Sustainability Gives Work and Investing Purpose

"Never has there been a more exciting time for all of us to explore this great next frontier where boundaries between work and purpose are merging into one, where doing good really is good for business." - Sir Richard Branson in his book, Screw Business As Usual.

Sir Richard Branson has always been a highly quotable CEO, and the quote at the top of this page is among my favorites. It highlights the transition that we are all experiencing: Purpose (i.e. doing good) is now a critical part of business success. Customers demand it. Employees are attracted to it. And investors are increasingly embracing it.

Generational change is a big factor in this phenomenon. Deloitte’s Millennial Survey 2014 found that millennials (who are just starting to turn 35 this year) demand that the companies from whom they buy are contributing to an "improvement in social and environmental responsibility." About 51% percent of them said they would pay extra for sustainable products—a rate more than four times that of baby boomers.

Businesses With Purpose

My own experience highlights this generational shift. More than 25 years ago, while a university student, I took a class in "entrepreneurship." This course didn't even begin to cover the skills entrepreneurs ultimately need to be successful and never even alluded to a greater purpose to running a business. In retrospect, it was a purely academic exercise and a lost opportunity. 

Contrast that with today's generation of entrepreneurs. Not only do they have a support network in their colleges, but also in organizations such as Village Capital, the Green Chamber of the South's Greenhouse Accelerator, Georgia Tech's Ideas 2 Serve or Points of Light's Civic Accelerator—organizations whose sole purpose is to enhance the entrepreneur's chance of success. The common denominator among these organizations is purpose! (For related reading, see: The 10 Fastest Growing Green Startups in 2016.)

So, here we are, at a place Richard Branson termed the "next great frontier in business...where doing good really is good for business." Yes, it's happening. As of today, more than 2,000 companies in 35 countries, including our firm, have passed a series of "triple-bottom-line" tests to become what are known as "Certified B Corporations." Companies such as Patagonia, Seventh Generation and New Belgium Brewing are among the best known B Corps, and each would say that their focus on purpose has helped them to distinguish themselves in the marketplace. 

Investing with Purpose

Investing with purpose has also grown in understanding and acceptance among mainstream investors—especially among millenials and large institutions. With more than 10% of professionally managed money incorporating social factors, it's clearly past the fad stage. The success of organizations like Kiva show that investors are hungry for real and measurable impact, even to the point of lending their money with no expectation of a financial return. 

Investors have more sustainable investment options than ever before. Accredited investors have always had access to interesting and potentially lucrative partnerships, but increasingly, these partnerships focus on renewable energy (i.e. Clean Energy Advisors), organic farmland conversion (Farmland LP) or even brownfield remediation (Cherokee Fund). Attracted to both strong cash flows and sizable tax benefits, clean energy has become one of the investments of choice for family offices. Their long time horizons may allow them to participate in such illiquid investments, when perhaps other groups may not. 

Burgeoning crowd-funding regulations may mean that soon these investments will no longer be out of reach of the average investor. Surely there are serious issues of suitability and appropriateness that must be addressed for each individual investor, but the democratization of long-term investments could be one of the more important trends of our day, and for the development of alternative funding sources for social impact projects. (For related reading from this author, see: Sustainable Investing Still Makes Sense.)

Impact Investing in Bonds and Stocks

Of course, one need not go to the esoteric or illiquid vehicles to invest with purpose. Even the municipal bond market can be segmented to deliver social impact. By focusing on segments such as education, health, clean water and green space, each investor can tailor a portfolio to their own social aims. Green bonds (usually taxable, but recently issued by states) are increasingly being issued to fund environmentally-oriented projects delivering similar credit quality and income characteristics as other mainstream issues. (For related reading, see: Green Bonds: Fixed Returns to Fix the Planet.)

Neither should run-of the-mill stock market investments be overlooked as a method of making an impact. Recent research by New Amsterdam Partners found that sustainable investing in the equity markets has delivered competitive performance, especially in weaker market environments, when the lowest ranked "sustainability losers" fall on especially hard times. This makes some logical sense since sustainability leaders are among the best managed and most profitable companies. But a rising tide lifts all boats, even the leaky ones. To quote Warren Buffett (and mix some metaphors), "Only when the tide goes out do you discover who's been swimming naked." 

If society is truly at the intersection of work and purpose, we could do worse things than following the advice of the Bransons and Buffetts of the world, emulating the business practices of Patagonia, or learning from the examples of Village Capital or Points of Light. We have plenty of examples of success, with more being made every day. 

(For more from this author, see: How to Make Sense of the Trump Stock Market Rally.)