[Michelle Levinson, ERG graduate student]

Photo credit: natsihlaneone on Flickr

In the aftermath of another round of divisive elections in the United States (and around the globe) many of us feel distraught about the ability and speed of our political systems to address urgent social challenges. Political change requires organizing and community- slow but necessary processes. Meanwhile, from climate change to income inequality, gentrification and displacement to the gender-wage gap, the challenges we face as a society seem more acute than ever. Votes may have been cast and ballots counted, but that does not mean we must wait another two years for our next chance to shape our world. There are other avenues by which we can continue to make change.

Last week I attended the SRI Conference in Colorado Springs as one of twelve conference scholars, where I got to see how investors perceive of their role in mobilizing finance for energy decarbonization and how they are integrating climate change risk into investment decisions. I met people that have spent decades working to spread awareness and develop the tools to leverage the power of investments to achieve better outcomes for society: individual retirement advisors, endowments for religious orders, the City of Chicago, the Sierra Club Foundation -- Socially Responsible Investing (SRI) is being practiced throughout the investment industry.

The principle is straightforward: when we own a piece of a company, be it via public markets, as debt, or as private equity, we are reducing that company’s cost of capital. In a way, we are betting that a company’s business model, practices, and products will contribute to a better, more prosperous world in the future.

This is what I call voting with your investment dollars, and this vote takes place every month of every year. Directly or indirectly, through our educational institutions, pension and retirement funds, and government treasuries, we are all investors in the global economy. But where do we direct this capital? To whom do we entrust it to be used well, and to build a foundation for our long-term personal and communal well-being? We are stakeholders in the economic system, but many of us do not wield this power with as much purpose as we could. 

I work with many people that strive to make such changes in the energy sector, where the financial factors that hinder the development of sustainable energy are perhaps just as daunting as the scientific, technical, and political barriers. Development in both the fossil-fuel and clean energy sectors is shaped by the market appetite for risks associated with investing in new projects, be they a new coal plant or an array of solar panels, which translate into the cost of capital for that project. These equations only account, however, for the internalized risks and costs that project investors are assuming. These may not be the same as the costs faced by society as a whole; they may not account for externalities. When determining our “required return,” investors have the opportunity to thoughtfully consider which risks they are willing to bear and what future they hope to facilitate with their capital for society at-large.

Why is Socially Responsible Investing hard?

Basic microeconomic principles show us that there are plenty of instances where corporate profit maximization can be misaligned with socially optimal outcomes, especially when those internalized benefits create externalized costs. In these cases, a rational business decision or practice that we are facilitating through our investments might run counter to our own long-term priorities and needs. There are lots of reasons why externalities are often not accounted for, such as measurement challenges, information asymmetry, and principal-agent issues. A classic example of private profit running counter to society’s values is the tobacco industry, where much of the healthcare costs that result from tobacco externalities are borne by society as a whole. This tension motivated famed moves by government agencies, such as CalPERS that manages health and retirement for California employees, to divest from tobacco. Even though this meant foregoing short-term profits, the long-term payoff was clear in the eyes of former California Treasurer Phil Angelides: “What sense does it make for CalPERS to be an investor in companies that cost the state billions of dollars?”

Avoiding negative externalities is a start, but investors are increasingly aiming to finance positive impacts. At this conference, Chicago City Treasurer Kurt Summers shared that his office sees its investment dollars as a way to “make a positive impact on some of the most fundamental challenges facing Chicagoans.” Considering environmental, social, and governance (ESG) factors helps his office promote conservation and sustainability, racial and gender equity, better labor standards and more, all of which improve the quality of life for both the current and future Chicago community. I am especially pleased to see that the Treasurer’s Office is setting concrete goals for itself, such as achieving a carbon neutral investment portfolio by 2020. The city recognizes that as a first-mover it is a catalyst for change and is using this position to test new approaches and move new efforts forward.

Investment plan from a presentation by the Chicago City Treasurer

Under this banner of impact there were a number of innovative approaches to mobilizing finance for energy decarbonization and sustainable development on display at the conference. I chatted with folks from the Iroquois Valley Farmland REIT, who are making investments in organic farmland, and with clean energy project developers from Clean USA Power; both companies are applying financial products in new ways to move finance towards positive impact. I also enjoyed learning more about my favorite startup, Hyphae Partners, which works to bring finance to businesses that practice regenerative agriculture.

