By Duncan Kinney
Funny how a receiving a steady income can set off an existential crisis.
Like many in my graduating class, after I finished journalism school I bounced around trying to find a reliable work. I freelanced for the local outpost of the Sun media chain, stage handed at rock shows with the local IATSE chapter, moved sandbags and light stands around on film and television sets, assisted professional photographers, blogged and wrote for a couple of different organizations and picked up the odd photography client.
It was fun, but it wasn’t very stable, and I was happy to move onto something where I knew I’d reliably make rent. With this new-found measure of stability in my life it was time to do the responsible thing and start thinking about the future.
I contacted a very reasonable financial adviser who put my money into a reasonable mutual fund run by reasonable people. But after three months of that I started to think about my investments in a more deliberate way. I quickly realized that I hadn’t really about what I was doing, and that I was investing more out of a sense of obligation and duty – to adulthood and to my future – than genuine interest. What exactly was I getting myself into? Something felt amiss about the whole investing experience, but I couldn’t quite identify it.
In the search for an answer, I sat down with my (slightly befuddled) financial adviser and talked to him about my concerns. This was probably unfair. I had sat down with him three months before and he had run me through the usual spiel I imagine he goes through with all of his new clients.
“This is a TFSA, this is an RRSP,” the speech goes. “They are like umbrellas for your money.”
I wasn’t a moron, but as far as a financial education goes I didn’t have a lot of experience. But he was a patient man, and he led me down the path that I’m sure he’s led so many others down before, the one that emphasized prudence, safety, and smart risk taking.
The problem, when it came to the standard program, was that I wasn’t much interested in those core investing values. I wanted to invest ethically.
Unfortunately I didn’t even really know what meant at the time and I was unable to communicate that to my helpful adviser. I wanted to invest ethically because I thought it would make me more money, but because I was extremely uncomfortable with the idea that I was essentially loaning my money to Fortune 500 companies. My retirement was predicated on the Ponzi scheme of infinite growth in a finite system. The fundamental building blocks of our monetary system, from compound interest and mortgages to stocks and bonds, are based on the idea that everything will continue to expand just as it has in the past. That makes me deeply uncomfortable and it freaked me out that I didn’t have anybody to really talk to about it.
Still, helpful adviser man did have some potential options.
His first attempt was Acuity’s Clean Environment Mutual Fund. This had a couple of problems. It invested in companies I wasn’t entirely sure I wanted my money to be supporting, despite their environmental credentials. Plus, when you dig a little deeper (warning, PDF) you discover that the combination of average returns and high fund management fees nearly guarantees that your investment will under perform.
Meritas was another idea that he suggested, and it was a more intriguing choice. They are a fund family that that incorporates Mennonite values. They’ve also been around for a while and have a fair bit of money entrusted to them. They deploy it very carefully, using a strict screening process which involves not investing in companies that are involved in areas that Mennonites don’t approve of. These include: military and weapons contracting, nuclear power, alcohol and tobacco manufacturing, pornography and gambling. If you’re ever looking for investors for your nuclear powered alcohol, tobacco, weapons, casino and pornography factory you’re going to have to pass the Mennonites by.
In all seriousness, though, I did find this choice more compelling. They are fairly active shareholder advocates and they also direct up to 2 per cent of the assets in each of their funds towards community development initiatives. They even acknowledge in their web copy that it could affect returns.
Admirable, to be sure, but there’s one small problem. I’m not a Mennonite, nor do I aspire to become one, and considering the fact that I’m a fairly faithful user of at least a couple of things on their no-no list investing in their funds would make me a hypocrite, something that doesn’t exactly jive with the essence of ethical investing. Plus, after thinking about the structure and function of mutual funds, I just had to give the whole class of investment a pass.
Then I read Mark Anielski’s book “The Economics of Happiness.” We’ve featured him before at Unlimited and his work on happiness measurement and genuine progress indicators is really interesting stuff. Anielski’s basic premise is that despite constant economic growth our entire adult lives, North Americans’ happiness levels continue to decline.
The problem that no one wants to talk about is growth. We are refusing to plan for the future, or at least one in which goods, services and other expressions of human activity expand ad infinitum. But at this point and time I hadn’t put those thoughts into words yet, and I was still scrambling to try and find the product and the right fit for my investment dollars.
In his book, Anielski mentions the ethical investing company Upstream 21 and the fact that he was an adviser to Ethical Funds of Canada, so I was curious to get his take on the issue.
It wasn’t too hard to arrange a meeting. Anielski lives six blocks from me and he knows my landlord. When I paid him a visit on a crisp fall Tuesday morning he had CBC Radio One on in the background of his rumpled, comfortable, lived in feeling house. His wife left to take the dog for a walk and we sat down at his kitchen table hashed this ethical investing stuff out as best as we could.
A major problem that Anielski sees with ethical investing is that accounting systems simply aren’t able to give you enough information about the environmental performance of any corporation in any one place. It’s nigh impossible to get geospatially specific environmental performance data from companies you’re interested in invested in. That level of disclosure just isn’t required at this point.
