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Goldman Sachs recently launched a sustainable finance-focused unit that will serve as a centralized resource to guide other divisions of the company regarding knowledge, skills, and input related to environmental, social, and governance (ESG) investing. This unit won’t replace any of Goldman’s current ESG functions or initiatives, but instead will support all groups as they build out their ESG offerings.¹

Impact investing has grown exponentially in recent years, and it does not seem to be slowing down any time soon.  According to Morningstar, ESG funds in the U.S. have attracted $8.4 billion in just the first half of 2019 – already shattering the previous annual record of $5.4 billion in 2018¹.  With this shift in investor behavior, more investment managers are looking to implement impact/ESG strategies to join the movement.  But are they all qualified to be doing so?

One hundred years ago, Icelandic glacier, Okjökull, was 50 meters thick and covered almost 6 square miles¹.  In 2014, it became the first glacier that Iceland has lost to climate change – but environmentalists are making sure that it will not be forgotten.  Members of the Icelandic Hiking Society and researchers from Rice University are installing a monument to memorialize the glacier which will officially be unveiled next month².  The monument will include the plaque below which is “a letter to the future” in an effort to bring awareness to the time sensitive issue of climate change.

Today, many of the world’s largest private and public organizations support a mission to work on solving the world’s most prominent problems. This includes helping to fight poverty, advocating for human rights, and protecting the Earth’s climate.  However, the question arises, are these large organizations are doing enough? Are we neglecting an obvious tool for impact? In a world in which economic and financial systems directly shape environmental and social conditions, are our investments helping to advance our mission or are they undercutting it?¹

The Global Impact Investing Network (GIIN) is a nonprofit organization that aims to spread awareness and increase effectiveness of impact investing worldwide. The GIIN builds critical infrastructure and supports activities, education, and research that helps accelerate the development of a coherent impact investing industry.¹  Every year, GIIN releases their Annual Impact Investor Survey and creates a report based on the results. This year’s report presents findings from 266 of the world’s top impact investors. This was the most respondents GIIN has ever received making this the most comprehensive and conclusive assessment of the impact investing market.

The Community Reinvestment Act (CRA) is a federal law enacted in 1977 to encourage banks and depository institutions to meet the credit needs of the communities in which they do business, including low- and moderate-income (LMI) neighborhoods. On the investment test, CRA credit typically requires investing in an institution’s nearby assessment area(s), but in areas hit by major disasters, CRA credit can be extended.  Last year, after Hurricane Maria, federal banking officials extended CRA credit to financial institutions anywhere in the United States to include hurricane-stricken Puerto Rico.¹  Eligibility for CRA credit in Puerto Rico is intended to increase capital flowing into communities as they try to rebuild.  

In the past year, many major U.S. cities have reported significant progress in housing for their homeless.¹  While homelessness has been on the decline nationally, the trend, unfortunately, does not hold true in several major cities.  In Los Angeles, the number of homeless people increased by 12 percent in LA county and 16 percent in the city last year.  According to the county’s Homeless Service Authority, they helped 21,631 people into permanent housing during 2018, yet economic conditions forced thousands more into homelessness due to economic forces and the interlocking systems of foster care, mental health, criminal justice, and the housing market.²

Summertime is usually associated with warm weather, days at the pool – or the golf course – and vacation.  For some of us at CCM, summer can mean travel, especially to conferences throughout the U.S.  This week kicked off the summer conference season with the US SIF conference in Minneapolis and the Catholic Health Assembly in Dallas.  CCM team members attended and networked with many of the attendees, including innovative influencers in the impact/ESG investing space.

Depending on the location of the conference – or in some cases, the destination of our team member’s travel – we ask our team to learn more about the stories behind our investments by conducting local on-site visits.  We always enjoy seeing first-hand the properties or small businesses that our clients’ investments are financing and how they are helping to create positive impact.  At many of our visits, we are able to meet with residents, employees and supportive staff, as well as receive a tour of the property and neighborhood.

Our team thoroughly enjoys visiting the properties as each visit gives us more insight into our direct impact on the community.  We value the opportunity to meet the people behind each of our investments and share details of our visits with our investors in our Annual Impact Report. 

Image: CCM's President & COO, Alyssa Greenspan visits a property in Minneapolis, MN

This summer we already have three scheduled on-site visits throughout the U.S. – one of them being our 2018 Annual CCM Impact Award Winner, the Hawthorne Eco Village Apartments in Minneapolis, Minnesota. To read more about three of our 2018’s on-site visits, our 2018 Annual Impact Report can be found here.

We look forward to reporting back on our upcoming on-site visits and happy summer!

As a firm that prides itself on a client-centric culture, we always look to align the values-focused nature of our client base with our own practices.  From inclusion in the hiring and promotion process to implementing programs that support work/life balance, the environment and our local communities, we like to practice what we preach.

As such, we recently went “ROWE” - Results Only Work Environment. ROWE is a human resource management strategy co-created by Jody Thompson and Cali Ressler where employees are paid for results (output) rather than the number of hours worked.¹

ROWE keeps it very simple.  It promotes a culture of efficiency by focusing specifically on the work.  This strategy puts the role of working directly into the employees’ hands, empowering their ability to contribute to the greater good, which builds passion and willingness to strive for greatness in the workplace. As a result, an employee’s performance becomes their responsibility, and therefore it promotes a drive to get things done well and expediently.²

Excerpt from book “Why Managing Sucks and How to Fix It” by Cali Ressler and Jody Thompson. Image Source: https://www.gorowe.com/

The more we learned about ROWE, the more we felt it aligned with the rest of the values of our firm.  Although we are still in early stages of implementation, it is off to a promising start.  The program helps to enhance our culture by focusing on efficiency, results, and most importantly, helping our clients.

^1,2 https://cultureiq.com/blog/results-only-work-environment-rowe/

According to Morningstar, over $4.1 billion of assets flowed into U.S. sustainable open-end and exchange-traded funds during the first quarter of 2019 – far surpassing the previous quarterly record inflows of $1.9 billion and on track to exceed 2018’s record-breaking net inflow of approximately $5.5 billion.¹ 

These strengthening inflows continue to prove the trend toward investors looking to do well and do good by investing responsibly and sustainable.  Last year marked the third straight year of record annual net flows to U.S. sustainable funds – despite the rest of the U.S. funds lowest overall asset flow since 2008.²  The first quarter number is proof that more managers and investors are adding sustainable investments to their portfolios and are recognizing environmental, social, and governance (ESG) factors as drivers of value.

Like the rest of the industry, we saw one of our highest inflows at CCM in the first quarter of 2019.  We are not surprised to see these numbers given the increase and demand for impact/ESG investments.  We look forward to seeing this number continue to increase as more and more investors see integrating ESG factors in their investment process and portfolios is critical to investing effectively.

We wish you all a happy Memorial Day weekend.

¹ https://finance.yahoo.com/news/u-esg-funds-gather-record-110000211.html

² https://medium.com/the-esg-advisor/bucking-the-trend-flows-into-esg-funds-set-another-record-in-2018-79c4ddafabb7