It seems every few years there has been yet another label to describe the screened approach:  values driven; values based; corporate social responsibility; responsible; socially responsive; socially conscious; environmental, social, corporate governance (ESG); triple bottom line; sustainable; green; and impact investing.  Although these terms can be defined differently, in practice they are often used interchangeably, which can certainly cause confusion.

The most common terms used today are SRI, ESG, sustainable, and impact. SRI is often associated with one’s personal values.  ESG is more often associated with financial performance derived from ESG screening factors.  Sustainable investing often emphasizes the environmental screen; however, it is also widely used interchangeably with SRI and ESG.  Impact investing is the latest term and I associate it with community investing, social venture capital, and microfinance.  Again, in practice, impact investing is sometimes used interchangeably with SRI and ESG.

The only way to really define these terms is to look closely at the underlying investments and match the investment choice with your specific screened objectives.  For example, many mutual funds that fall under the category of SRI, ESG, or sustainable, invest in oil companies, which some people may not consider a sustainable approach.

Carsten is Portfolio 21 Investments' founder and Chairman. He has more than 25 years of experience in socially and environmentally responsible investing.

According to Jeffrey Hollender, co-founder and Board Chair of ASBC and co-founder of household product company Seventh Generation, “The White House summit was a unique opportunity for the American Sustainable Business Council to collaborate with the administration to develop the innovative strategies that will lead to a healthy, just and sustainable economy.”

ASBC believes that only through “responsible and comprehensive change” can we as a society “continue to enjoy the benefits of market capitalism.”  For change to occur, ASBC boosts that five core principles must be upheld.

1.  Market Economy:  ASBC believes that a market-based business system must remain; however, it needs to be adjusted to account for externalities, including human health and environmental costs.

2.  Broad Prosperity:  Education is a fundamental right.  Also, business development should anchor living wage jobs.

3.  Sustainability:  Managing our economy to meet the needs of the current generation without impairing the ability of future generations to meet their needs.

4.  Sensible Measures and Regulations:  Regulations have the ability to limit the power of harmful companies and technologies and by doing so they promote fair competition, innovation, and change.

5.  Democratic Control:  According to ASBC a “sustainable market should be structured and managed to be fair, transparent, well regulated, and fully accountable to all participants.”

I applaud ASBC for bringing together the business community, thought leaders, and politicians.  Although I do not believe that adherence to these principles alone will make for a sustainable global economy, I am encouraged by the high level of discussion.  It is my hope that the summit brings attention to the fact that our current market-based economy is flawed and in need of new paradigm thinking.  Only when the market embraces the business opportunities that environmental stewardship and equitable economy can have, will change occur.

Beth is a Senior Research Analyst with Portfolio 21 Investments.  She has 8 years of environmental and social investing research experience. 

This is how finance sees the world:

This is how my 3-year old daughter would see the same equation:

1 + 1 = 2

In the wake of the recent JP Morgan debacle it is even clearer that, in too many ways, finance has gotten unnecessarily complicated. From unexplainable derivatives to densely packed academic papers, we continue to try to hedge the un-hedgeable and explain the unexplainable.

Perversely, the complications have served the industry well over time. Many investors seem convinced (so far) that investing is a process so intricate that it is best left to those who trumpet their services most opaquely. And loudly.

That is not to say investing does not take skill. But it is too often forgotten that investing is sometimes as much art as science. And that risk, no matter how dressed up, is still risk. Modeling is fine, as long as it leaves room for human nature.

There is plenty of room to add value as financial professionals. Being a good steward of people’s hard earned money is a valuable service. But a confusing maze of unnecessary middlemen, combined with manufactured complexity of financial instruments, destroys rather than adds value.

During the CFA Conference, the President and CEO of the CFA Institute, John Rogers, issued a call to action urging all members to take the necessary steps to restore trust in the financial services industry. It was a timely message. Focusing on transparency and actual client needs are effective remedies for an ailing industry. And, best of all, they are not complex in the least.

Jim is Portfolio 21's Chief Investment Officer.  He has more than 20 years of experience in socially and environmentally responsible investing. 

Aside from the diversification benefits, frontier markets offer substantial opportunities.  The International Monetary Fund expects significantly greater economic growth in emerging and frontier economies than in developed economies.  Furthermore, this expected growth comes without the enormous debt loads and fiscal troubles that are plaguing most developed economies.  Standards of living and health are on the rise in many frontier economies, and will drive economic development.  The lower the per capita income, the greater the potential is for growth.    Demographics in frontier economics are also favorable relative to developed economies.  Developing countries tend to have a greater population of young people and production will surely shift to where the hardworking people live.   This will likely result in a rising middle class with appetites for food, energy, financial services, and electronics.

Investing in frontier markets can be challenging.  Stocks in frontier markets are generally driven by local dynamics as opposed to foreign institutional investors, resulting in lower trading volumes.  Additionally, there are more inefficiencies in frontier markets, although at times inefficiencies can translate into profitable investment opportunities.  Frontier market stocks are cheaper than developed markets.  The price-to-earnings ratio for the MSCI Frontier Emerging Markets Index is currently 12.75, while this ratio for the MSCI World Equity is around 14.75. The dividend yield is also higher in frontier markets.  However, companies in frontier economics may lack good governance practices, making careful company research a must.  In summary, where there are potential opportunities for enhanced return, there are often increased risks to navigate.

Tony is Senior Portfolio Manager with Portfolio 21 Investments.  He has 15 years of experience in the field of investment management.

The corporation came to us from the monarchies of medieval times.  Monarchs were the conscience of the corporation and could revoke a corporate charter. The oldest existing corporation is Stora Enso, a Scandinavian basic materials company, started in 1288. Corporations were a catalyst to the expansion of European colonialism from the 1400s to 1700s. At one time the Hudson’s Bay Company controlled 15% of the North American landmass.

In the 18^th century, the authority to charter corporations was passed from monarchies to legislative and administrative bodies. However, a corporate charter could still be revoked if the corporation failed to meet the needs of the sovereign.

The United States inherited the concept of a corporation in 1776. The authors of our Constitution feared the power of corporations. Corporate law was designed to protect the public interest rather than the interests of shareholders. At that time corporate charters were closely regulated by the states and were seen as the external conscience of corporations. Beginning in the 19^th century, the states’ ability to revoke charters was limited, which granted corporations more power. Limited liability for officers, directors, and shareholders was adopted. The business of corporations became to maximize wealth for shareholders through unlimited growth. As we continually see today, this objective often comes at the expense of employees, community, and the environment.

Today there are new choices in corporate governance from benefit corporations to an L3C which is a hybrid for profit/non profit. To learn more about these innovative new corporate structures, see “The Rise of the Charitable For-Profit Entity” by Evangeline Gomez in the January issue of Forbes.

Carsten is Portfolio 21 Investments' founder and Chief Executive Officer. He has more than 25 years of experience in socially and environmentally responsible investing.