Donovan Ervin understands well the benefits of sustainable investing. He worked with Radicle Impact, an impact venture fund focused on social justice, environmental resilience, and economic sustainability. He also worked with Beneficial State Bank, a bank mandated to produce meaningful social justice and environmental benefits at the same time that it is financially sustainable. However, Donovan, like many investors, struggles with doing his own sustainable investing. He continues to ask himself two questions: 1) Does this investment address the intersectionality of finance? 2) Is this investment doing enough?” In this blog post, we discuss two frameworks which can be applied to holistic sustainable investing: intersectionality and net contribution.
Bank account musings
Donovan and I discussed the challenge of figuring out which bank to use for our checking and savings accounts. Donovan has banked with the same bank since childhood. He is unhappy with the bank but struggles to find a bank that meets his intersectional needs. Local banks or community development finance institutions (CDFIs) offer support to the local community. There are banks that have taken a climate-related stance and are not investing in fossil fuel projects. But are there banks that address community, health, and environmental issues? And are they banks that are local to him in Texas?
Intersectionality is a framework used to describe how race, class, gender, and other individual social markers “intersect” with one another and overlap. The environmental justice movement has long heralded the fact that people who live, work and play in America’s most polluted environments are commonly people of color and the poor. Therefore the environmental movement also needs to address systemic racism, harmful health impacts, and economic disparity.
There has been recent progress in increasing the number of womxn on corporate boards. However, just focusing on gender is insufficient. Diversity cannot be achieved unless it looks at gender, race, class, sexual orientation, and other social determinants. Focusing just on diversity is also insufficient. If a company does have a diverse workforce but its products harm communities of color or the natural environment, a true intersectionality lens has not been applied.
Good vs Bad
Donovan raised the point that, in reality, no company is 100% good or 100% bad. It is therefore challenging to make decisions about supporting “good companies”. Are there banks/funds/companies which are “good enough” or “too bad”? Are there companies which are, although imperfect, are moving in a positive direction?
The Heron Foundation has created a framework that helps to look at companies from a “net contribution” perspective. “Net contribution” is the aggregate effect of an enterprise on the world. The question is if, on net, the world is better off with or without any given contribution based on its net contribution to people, place, and planet. Companies can be looked at in the way that they consume and generate different types of capital. These types of capital are:
- Human capital (e.g. job creation)
- Natural capital (e.g. greenhouse gas emissions),
- Civic capital (e.g. interaction with local communities)
- Financial capital (e.g. financial governance structure).
The concept of net contribution is designed to be flexible, translatable, and customizable. Investors can weigh different types of capital based on their values.
Where Do We Go From Here
This blog post introduced the frameworks of intersectionality and net contribution. The former asks us to look at how characteristics overlap. The latter asks to look at companies’ impact as a whole. These two frameworks are not prescriptions. They do, however, help provide sustainable investors with tools to use on their sustainable investing journey.
Holistic Sustainable Investing Additional Resources
- Intersectional Environmentalism: Why Environmental Justice Is Essential For A Sustainable Future
- What’s Intersectionality? Let These Scholars Explain the Theory and Its History
- What Is a Net Contribution Lens?
- Donovan’s blog. Note that Donovan is currently looking to support companies and organizations that align with his aspirations.