By definition, these negative externalities and positive impacts are not captured in traditional financial information. However, the finance industry is awakening to the notion that non-financial information can be material to a company’s economic performance. This is illustrated by the groundbreaking work of Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD), which are setting standards for corporate sustainability disclosures across industries and asset classes. Better sustainability information allows investors to employ more precise strategies when they invest in their values. SRI strategies were developed decades ago and have been continuously refined over the years, evidenced by the fact that this year’s conference was the 29th reunion of these industry practitioners.

SRI 2018 Conference Scholarship Winners

This year’s 29th SRI Conference provided attendees with a rich snapshot of a dynamic, multifaceted industry. This snapshot illuminated the industry’s shift from niche to mainstream, a growth in asset types and sectors represented, and a welcome intentionality around diversity of representation and perspectives. These trends ensure that this conference will continue to be a fascinating window into a the finance industry and bell-weather for its future. To read more about what you can do to align your personal finances with a future you want to live in, check out Nick Depsky’s great Life@ERG posts on Personal Banking and Retirement Accounts + Mutual Funds.

[compiled by Yoshika Crider and Emma Tome, ERG graduate students]

The Energy & Resources Group is by no means a homogenous space -- methodologically, ideologically, disciplinary -- but we are united by our commitment to asking and answering questions that are consequential to more than the academic world alone.

In recent months, politically-motivated events have impacted life at Berkeley, disrupting a place we call home. We asked ERGies how they engage with the world through or outside of the university, why, and to what ends. Here’s a brief glimpse into Life@ERG.


Starting a conversation
 

After the election in November 2016, the ERG space became a setting for many conversations about the difficult politics that affect our community, our work, and our daily lives. One of our department tea times became a brainstorm session for what we could do.

Raising money for causes we care about

“This is a picture of germinating Zinnia seeds in preparation for the sale, a variety called ‘Cut and Come Again.’ Seemed appropriate.”

“Several of us at ERG have been dismayed by the increasing "othering" and xenophobia that's been exacerbated and further legitimized in our current political climate. One of our small acts of resistance and peace in the face of all this was to grow lots of baby plants this spring, with the intention of donating all the profits to organizations working for social or environmental justice. On Mother's Day, we had a plant sale and bake sale in North Oakland, with hundreds of veggie and flower starts and a table full of cookies and brownies and other delicacies. We told everyone to pay whatever they wanted for the plants and baked goods -- honestly, just a day of community gathering to talk about gardening and eat tasty snacks together felt good. So it was a really nice surprise to see that we raised $1290 (!) at the sale, which we decided to donate to the Immigrant Legal Resource Center. For me, the daily ritual of watching seeds germinate and unfurl, watering baby plants, and observing them grow was a good antidote to the the news, a meditation to keep grounded and a reminder to do the best I can, now.” (ERGie Sasha Harris-Lovett)

“This is the group of women in a group called ‘PMS - Post March Salon.’ We've been meeting monthly to discuss resistance activities, and we had our first fundraiser last month for a Democratic nominee in a flippable district in Southern California.” (ERGie Gauthami Penakalapati, pictured far right)

Volunteering our time

“I’m attaching a pic of the volunteer training day of Surf City Project. SCP takes undeserved youth in the surrounding area surfing, and shares values related to respect for the environment, healthy living, and personal growth.”

"I’m thankful for the times we are living in. I have taken a look at myself and how I live, and decided to keep changing. Where I put my money, what food I eat, how I spend my time, what I learn, how I share what I have, how I give to where I’m from and where I live. If Trump and his posse hadn’t won I would still be living in my old-fashioned ways. How would people living 30 years from now wish we had lived? What decisions do they wish we had made? Are we living in the past, or shaping the future? To keep going, one must stay ahead of the times." (ERGie Diego Ponce de Leon)


Attending marches and rallies
 

ERGie Noah Kittner at the Washington, D.C., March for Science

ERGies Peter Worley, Gordon Bauer, Yoshika Crider, Seigi Karasaki, Veronica Jacome, Sophie Major, Samira Siddique, and Emma Tome at the Bay Area Rally for Peace on August 27, 2017.

