What a difference a pandemic, a Presidential election and advances in technology can make.
In October of 2019 I wrote for this column an article “A Vice for Some Can Be a Virtue for Others.”
In that article I described a “Vice Fund” as focusing on 4 key sectors: gambling, military, alcohol, and tobacco. On the other hand, sustainable products, environmental health, and human rights are seeing renewed interest in socially responsible start ups and investments. This article will focus on how “GREEN” has become good.
From my previous article:
“New businesses interested in socially responsible areas tend to give preference to those that promote, for example, sustainable products, personal and environmental health, and human rights. Perhaps in response to this trend, investment manager Dan Ahrens introduced the Vice Fund in mid-2002. The Vice Fund focuses on 4 key sectors: gambling, military, alcohol, and tobacco. The performance of the fund to-date suggests that “vice” can indeed pay … and sometimes pay big. Over the years 2003-2007, the Vice Fund returned an average of 27% per year to its investors. During the same period, the Domini Social Equity Fund (which tracked an index of 400 'socially responsible' companies), returned an average of 11% per year to its investors, trailing 3 percentage points per year behind the S&P 500, which measures overall market performance.”
Today the Domini Social Equity Fund reports a return of 20.62% in 2020, and 31.66% in 2019 compared to the S&P 500 at 18.40% and 31.49% respectively. A very interesting turn for the better.
Arguments for starting and or investing in socially responsible companies:
- Individual decisions – multiplied by thousands of investors – can make the world a better place. The Domini Social Investments Website sums up this perspective in their message to prospective investors: “We are dedicated to making your investment decisions count – for your personal financial benefit, as well as for your broader hopes for a healthier environment and a more just and humane economy”.
- Over the long term, “socially responsible” investments perform at about the same level as the market in general, and sometimes even outperform the market.
- While people can always invest in philanthropic programs to resolve global problems, investing in firms that don’t cause problems is more efficient and effective.”
As reported in the Wall Street Journal (WSJ) May 22,23, 2021, “Assets in investment funds focused partly on the environment reached almost $2 trillion globally in the first quarter, more than tripling in three years. Investors are putting $3 billion a day into these funds. More than $5 billion worth of bonds and loans designed to fund green initiatives are now issued every day. The two biggest U.S. banks pledged $4 trillion in climate-oriented financing over the next decade.” “.. green finance is now looking less like the niche interest of socially conscious investors and more like a sustainable gold rush.” Finally, ”the Biden administration’s proposed … Clean Energy and Sustainability Accelerator Act would provide $100 billion in funding for projects in renewable power, grid infrastructure and reforestation.”
What does this mean for you, the small business owner? Much of this investment can and must be directed at small businesses. Sometimes as a subcontractor to a large company, sometimes as grant money for product research that you may have ready, and sometimes as a new technology in renewable power or reforestation or other sustainable farming. From the WSJ article: “Tesla which received a $465 million loan in 2010 … was a risky startup. Now, it is the most valuable automaker in the world … The company repaid the loan ahead of schedule in 2013.
SCORE is a nonprofit association dedicated to helping small businesses get off the ground, grow and achieve their goals through education and mentorship. We have been doing this for more than 50 years. SCORE is associated with the Small Business Administration (SBA) and has 11,000 volunteers nationwide. SCORE.org has some wonderful resources available to everyone.
Tip of the Mitt SCORE is partnered with the Petoskey Regional Chamber of Commerce and mentors there on Tuesday and Thursday from 9 a.m. to noon. We mentor in pairs and if the scheduled times don’t work for you, we will schedule a meeting outside of those hours at various locations such as the library in Petoskey, the library in Boyne City and various coffee shops. To make an appointment with SCORE in Petoskey, just call (231) 347-4150.