The idea of investing in good can often mean different things to different people both from a values perspective as well as from a risk/reward perspective. We wanted to share what the investing spectrum looks like as we see it, what kinds of options there are in the market, and where socially responsible investing fits in.
Traditional investing is considered to be extractive for many reasons. For starters, Wall Street was built off of the slave trade 400 years ago. And now “over the last 15 years, 94% of corporate profits have gone to shareholders in the form of buybacks and dividends, instead of to workers and their families." You can learn more about how our current economy is based on the accumulation, concentration and enclosure of wealth and power from the Just Transition Framework. This doesn’t mean the system is broken. In fact, this is how the system was designed to function.
And now here we are in the 21st century and we’re starting to come to terms with the fact that resources are unsurprisingly not endless. Companies no longer can exist in a silo, oblivious to their external impacts. Companies are being held accountable for the treatment of their employees, the community, and the environment. Meanwhile, consumers are becoming woke to what they’re invested in and the power of their investments. It’s not enough to merely grow your wealth, now we want to do it in a way that also has positive effects on society. This is where socially responsible and impact investing comes in. These terms, in addition to ESG investing, SRI, responsible investing etc. are often used interchangeably.
Good Capital falls under the Socially Responsible & Impact Investing part of the spectrum. Similar to Traditional Investing, performance and returns are still prioritized and the investment vehicles we use are similar. However, with Socially Responsible & Impact Investing, there is also a focus on valuing environmental, social, and governance (ESG) factors, and a push to move from shareholder to stakeholder capitalism. You can learn more about socially responsible & impact investing here and here and here. Think about this part of the investing spectrum as working to create change within the existing system, working to move the needle in the right direction.
And finally, the regenerative side of the investing spectrum. This area is relatively new and still getting developed which is super exciting. We have heard it referred to as investing in the solidarity economy or regenerative economy. The idea is to shift to an economic and social system that is ecologically sustainable, equitable, just and inclusive. The focus here is on generating social impact rather than maximizing returns for the investor. Investments made in this part of the spectrum occur mainly in the form of direct investments in the private markets. To learn more about the regenerative economy, visit RegenerativeFinance.com.
Have you heard of the solidarity or regenerative economy? What are your priorities and values when it comes to investing?