Conscientious Investors: The Role of Socially Responsible Investment in Sustainable Agriculture
November 7, 2011 | Jon Christian
Socially responsible investment is the idea that investments are social as well as financial. What role can that longstanding movement play in the development of sustainable agriculture?
“Within sustainable agriculture investments we have definitely focused on local enterprises where we understand the food system and can get to know the management,” said Eric Becker, chief investment officer for avowedly socially responsible investment firm Clean Yield, in an email message. “We also are looking at how the business can have an impact on the local or regional food system as a whole. We want to invest in businesses that are going to make a difference.”
Clean Yield works with individuals and families with high net worth to invest in entities committed to sustainability and a positive social impact. The company, which was founded in 1984, currently manages over $170 million of investments.
“I think that as wealth continues to transfer generationally to younger folks, that is often a time when people start to look into the stocks their parents or grandparents own and say ‘this is not making the world a better place,’” Becker said.
Increasingly, socially responsible investment has become tied up with sustainable agriculture. Clean Yield invests in High Mowing Organic Seeds, based in Wolcott, Vermont, which is a USDA certified organic seed seller committed to sustainable food systems and agriculture on a variety of scales. They also work with The Carrot Project, a nonprofit organization which creates loan programs and spreads information on financial management among small to mid-sized sustainable farms and related industries.
Social investors work to recognize the social implications of investment–a practice the company characterizes as taking account “of both financial and social bottom lines.”
Socially responsible investment traces its history as far back as 18th century Quaker and Methodist proscriptions against business practices that caused social harm or contributed to unethical industries, including the slave trade. Modern protest movements have mainstreamed boycotts, and it has become acceptable – though by no means universal – for organizations to respond to public pressure by avoiding investment in states with notably unjust laws, such as South Africa under apartheid.
Currently, Becker sees potential to raise awareness about the connections between sustainability, food issues and responsible investment in the Occupy Wall Street demonstrations, as well as at similar movements around the nation and world. The world of socially responsible investment, he says, has spent years pushing for sustainability, transparency and accountability from inside the system – from supporting green technologies to investing in local agriculture.
“I think that what you’re seeing with Occupy Wall Street, and related movements, is about getting people’s money out of the big financial institutions, and moving those assets into local, responsible institutions,” Becker said. “This puts that money, those assets, where they’re going to make an immediate difference.”
Research, Becker says, has upheld the financial viability of the model. A 2003 meta-analysis by the University of Auckland Business School found a positive association between corporate social performance and financial success.
“We don’t view there as being a trade off between returns and socially responsible investments,” he said. “If you look at our long-term investments, we have outperformed industry benchmarks.”
Becker has worked with Clean Yield since 2009, and in the field of socially responsible investment since 1993. He was attracted by the notion of investments that are both financially and socially profitable, but stayed for the idea that investors can guide organizations toward greater stewardship and responsibility.
“I was drawn to the field out of personal interest in responsible investing,” he said. “I discovered my meager investments in Fidelity were invested in things I didn’t like.”
He describes an evolution during his tenure in socially responsible investment from a proscriptive strategy of avoiding investment in organizations with negative social practices to a proactive model of seeking investments in organizations with sustainable and socially positive business models.
This transition, he says, has been exemplified by the rise of the Slow Money Alliance, a network of investors, entrepreneurs and farmers who stand for sustainable principles in the business world–a dedication that Becker, a founding member of Slow Money, characterizes as “really focusing on channeling capital into sustainable food systems.”
“We must learn to invest as if food, farms and fertility mattered,” reads one of the group’s principles. “We must connect investors to the places where they live, creating vital relationships and new sources of capital for small food enterprises.”
In its focus on sustainable agriculture, Clean Yield has prioritized smaller-scale innovators and startups rather than established entities, working with the idea that positive changes to the food system are likely to bubble up from idealistic young ventures.
“[W]e are more focused on the small-to-mid scale enterprises that are emerging in the sustainable agriculture space rather than focusing on trying to change the big players,” Becker wrote in an email message.
“[Socially responsible investment] is gaining share, and gaining momentum,” Becker said. “The desire has increased from our clients to more directly channel their capital into companies which build a sustainable economy for the future.”