As fund managers continue to invest assets in companies whose values run opposed to their investors, individuals will seek out new ways to invest their resources.
Philanthropists are growing wise to the fact that large asset managers like BlackRock, Vanguard, and State Street—the three largest fund managers in the US—use their assets under management to push an agenda that often directly conflicts with their client’s vision for society. BlackRock, Vanguard, and State Street are among the largest shareholders of most companies in the Fortune 500, and they use their immense size and influence to weigh in on political issues, pressure legislatures, and push their progressive worldview.
Many have noticed over the past few years that companies like Disney, Coca-Cola, Nike, and many others assume a voice of moral authority in our culture and use their power to push their sexual, social justice, and environmentalist agendas. Regardless of where you may fall on these issues, nearly everyone can agree that the way these hypocritical companies fail to practice what they preach is nauseating to say the least.
Here are just 3 examples:
- As we approach the end of June, can you spot the difference between the Mercedes Benz USA and Mercedes Benz Middle East’s logos? Does Mercedes actually believe in promoting rights for different groups of people, or just moral posturing in accord with the elites of whatever country they are marketing to?
- Last week, Lululemon launched a new line of moisture-wicking hijabs while potentially using cotton from the Xinjiang region, where the Chinese government is using forced labor from the Muslim-minority Uyghurs and conducting a genocide through forced-sterilization. How righteous and progressive of Lululemon to pander to some Muslims while turning a blind eye to human-rights violations that affect others.
- Last year, Coca-Cola offered a course on “Confronting Racism” to its employees and encouraged them to “be less white.” You might be wondering “How?” One slide offered this tip: “be less oppressive.” This is coming from a sugary-drink company that has helped perpetrate a diabetes epidemic in the United States that is disproportionately affecting the black community—certainly that’s not oppressive, right?
I could go on, but you get the point—and so do philanthropists. Why would a conservative or libertarian philanthropist—or anyone who expects consistency and integrity from those purporting to be moral authorities—allow a fund manager like BlackRock to manage their funds (and proxy-vote their shares)? Clearly they will do so in a way that is not in keeping with the vision they have for their philanthropy?
Philanthropists are finding new ways to deploy capital that challenge the typical philanthropic models. Last Wednesday, Doug MacGray—president of Stonecrop Advisors—moderated a panel with David Simms of Talanton and Erik Olson of Dignity Coconuts about impact investing that could pose a possible solution to this problem.
Talanton invests money from DAFs or other investment accounts into values-aligned, growth-stage businesses in the developing world. The name “Talanton” is an homage to the parable of the talents where Jesus instructs his followers to use their time and resources in a wise and responsible manner rather than wasting them by burying them in the ground.
Talanton is seeking to live up to this standard by investing in companies like Enda, the first ever Kenyan-owned and -operated running-shoe company. After performing a due-diligence assessment, Talanton recognized that investing in Enda would create high-quality jobs in a region where those jobs would have the most impact by creating opportunity, pulling people out of poverty, and delivering a quality product to consumers around the world—all while delivering a decent return for investors.
Dignity Coconuts is a company that was founded in an area of the Philippines that had a 70% unemployment rate and was plagued by poverty, addiction, and crime. Many in the community were vulnerable to modern-day forms of slavery, with no prospect for a better future. Rather than moving in and giving solutions to a community that didn’t want them, Dignity listened to the community and decided to set up a coconut processing plant that would benefit the people that lived there by having employee stock-ownership, profit-sharing, and local leadership.
Dignity has developed a method that uses 100% of a coconut so that nothing goes to waste, and Dignity’s products are superior to many mass-produced alternatives because they don’t kill off the nutrients in their coconut oil by superheating it. While developing this method, Dignity has created more than 500 jobs—200+ in the processing plant and 300+ jobs for coconut farmers.
Companies like Talanton and Dignity are making an impact in underdeveloped and impoverished communities around the world. The leadership of these two companies follow the approach that in order to truly alleviate poverty and suffering in a long-term way, “we need to make a crucial shift from the giver-receiver mentality to a truly dignified approach to walk alongside people as they work themselves out of poverty.” This approach is laid out in greater detail in a whitepaper that was published by Business as a Mission (BAM) and the Lausanne Movement.
Many philanthropists keep their money in a foundation or DAF while they give to causes that they find worthy. For many philanthropists, this money is invested by a fund manager to ensure that it makes a decent return on investment. However, the companies that those fund managers invest in may directly conflict with the worldview of the philanthropist, or the fund manager may even vote their shares in a way that is not in keeping with their values.
As long as companies like BlackRock and Vanguard abuse the trust that people place in them by using their dollars to promote values they aren’t aligned with or actively harm oppressed communities around the world (while alleging to do just the opposite), philanthropists will find alternative ways to invest in companies like Talanton and Dignity that are transforming lives in impoverished communities while providing decent returns—socially and financially.
1 thought on “Impact investing for individuals and DAFs”