Socially Responsible Investment (SRI) is a hot topic, made hotter by the vision of an Obama-inspired era of service coupled with the reverberating shock waves of devastating financial crisis. In case there was any doubt, the recent panel “Different Faces of Socially Responsible Investment” (presented by New York Women Social Entrepreneurs held at Columbia University) attracted a highly engaged, standing-room only crowd, even on an icy cold, January, NYC weeknight. Two thoughts linger from our discussion:
- there’s no substitute for integrity, and
- the best question was the one not asked.
Let’s start with the unasked question.
Funny thing is, while I loved participating as one of the “faces of SRI” on the panel, at times I wondered if I was in the right place, or if the panel had the right name. Why? Because our start-up, the Fast Forward Fund, isn't an SRI fund; FFF is a youth Social Investment venture. What’s the difference? SRI is a financial investment strategy; “social investment” is a philanthropic strategy. So, while I jumped in and enjoyed the provocative discussion swirling around the question of what is a socially responsible investment, here’s what we didn’t ask: what is a responsible social investment?
The distinctions between socially responsible investments and social investments may blur or overlap, especially as new investment models emerge and merge. But for now, I think the question of what makes a financial investment socially responsible is fundamentally different from what makes philanthropy responsible. It’s the latter that grabs me. How do you know if a social investment is responsible?
I suggest looking at three things: the soundness of social investment vehicle itself, compatibility with social investor profile, and (perhaps, most importantly and elusively) integrity.
First of all, know where your social investment goes. We have more capacity than ever today to assess the operational, financial, and social soundness of social investments. Online tools like Guidestar, Charity Navigator, and other hubs of nonprofit management information, offer good, though limited (and potentially contorted) snap-shots of organizations in the social sector. Responsible social investments consider available information from primary and secondary sources indicating how effectively the operation is run, how impact is measured, how finances are managed, how an organization is developed and how it is responsive to its mission and stakeholders.
Secondly, know who you are, or want to be, as a social investor. I say “social investor” rather than “philanthropist” here because I want to emphasize that the way we give, the way we direct capital to social causes, is a real investment with real returns and real impact. As social investors, we need to choose social investments reflecting our own investor profiles. Just as financial portfolios reflect investor profile in terms of capacity, style, risk threshold, financial goals, etc., so should social investment portfolios. Responsible social investments match investor interests, capacity, style, commitment, engagement, and philanthropic goals.
Finally, the heart of responsible social investment comes down to integrity. I raised this issue as the panel discussed governance and how we ensure that we’re doing the best work we can do as social entrepreneurs. While we talked about the challenges and importance transparency, leadership development, internal performance measurements, benchmarks and other governance metrics, I suggested there was another piece that may be even harder to address: we really need to talk about integrity. While perhaps immeasurable in quantifiable terms, integrity in governance is indispensable to doing your best work in social investment. Most of us recognize its quality when it is present, and notice when it is absent. Integrity is more than workplace ethics, though that’s essential, too. It’s about bringing a sense of wholeness to our work, and deriving a sense of respect, creativity, growth and fulfillment. The integrity of social investment establishes its reputation, enhancing its ability to recruit talent, attract investors, forge collaborative partnerships, and optimize social impact. Thinking about what is responsible social investment brings me back to my other key take-away: there’s just no substitute for integrity.
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ReplyDeleteI strongly agree with the notion here that integrity may well be the key to bringing about a socially responsible investment, but that also brings about a larger question: Are we talking about investments, or the individuals to lead these investments?
ReplyDeleteBroadly, do these individuals we clearly treasure and need, with their integrity related traits, need to even be orienting their lives around making sound investments to be what is most useful to the world?
In line with the Obama ethos of personal responsibility, we're seeing an unprecedented meritocratic calling of all individuals across the U.S, and perhaps even the globe, to bring their best foot forward in the name of public service. What people qualm with in this statement is the question of "what for?" Indeed, it is hard to convince individuals without a sense of personal responsibility, who in their confusion so vividly demonstrate their own lack of integrity that is the opposite of what the government and social philanthropists now equally seek, that there can be something intrinsically, personally valuable in the name of public service that may not be tangible or demonstratable to a public so eager for "external rewards".
What are these "external rewards"? Claiming that it is required to maintain top talent, banks have spent over $18 billion dollars to give bonuses to their high-ranking officials, as if to say "we are afraid that if we do not pay them, those who have made us what we are will jump ship because their only loyalty is to money."
This is the world that we see dying today, and with the Obama administration and the communication methods brought forth by the technologies that continue to expand the internet into every business, home, and hand, we will see change that will rest on the shoulders of those who are motivated by what is within, not what is given to them in exchange.
I agree that integrity is key--however it is a pretty amorphous qualification. While essential to create a reputation, it is not all that is required to attract investors; the broader question is how does one build a reputation?
