Thursday, August 14, 2014

Introducing the SEA fund

Over $1 trillion is invested in 720 socially responsible (SRI) Funds. That is up from $200 Billion in 260 SRI funds just 7 years ago.

 After 15 years of working in the financial services industry and four years of working with humanitarian and environmental NGOs, last year it struck me that sustainable and responsible investing is not a gimmick or a fad, but a potentially lucrative way to invest.  I realized that running a company is an expanded version of how we run our personal lives, and that when we live a sustainable lifestyle, it becomes more abundant. 

 So I began the research and I started to find qualitative and quantitative research and meta-analytical experience fortifying this theory. Which led me to the SRI investment industry and I was happy to find a trillion dollars invested in companies with socially and environmentally responsible management.  But as I started to examine the holdings within these funds, the screening process seemed to fall apart, and I was finding companies that were clearly producing unhealthy products, or complicit in ravishing the environment.  One of the most prominent SRI funds goes as far as write the following in their research disclosure...."we may determine that a security is eligible for investment even if a corporation’s profile reflects a mixture of positive and negative social and environmental characteristics.”

 I have whittled down the the hundreds of funds to only two that seem to follow a strong SRI screening process.  Highwater Global, which is an in-house fund run by Baldwin Brothers with $37 million under management and Portfolio 21, which is an open-end mutual fund with $500 million under management. So why so few? Consensus is that it comes down to distribution.  An SRI fund with strict screening will not fall into any existing benchmark or asset allocation, so there is nothing to compare. Performance may trail any given benchmark in the short term.  But as both Highwater and Portfolio 21 have shown that over the long term, they start to run closer to the broad market, if not out-perform. Fund administration costs and high fund employee compensation expectations are most likely another obstacle. 

 But there is clearly a market for an SRI fund that seeks to invest in companies that do not compromise social and environmental awareness when making strategic decisions… companies that strategize for the long term.  From high profile executives like the leaders of Facebook, Google, Whole Foods, Virgin, Patagonia, Tesla et al, to college graduates who feel strongly about the importance of SRI practices, encompass a broad, wealthy and influential market who are passionate about investing in their future.

Our mission is to place a spotlight on the paradigm of human and environmental interdependence. To provide an environment where people can participate in the mission while also enjoying its benefits. How we use our money is an expression of the energy we wish to extend to the world and a direct correlation to what we get back. An investment fund is an active vehicle, which can lead and teach, connect like-minded people, provide objectivity and improve the lives of investors, and simultaneously offer opportunity to under served and under resourced segments of the community.

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