“After the first Milo Yiannopoulos protests in February, friends from opposite sides of the political spectrum made very different claims about what had happened, each narrative portraying a very different picture of the Berkeley community. Who punched who? How much property damage was really done, and by whom? I had my own thoughts and opinions, but ultimately I couldn't give any more of an objective account, because I hadn't been there, either. I was across the street at an ERG Chinese New Year celebration, and had been thinking of going to the protests after, but then some friends who had been there started coming in looking scared, and I decided to stay away. In late August, in response to yet another far-right rally planned for downtown Berkeley, a broad coalition of groups organized a rally called Berkeley Unites Against Hate. In the week leading up to the event, I got a flurry of  emails from administration at both UC Berkeley and  Lawrence Berkeley National Lab telling me to stay home. But this time, I knew I had to be there, if only so I could say definitively what happened.  As it turned out, the event was beautiful--bouncing music, inspiring speeches, and good friends smiling in the California sun. There were 7,000 peaceful protesters there, and together we made a strong statement about what Berkeley stands for. The headlines that day focused on the four people who were arrested when a fight broke out, but I know what the event was really about: solidarity, community, and resistance.” (ERGie Gordon Bauer)

The Bay Area Rally for Peace, August 27, 2017 (Photo by ERGie Gordon Bauer)

Women's March, January 21, 2017 (photo by ERGie Gauthami Penakalapati)

[Christopher Hyun and Emma Tome] 

This is the email that all current ERGies received on election night.

Equity and Inclusion Rally on Sproul Plaza, UC Berkeley (C. Hyun)

The students initiated an unanticipated ERG Town Hall the day after the presidential election in the department Reading Room. First-year graduate student, Emma Tome, wrote to all of us, eloquently expressing what many of us were thinking as that night progressed:

RE: Can we talk about this?
     Are we studying solutions to climate change and pressing environmental problems under an illusion of political inevitability?
     I'm writing before the returns come in because part of me hopes that the existence of political rationality is not yet completely foreclosed. But is it the assumption of rationality itself that has led us astray?
     Even if the non-climate change denying candidate manages to win, this remains a wake up call.
     I'm sure there are many think pieces underway that will far better explicate the phenomenon we are witnessing now.
     I'm here with many fellow students at Professor Harte's house. And in between checking competing returns on our phones we are puzzling over what our work in the department means.
     I will be the first to admit that I am new and naive to this work, it being my first term back in school. But this is also why I am asking for your collective guidance.
     Could we hold a town hall about the election in the coming weeks? It's not exactly about the election, but also the politics that underlie and motivate, implicitly or explicitly, the questions we might ask and the arguments we make, and dare I say, change we might achieve.
     Can we talk about this?

Immediately, the ERG community responded and organized a meeting with faculty, staff, students, post-docs, and visiting scholars the following day. We realized that we first needed to acknowledge what was going on in our community. We shared our histories, passions, realities, and concerns. We came out of this understanding that there is much to do within and outside of the scope of our individual academic work, within and outside of ERG, on and for both sides of this divided country. Our conversation still continues on day two and beyond via email, during ERG tea breaks, and butcher paper in the kitchen.

On butcher paper (C. Hyun)

The ERG executive committee of faculty, staff, and students has recognized the urgent need to reinforce and clarify ERG’s stance on inclusion and has put this preliminary affirmation on our homepage:

The mission of the Energy and Resources Group is education and research for a sustainable environment and a just society. ERG actively promotes intellectual, racial, ethnic, and gender inclusion; researches the impacts of equality and inequality; and celebrates diversity in our community.

The use of the word “inclusion” in this affirmation is purposive, so as to maintain space for those who are concerned about a sustainable environment and a just society but who may not often be perceived as a part of “diversity.”

This is in addition to the University of California’s official statement on the results of the presidential election by the UC president and chancellors:

In light of yesterday's election results, we know there is understandable consternation and uncertainty among members of the University of California community. The University of California is proud of being a diverse and welcoming place for students, faculty, and staff with a wide range of backgrounds, experiences and perspectives.  Diversity is central to our mission. We remain absolutely committed to supporting all members of our community and adhering to UC’s Principles Against Intolerance. As the Principles make clear, the University “strives to foster an environment in which all are included” and “all are given an equal opportunity to learn and explore.” The University of California will continue to pursue and protect these principles now and in the future, and urges our students, faculty, staff, and all others associated with the University to do so as well.

We are proud of what the University of California stands for and hope to convey that positive message to others in our state and nation.

Students, staff, professors, post-docs, visiting scholars taking the opportunity to meet during ERG tea (C. Hyun)

At ERG, we continue to meet and strategize during breaks and via email and Facebook. We encourage alumni, faculty affiliates, related programs across campus, California, and the US to reach out to us as well. We hope to have a stronger and more detailed statement ready in the near future and to keep the dialogue going.

In the meantime for more information, please contact an ERGie near you.



Note: The views expressed here belong solely to the author of each entry and are not representative of the position of the Energy and Resources Group, UC Berkeley.