There are several ways in which banks, asset managers, and individual investors can be catalysts for change in the businesses they invest in. Here are three things that they can do to be advocates for positive change:
1. Get Educated
It's imperative to find out where your hard-earned money goes. In fact, there was a surprising news story that surfaced in late 2016 where members of Kiwisaver discovered their retirement savings were funding weapons of war. The investor backlash from this led to over $109m being divested and instigated other changes such as more ethical investment options becoming available. Considering the population of New Zealand, this was a great David vs Goliath story.
Unfortunately, this is just one example of how retirement savings are being invested. The financial risks involved with climate change and Stranded Assets also poses a threat. Entire industries are being affected which will impact the bottom line of your retirement savings.
So, the first step in leading positive change in your life is to get educated. Find out what your retirement savings is invested in. What are the macro-trends affecting markets? Is it aligned with your values? What other options are available?
2. Get Involved
As an investor, you own a share in a company. That share gives you the right to vote. This vote can be used to help influence improvements in corporate behaviour through the process of shareholder resolutions
One famous example of shareholders influencing change is when UK group,
Friends of the Earth used a shareholder resolution as part of its campaign against Balfour Beatty’s plans to build a controversial dam in Turkey. Protest groups warned that the dam would make 78,000 local people homeless and drown dozens of towns and villages, including the world historic site of Hasankeyf. FoE bought £30,000 worth of shares in order to submit a resolution on the dam contract at Balfour Beatty’s AGM.
Some months later, the company pulled out of the project, announcing that ‘after a thorough evaluation of the commercial, environmental and social issues, it is not in the best interests of our stakeholders to pursue the project further’.
On another level, Laurence Fink, CEO of the investment firm BlackRock, which manages over $6trillion in assets, recently sent a public to business leaders that their companies need to do more than make profits —if they want to receive the support of BlackRock. Regardless of its immediate effect, his public call-to-action seems likely to trigger conversations in boardrooms about the impact of business on society.
There are various ways you can get involved, from community petitions to shareholder resolutions to personal letters. Change starts with you.
3. Join Forces
As a conscious consumer, your daily actions can help make a difference to your family and community. As an investor, however, you can make a greater impact by pooling your resources together with other conscious investors to invest in companies which show proactive leadership in sustainability. Ultimately, it’s the actions of corporations which have the biggest impact on the environment and communities.
This is what it means to be socially responsible. As more investors practice this, businesses will be more encouraged to engage in sustainable practices. In fact, due to growing demand, there are a wide array of ethical or ESG funds becoming available. Do your research and find one that suits you.
Awareness and Involvement are the keys to achieving change. Start with yourself to take the first step. Remember the butterfly effect? Small changes made now can lead to enormous changes in the future.
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