3 Impact Changes Millennials Can Make With Their Capital

bunsundesigns May 5, 2016

Twenty- and thirty-somethings of today face a different kind of global threat than those coming of age in the mid- to late 20th century did: unchecked climate change.

Those who analyze the past and try to predict the future are starting to see that it is not escalating nuclear arms development but the continued production of fossil fuels that poses an existential threat to Earth’s inhabitants. Luckily, as a generation, Millennials have unprecedented access to resources and the potential to create real change. Some Millennials stand to inherit enormous amounts of capital over the next several decades (some estimate between $25–$30 trillion), re-emphasizing the question Barack Obama posed just a few years ago: how do we divest from what harms and invest in what helps?

There is no silver bullet or moon shot to address the challenges of today, but there are some changes this next generation can make with their capital to transition the current emphasis on extractive systems into a more regenerative paradigm. If you or your home were on fire, you might just consider these basic steps:

STOP new investment in companies and funds that are known to be associated with high levels of social and environmental risk. You can start by working with your financial advisor to freeze new investments in companies whose primary business models are rooted in the extraction, distribution, and processing of fossil fuels. An easy first move, albeit just one step, is freezing any new positions in the Carbon Underground 200; those identified as the top 200 publicly traded fossil fuel companies with the largest identified carbon reserves.

DROP existing positions you may have in companies and funds that rely primarily on resource extraction to generate outsized profit. This is a point in the divest-invest process where it is essential to do your research and find out where your capital is currently invested; how; and why. If your financial advisor does not understand climate or social risks, and cannot articulate a strategy for investing your capital beyond “generating optimum returns,” it is important to open up a dialogue and express your strong preference for finding returns that transcend quarterly balance sheets. Creating a system for what you will and will not hold is a process. It is important to beware of the classic “that’s not possible” or “you will lose money” responses from an intermediary. Unfortunately, the current system has not incentivized managers to be particularly innovative in balancing the need for returns with impact. If an advisor or intermediary cannot meet your demand for both impact and returns, it may be time to consider whether they are truly serving your needs and best interests, or are functioning as a bottleneck.

ROLL out an investment strategy that is aligned with your values and desired returns. Make sure to work with the right advisors to find investment opportunities that are diversified and rest on strong processes that consider environmental and social risks and opportunities. Outside of your investment portfolio, this also includes using your purchasing power as a consumer to support products and services that prioritize health and profit for people and the planet. Finding companies that align with B Corp principles is a great first step, as is doing your best to invest in products and services that are created locally and regionally in an effort to support the flow of capital back into the community.

Kathryn Hoffman is the co-founder of Resco, LLC, and member of the international Divest-Invest steering committee. She holds more than a decade of experience building enterprises and projects focused on climate innovation, including her most recent role as a project director with Etho Capital, an investment advisory firm focused on delivering optimized sustainability products. In 2011, she spearheaded the California Divest-Invest Initiatives, which led the University of California system, CalPERS, and CalSTRS public funds to begin shifting from fossil fuels towards more sustainable investments.

Corie Radka is the co-managing partner of Resco, LLC, and a development strategist with Etho Capital, where she focuses on scaling investment opportunities to address pressing environmental and social challenges. Corie received awards for her research on climate and local food systems from the University of California, Santa Barbara, and taught a course on community development at University of California, Berkeley.

Impact Investing / Stakeholder Capitalism
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