Align Your Money with Your Values

Moving your money out of the fossil fuel industry is relatively straightforward. But how do you put your money into things that align with your values and help finance a more sustainable planet and just economy?

Like most worthwhile things in life, the best options require some work and deep thinking. Fortunately, new options are emerging that weren’t even possible just a few years ago. The field of authentic deep impact investing and finance is still evolving. As more people question what their money is financing and demand more fair and sustainable options, we’re redefining what’s possible.

Level 1: Spending, saving, and giving it away

If you’re living paycheck to paycheck, the biggest impact you can have with your money is through your spending. Consider the environmental and social impact of your purchases. But look beyond the green packaging and self-serving claims and labels. Do some research into the companies that make the products you buy most often. Is the company transparent about the way it treats the workers, producers, and the environment with all its products? Or has it just bought a few “eco-flavored” brands as part of its greenwashing? Give priority to worker and farmer co-operatives.

What about the store itself? Consider joining a consumer co-operative that owes its loyalty to its members rather than outside shareholders.

If you’re fortunate and thrifty, you’ll have some money to save. Do you want to give it to a global bank that sees customers as profit centers for its shareholders? A better alternative is to join a credit union. Credit unions are a form of member co-operatives that exist to serve their customers and their communities.

Level 2: Saving for change

If you are able to set aside some savings for a year or more, there are a growing number of places that will pool your deposits with others and make loans to companies and organizations that are putting the planet and people ahead of profits.

These options are generally open to anyone in the United States (and often elsewhere), and tend to have low minimums.

Equal Exchange CD at Eastern Bank – 3-year Certificate of Deposit (CD) with a minimum of $500. While the CD is FDIC insured with the bank and receives the same interest rate as a conventional CD, the depositor agrees to allow Equal Exchange to use up to 90% of the CD as collateral for line of credit at a below-market rate. If Equal Exchange were to default on the loan, the CD would be at risk. Equal Exchange uses the funds primarily to buy coffee, chocolate, and tea at Fair Trade prices and terms from our farmer co-operative partners around the world.

Cooperative Fund of New England (CFNE) Loan Pool – 1-year loan/investment with a minimum of $1,000. The funds are used by CFNE to finance co-operative businesses and non-profits throughout New England. They made the first loan to Equal Exchange nearly 30 years ago! Depositors can select an interest rate between 0-2%.

RSF Social Finance – Pooled loan/investment fund, with a minimum of $1,000 and a term of 90 days (renewable). RSF uses the pooled funds to finance over 90 non-profits and mission-oriented for-profit businesses. Variable rate of return, determined through a unique dialogue between lenders and borrowers.

Level 3: Investing for change through public markets

If you have some retirement funds, either through an Individual Retirement Account (IRA) or through an employer stock fund (401k, etc.), you probably have a number of funds available through your program. Among these offerings will likely be several funds that specialize in “Socially Responsible Investing” (SRI), also called “Environment, Social, Governance” (ESG) investing. These funds typically engage in “negative screening” – filtering out companies that engage in certain practices and industries (environmental, social, etc.). Some engage in “positive screening” – choosing companies that are pursuing practices approved by the fund. The types of screens, as well as the fees and fund performance, vary greatly. As with your shopping, don’t just go by the labels and marketing, but actually do a little digging into which companies the funds invest in. There are many self-styled SRI funds out there. Some of the best known ones include Domini, Calvert, Pax, and Parnassus. Almost all funds are limited to publicly-traded stocks and bonds.

Level 4: Direct Investing

Although SRI and ESG funds are a good step towards shifting your money away from unethical companies, they are still limited in their impact in terms of changing behavior in the business world or allowing you to align your investments with your values. Because the companies are almost all publicly-traded, the money you invest is for the most part buying shares that the company has sold a long time ago. And while in theory your stock gives you a vote and the ability to influence the company, modern markets and rigged voting greatly reduce your impact and voice – and often eliminate it altogether in favor of investors who demand that the company put profits before any other social, environmental, or other factor.

There are many securities rules and restrictions that make it difficult for the average person to invest directly in a private company. But changes in regulations and some innovations from co-operatives and mission-driven companies are helping to change that. Although investing directly in companies with practices you’d like to support has the potential to have the greatest impact, it also requires the most time and effort.

Privately-held companies, including co-operatives, can raise capital from outside investors and lenders, however they must do so in accordance with state and federal securities and regulations. These rules are primarily designed to protect the public against fraud. However, they make it difficult and expensive for most small companies to raise funds directly from the public, especially from individuals who do not have a high net worth (officially called “accredited investors”). When these companies do offer stock, Some companies, including co-operatives like Equal Exchange, have been able to sell stock and take loans from their customers and supporters, without putting their democratic, environmental, or social goals at risk.

Private Placements

If the company is offering stock to both wealthy and non-wealthy investors across the country, they are likely doing it through a Private Placement, which means that they are not allowed to publicly advertise the stock offering. You may be able to participate in the offerings if you have an existing relationship with the company, or you are working through a financial advisor who specializes in Impact Investing (not many advisors do this, especially if they are working for a large investment firm).

These types of stocks vary greatly, but often come with different risks than publicly-traded stocks. A good rule of thumb is to never invest more than you are able to afford to lose. Read all the offering documents closely, and if there are parts you don’t understand, ask a financial professional for guidance before investing.

The terms of the stocks will vary in each instance, but often have no voting rights (so investors can’t force a company to drop its sustainable practices to boost profits), the stock prices tend to be fixed (eliminating speculation), and pay either a fixed or variable dividend. Companies that have used this type of stock offering include Equal Exchange and Namaste Solar.

Direct Public Offerings

An alternative method that is growing in popularity is called a Direct Public Offering. These offerings can be for the same kind of preferred and restricted stock that are sold in Private Placements, but with several differences in the way that they are sold:

The offering documents are examined by state regulators before the offering is allowed to proceed.

The offerings are limited to one or two states (or more in rare circumstances).

The company can advertise the offering publicly.

In most cases, anyone can purchase the stock.

Some worker-owned co-operatives that have successfully raised capital through this method include Real Pickles, CERO, the Dorchester Community Food Co-op, and The Merc Co-op.

Unlike donation-based or pre-purchase “crowdfunding” platforms like Indigogo and Kickstarter, Direct Public Offerings offer you a chance to invest directly in the company, including the chance to earn a financial return if the business is successful. Unlike publicly-traded stocks, the funds go directly to the company. You become one of their financial backers and are directly supporting their social and environmental mission.

There is no central clearing house or website that lists all the preferred stock offerings that are available, so you’ll have to join some groups or do some research on your own, including just contacting the companies you admire to ask if you can invest with them.

Some groups that are trying to help promote these kinds of financial partnerships include Slow Money (which has local chapters as well as national gatherings), and BALLE. A law firm that has helped many companies conduct Direct Public Offerings has an online portal for their clients, Cutting Edge X.

Other Resources:

Copyright: Daniel Fireside, Equal Exchange 2015

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