We asked Michael to tell us more about responsible investing in 2013, the "heart rating," and Natural Investments' next green step...
Green America: What does your business do and what are your most popular products?
Michael Kramer: Natural Investments is a registered investment advisor that has been exclusively focused on sustainable, responsible, and impact (SRI) investments since 1985. With 12 offices in nine states nationwide, the firm helps hundreds of individuals, families, businesses, non-profit organizations, and foundations to align their values with their investments.
We've been a member of Green America since 2000, and our firm is known for its “deep green” approach with investors who want to be proactive in putting their capital to use towards enterprises and projects that facilitate social justice and environmental sustainability. Natural Investments is also known for its NI Social Rating (the heart rating), which since 1992 has rated domestic socially responsible mutual funds on the breadth and depth of environmental, social, and governance criteria used to select their investments; the heart rating is featured on our Web site and is published in each issue of Green Money Journal and LOHAS Journal.
What makes Natural Investments green?
Michael: Natural Investments solely offers portfolios of sustainable and responsible investments, including cutting-edge private equity and venture capital opportunities for qualified investors. Natural Investments is a Founding B Corp and in 2012 was given a “Best for the World” award for overall positive impact in the small business category, meaning its audited sustainability assessment score ranked in the top 10% of all B Corps in the nation.
Natural Investments is an advisor-owned LLC that functions like an autonomous collective. With no physical headquarters and all operational systems in the cloud, the company is lean in its virtual form and therefore has a minimal environmental impact. Many advisors work from home, reducing both their carbon footprint and the costs of operations. Advisers own their client relationships and contribute resources to cover compliance and other shared services; there is no back office with employees.
Nevertheless, the company and its contractors do purchase from local and green businesses in its respective communities, and several of the offices operate on renewable energy. In the social realm, many decisions are made by the consensus of the entire team. Everyone serves on the investment committee, for example, contributing ideas that shape the design of the firm’s model portfolios. The line between the three advisor-owners and other advisors is intentionally soft so as to elicit input and engage everyone in contributing to the firm’s ongoing evolution.
|The Natural Investments team.
What can you tell our readers about the emerging fossil-fuel divestment movement?
Michael: The fossil fuel divestment movement is the apartheid of this generation. Climate change impacts the entire planet and is a direct threat to our survival, so the passion with which advocates are fighting for change seems appropriate.
Divestment is an important stand to take, and while some feel it doesn’t bring about change, the same was once said about divestment from companies doing business in South Africa. Divestment sends a powerful message to companies, other shareholders, communities, and government that the continued procurement and distribution of fossil fuels is harmful in a potentially irreversible way.
While some divestment opponents prefer to engage fossil fuel companies directly, most such efforts focus on transparency and reporting on potential risks rather than demand that these companies move into the renewable energy field. Shareholder advocacy can and does work in general, but unless such efforts change the core business of fossil fuel companies, some investors prefer to not own these stocks and instead invest in renewable energy and other green sectors of the economy that can have a positive transformative impact on our lives.
With this particular issue, engaging companies directly is only part of the solution: government regulation is needed, such as placing a price on carbon and taxing it, in order to incent companies to reduce their carbon emissions. The more people who clamor for divestment, the more likely that elected officials will listen, so it is important to be part of the solution to the climate crisis in whatever way moves you.
What were you doing before you started your green business?
Michael: Natural Investments was founded on the principle of “natural investing”, which co-founders Hal and Jack Brill wrote about in their seminal book on the field, Investing With Your Values: Making Money and Making a Difference (Bloomberg, 1999). Since they suggested that it is completely natural for people to align their values with their financial choices, it made sense to coin the term natural investing and form a company with this name. The three current owners – Hal Brill, myself, and Christopher Peck – all came to this field with a background in sustainability, community development, and environmental education, including the realms of holistic management, permaculture, and eco-village development. Interest in creating a more regenerative economic system led to interest in community development loan funds, financial planning, and investment management as a way to direct capital towards more just and wise endeavors that benefit people and the environment.
What have been the biggest challenges to social and environmental responsibility?
Michael: Since there aren’t universal standards for social and environmental responsibility, it is a continual challenge to examine the underlying practices and policies of companies holding themselves out to be sustainable, responsible, and ethical. We notice that there are indeed many shades of green, particularly in the investment arena, which is one reason we started the heart rating – to distinguish those funds that weed out alcohol, tobacco, and firearms from those that take a comprehensive look at each company’s efforts in all sorts of environmental, social, and governance areas.
We also see how difficult it is to create industry consensus about what sorts of screens to apply or corporate engagements to make. The big pharmaceutical and financial institution sectors, for example, are still heavily favored in the SRI industry, despite some very clear evidence of unethical behaviors with serious economic consequences. And while we have launched a Fossil Fuel Free portfolio and have been advocating for this type of investing in response to investor interest, there isn’t consensus in the field that it’s the best approach. So we continually see a wide range of values and standards of their application in the sustainable investment field, and this likely matches the variety of investor sentiments on these issues.
|The Natural Investments strategy.
What advice would you give to other green entrepreneurs just starting out?
Michael: Our advice is to be true to yourself and the lifestyle you want to have. While we’re all activists, we also intentionally balance this meaningful work with a lifestyle that is healthy and low-stress. It is important for us to walk our talk and live a life that is personally sustainable. No cause, no matter how significant, is worth the sort of self-sacrifice that wears people out or causes them to feel irritable and overworked. This isn’t work to us – we’re creating a high quality of life, not only for us, but for our clients and hopefully for the stakeholders involved in the entities with which we invest.
What's the most hopeful sign you've seen recently from the green economy?
Michael: For those of us who’ve been involved in the green economy movement in this country for decades, it is heartening to see its mainstreaming effect, particularly in the organic food, biodegradable/recycled products, renewable energy, and green building arenas. Consciousness does appear to be moving in a greener direction – the proliferation of electric cars is an encouraging sign, for example. As pioneers in the sustainable investment field, our experience and reputation as experts in the space has certainly been great for our business. It is humbling to move from the margins of society into a position of leadership, and we draw inspiration from this.
What's the next green step you're working on right now?
Michael: We are currently authoring our third book, The Resilient Investor, due out later this year, because we feel that it’s important to give voice to the diverse perspectives on where the world is headed and how one can invest suitably based on one’s worldview. With risk and volatility at all-time highs both at the economic and ecosystem level, we feel that sustainability is only part of the story. For while we may face breakthroughs in consciousness, technology, and resource management that allows us to survive and thrive, we may also face a scenario that isn’t pleasant, and we think it’s prudent for investors to be self-reflective and allocate their assets (financial and other) to be in alignment with their view of the future. We think this new way of looking at investment will change our business, as we advise investors to diversify in new ways and hopefully change the regulatory framework for the financial profession to transcend the systemic risk of global corporate and government securities.
What green product (besides your own!) can you not live without?
Michael: The work that Equal Exchange does across so many continents to create fair wage small farming jobs using sustainable methods to produce high quality organic specialty foods is well worth our support.