses, even where they can’t track financial results.
Change is happening, but the voice — and values — of investors could really tip the scales. Eighty-eight percent of CEOs identify sustainability integration in financial markets as a key to making more progress. And right now, only 10 percent view investor pressure as a driver for sustainability efforts. That means investors like you have a huge opportunity to help create a financial system that rewards long-term value and sustainable profits.
Take charge of your financial footprint
Nobody wants to find out that they’re unintentionally funding something they disagree with. Transparency and ESG reporting are at an all-time high. Technology is more accessible than ever. We have everything we need to help people make more informed, more mindful decisions for the long term.
Financial tools and systems should enable all investors — not just the wealthiest — to connect their portfolio to their priorities. It’s time for investors to take charge of their financial footprint. We should all feel the ownership and responsibility of our investments.
We started Censible to help people invest in their values. And whether or not you are one of our clients, we believe you can, and should, invest on your own terms. Set your standards, hold your financial portfolio accountable to them, and most importantly, never settle.