ReplyDeleteIn addition, there has been mention several times of "real returns." Does this mean monetary or social? Assuming it means social returns how should an investor expect to measure such a thing?
-Rachel Fagiano
While one’s own integrity is essential to responsible social investment, I believe that it should also be present in the people you work with and the ventures you invest in. In order to be a good judge of it, one has to have a necessary set of skills. While we can judge whether or not a person has integrity, it is harder to spot it in companies, organizations and other initiatives. As stated in the post, responsible social investment stems from “knowing who you are and want to be as a social investor.” Determining where your interest and expertise lie is the first step in making the right decisions about where you want give to. For example, limiting your investments (whether they are your time or financial resources) in a field you know about like health or climate change would put you in a position to understand the workings of a particular company to a greater extent. This would form the premise on which to evaluate the transparency, impact and operations of an organization. Only after you feel that the venture you’re investing in meets your standards, should you go ahead with it. The reputation of a place is vital to the success and growth of the organization or operation and a new social investor should always keep it in mind as well. Maintaining and improving it should also be a priority.
ReplyDeleteIntegrity:
ReplyDelete1. adherence to moral and ethical principles; soundness of moral character; honesty.
2. the state of being whole, entire, or undiminished (Dictionary.com)
I think that there is something to the second definition of integrity given above. It's an honesty, yes, but it's also a wholeness. Integrity in social investment is perhaps comparable to good character in humanity. Both traits describe a beyond-self awareness that inherently makes for consistent good judgment and moral operations, all leading to a solid reputation.
That is not to say that integrity is selfless, as it does produce satisfaction at its deepest. But it is to say that it takes a responsible person to seek fulfillment in social investment, to approach honest causes with support and humility, and to learn from philanthropic successes rather than bathe in them.
What do we try to achieve with investments of this nature, financial or philanthropic? Presumably, the goal is to effect a change of sorts, to impact society in a positive way. As you said, the specific goal can vary with your own investor profile, but the overarching goal is, fundamentally, very similar. As an intern at the Carnegie Council, I’ve been pondering their mission (indeed, the latter half of their organization’s name): for Ethics in International Affairs. Ethics is a powerful word, and a friend of integrity, I believe. At base, responsible social investments seek to be ethical and create ethicality in the world they seek to affect. Perhaps ethics are one’s own integrity, reflected onto the world around us? You mentioned workplace ethics in passing, but I think there’s more to that thought. There is a strong aspect of the personal in any social entrepreneurship venture, and that is what demands integrity and ethics.
ReplyDeleteI couldn't agree more with the idea that integrity is vital for responsible social investment, yet I think it is important to highlight that there are more equally important qualities you need. Integrity may help you adhere to moral and ethical principles, but by itself, having integrity will never get anything done. The challenge here is to take ones integrity and learn how to apply it to the world of investment. One must learn to uphold their own moral and ethical standards, while still fitting some sort of "investment profile" that will be financially viable and attractive to investors.
ReplyDelete-Thomas Holum
In my opinion, integrity is an essential factor that sets apart “social investment” from just “investment”. By definition, social investors are highly motivated individuals determined to make a change in the world: the returns to their investments benefit society and not them directly and exclusively. Social investors must be honest in their endeavor in order to be able to dedicate themselves to something often eluding quantifiable and immediate outcomes.
ReplyDeleteMoreover, integrity matters from an outside perspective as well. Social investments rely on financial support from donors who require transparency and accountability – not perfectly synonymous, but overlapping concepts. Perhaps this is where responsibility, as in responsible social investment, is tangent to integrity.
Philanthropy is the altruistic concern for human welfare and advancement. How could you be philanthropic and not righteous then?
As the comments have illustrated, the definition, utility, and significance of integrity in social investment is not static, and so its potential positive effect on seeking and supporting enterprises may manifest in different ways.
ReplyDeleteHow I define it is not necessarily having an ethical foundation from which you extend your business, investment, or social arm. Rather, it is, as Diana described a sense of wholeness derived from the work you’re contributing to (this goes back to the definition being amorphous). For example, that means taking seriously what Paul Hawken in his book Blessed Unrest calls the “comprehensive outcome” principle, which means approaching and engaging with a problem or enterprise with the totality of effects thereof in mind. Obviously, this could be utilized for various reasons: in a strictly revenue-as-bottom-line enterprise, one could spend time and energy considering all possible angles and outcomes for the purpose of eliciting the best financial return. For a socially-minded enterprise however, one could appreciate that principle to make sure their metrics for measuring their return (social change) are solid.
That in my mind is an example of the usefulness of integrity in social investments. Of course, if that intent is apparent and espoused, then it could indeed aid in establishing social investments’ “reputation, enhancing its ability to recruit talent, attract investors, forge collaborative partnerships, and optimize social impact.”
I might add however, that the way one communicates (not markets) that integrity is often as important to establishing partnerships and increasing social returns, as having the integrity in the first place. Much like charisma, integrity is magnetic, and thus elicits the desire to be involved and be a part of whatever it is that's being discussed.
These days I often wonder is Social Entrepreneurship a way to save Capitalism? And the next question always is, even if would be, is that acceptable?
ReplyDeleteI cannot stop thinking how easy is to sell if you know how to pack it. So, if I want to be a good seller I have to know how to pack my product to be interesting and wanted on a market. If that means to call it Social Investment or Socially Responsible Investment, it is not a problem. Because, my goal would be to make money.
I agree that integrity is important. But, how often we know what is behind a good story, behind a great package? As you said, integrity is not something that we can measure.
Even in that case, I would still argue importance of social investment in front of capitalistic point of view. It is hard to argue that every real capitalist, when he sees the power of Entrepreneurship, will not try investing in that way. My favorite example for this moment is free trade coffee in every coffee shop. It sounds good but how much do we know about it? For me, better still does not means good.
Furthermore, when it comes integrity, I also always wonder what is better, to look the outcome, or the intention. But both very easily can have disastrous consequences.
Even though it is hard to really make the difference between social investment and socially responsible investment,it is important to understand what a responsible means in this case. SRI, as everyone knows, aims to maximize both financial return and social good. In this case, if we seek for maximizing social good, then we need to think in more depth about the question "How can the social good be achieved?" In some cases it becomes hard to reach this goal when both the private and the public sector are involved. Here, I see the link between them - responsibility. First, in my opinion, the private sector, or the philanthropist, should be responsible in terms of where finances are actually going and how well they will be allocated and used. Second, as was mentioned in the blog, the private investor should know his/her role in the whole mechanism and this role should be well understood in order to bring successful results towards the social public good. Last, but not least, I fully agree with the great importance that integrity has in SRI scheme. Integrity is not only the strongest link between those who donate and those who receive. I believe that all who invest and who try to be on the philanthropic side should apply integrity in their actions and ideas. That would be the direction where social investment be really responsible for society and for the public good. Here comes my question, can we achieve SRI without integrity? Can the public and the private sector be successfully linked with no integrity?
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteImola Unger
ReplyDelete"First of all, know where your social investment goes."
To me this not only entails tracking financial soundness. It is rather a measure of integrity. It is rephrasing the "know who you are" tenet and placing it within the "person" or entity of the investment context. This is one factor that should not be found out only by using services like Guidestar. Knowing exactly where the investment goes and how it will be used should precede investing in the first place; tracking should only reaffirm that. Knowing where it goes gives you a sense of integrity, the motor of the investment; being able to verify that afterward is the proof of responsibility.
I would also like to question the meaning of the following 2 phrases: "the way we direct capital to social causes, is a real investment with real returns and real impact" and "As social investors, we need to choose social investments reflecting our own investor profiles."
I fail to see the purpose of emphasizing that social investment is real investment. This alone does not differentiate it from socially responsible investment but rather unites them under the umbrella of all kinds of entrepreneurship. I would also like to clarify what is meant by "real returns" and "real impact." The former, I assume, is financial returns. "Real impact," however, is an elusive term.
As for the second statement, this seems to be somewhat paradoxical to me in terms of "what came first." Isn't it through your investments that you build yourself an investor profile? In other words, the two mutually define and shape each other.
To extend on the comments regarding integrity, my question stems from the “final product” of the given social investment: how often do such investments reflect the original vision of the innovator, and how often or not is that idea compensated/directed by outside forces such as finances, degree of resources, etc. To reach full “integrity,” is one required to try to maximize that original vision toward a social cause? Or, if the intent is there, but the outcome doesn’t necessarily reflect the goal, is integrity itself compensated? How is intent and integrity measure in this way?
ReplyDelete-Katharine Alexander
In a nutshell, here we can apply the term “Necessity is the mother of invention.” Objectives such as profit, growth, and social objectives we can say are interrelated. Even though, one may say that, profit and social objective may not be necessarily compatible-yet, to be successful in this fast changing environment we need clearly defined goals. For instance, regarding assisting groups in the community or even protecting environment. In all of this, where does the competitive edge takes place? What makes one investment more attractive over another one? Again, some factors that might provide such an advantage are –specifically integrity, quality, reliability, service. In a toy industry, for example, to have a competitive advantage you need both integrity/novelty and innovation. In sum and bluntly speaking, it appears to me that these forms of competitive advantage create value of the investment, which in turn creates value for society/customer per se.
ReplyDelete-Saranda Stublla
This reminds me of a Thomas Friedman article, "Why How Matters". The personal aspect of investment has been lost, and now it is strictly about financial return. It seems that both socially responsible investments and social investments are a genuine movement to reconnect to the individual. The business community is finally acknowledging (and perhaps accepting the responsibilty) that it has the power to focus on more than just profit, and is actually capable of leaving things better off than they were found.
ReplyDelete-Erin Kammerer