Isn’t it a little odd that we haven’t crafted an accounting system that adequately measures the environment around us? Despite the idea of natural capital being around for quite awhile we haven’t started examining it and recording it in any meaningful way. It was Lord Kelvin way back when who said, “If you can not measure it, you can not improve it.” Business schools and management training science have, in the years since, transformed – perverted, really – this into the idea that “If you can not measure it, you can not manage it.” When we refuse to measure and recognize the value of the local landscape what do you think we do to it?
One of the major problems that Anielski sees is that any kind of direct investment in a small company or business is impossible given our limited funds in comparison to institutional investors or high-net-worth individuals. Last year Anielski sat down for a meeting with an interesting and ethical company looking to raise money for a new building. Their minimum ask was $50,000.
“The fact that there is such a high bar for entry seems ridiculous,” Anielski says. “I’d be willing to throw in $1000 to $2000 into something I believe in but this ridiculously high threshold precludes small investors.”
Without massive scale on your side, you’re nobody. With a system geared towards the centralization of capital, it’s almost impossible to invest locally. Of course it was the so-called sophisticated investors who led us down the path to ruin in 2008.
Investing ethically in this kind of climate seems pretty impossible, given my definition of ethics and the small amount of funds available to me. Anielski and I didn’t figure anything out that day but it was a stimulating conversation. Unfortunately, I was still lost. When I briefly shared my troubles with finding the right place to put my money with my mother, she mentioned my uncle Martin. He was invested in some kind of Mennonite thing, she said.
While Martin and I aren’t the closest we look eerily alike. My grandmother will still call me Martin to this day. And funnily enough I’ve unconsciously started following in his footsteps. I’ve started to bicycle more, drive less and I’ve become more environmentally aware.
I decided to call him out of the blue. After getting chewed out for referring to him as “Martin” instead of “Uncle Martin”, he told me that his retirement planning had been lackadaisical. Some former neighbors had sold him some mutual funds but he wasn’t really paying too much attention to them until 2008 before the financial meltdown.
“I kept looking at my RRSPs and I wasn’t making any money. Maybe 3 or 4 percent, and I’m thinking, ‘what’s this about?’ We’re in the midst of the greatest boom in my lifetime.”
Looking at his meager returns, he cast about for something better. He eventually found the Canadian Conference of Mennonite Brethren Churches Deposit Fund. They lend money to Mennonite churches to build buildings and the returns come from the interest paid on the mortgages. The Mennonites have basically become their own bank. It’s not an amazing return (2.80% as of November 1st) but it’s guaranteed and it supports something that Martin wants.
And while it wasn’t any particular ethical issue that caused him to switch to this fund, he’s a lot happier having his money invested the way it is now. “I am a member of the Mennonite church,” he said. “Why shouldn’t Mennonites benefit from other Mennonites borrowing money?”
That said, he is realistic, and most of his expected retirement funds remain tied up in the BC government pension fund. “I don’t know where my money is in those big funds that I’m hoping to support me when I’m in my retirement. You could also discuss the theological, ethical or environmental issues behind throwing up a 5,000 square foot concrete structure. That’s another big debate. I’m not sure it’s that useful but I haven’t really thought through where my money goes.”
It was comforting to hear that he really didn’t know either. When I brought up the idea that our system is based on the problematic assumption of infinite growth in a finite system, he seemed to agree. “You’re chipping away at the foundations of what we believe is the most important thing in the world,” he told me. “The sense that growth could stop or at least be stable and exist in a steady state that hasn’t really been accepted by humans as a potential realistic outcome in life.”
“We overshot our carrying capacity as far as solar input a long time ago,” he continued. “I think in general, everyone thinks they can’t get off the train so why bother. It’s pointless. If there is a billion and a half Chinese doing whatever they want opening a new coal plant every week how can you help by getting a hybrid car?”
I liked my uncle even more after the conversation. Unfortunately, it still didn’t help me find what I was looking for, a place where I could invest my money ethically and even locally. As such, while I admire the fact that he’s at peace with how he’s invested his money, his idea wasn’t going to work for me either. If there’s one thing I did come out of this process with, it’s a renewed sense of respect for the Mennonites. If nothing else, they’re bloody smart with their money.
So, if it wasn’t investing in:
- The Acuity Environmental Fund
- Meritas
- Upstream 21
- Ethical Funds of Canada
- Canadian Conference of Mennonite Brethren Churches Deposit Fund
What would it be? Ultimately, I went with boring and safe, a truly Canadian decision. I switched to a local credit union and started rolling over a savings account into different kinds of GICs. The credit union being the biggest decider for me. I get a vote in how they operate and there is some marginal profit sharing. I chose GICs because I don’t have to think about them and they’re super secure. It’s probably a terrible investment strategy, but I’m happy with myself and that is ultimately what matters.
I’m more content than I was at the beginning, but I still have major concerns. How are you investing your money? Are you bringing ethics into the conversation? If so, how?
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The same thing happened to me. I met with my financial advisor at my banking institution to discuss ethical investing and I basically got a blank stare. As far as they’re concerned, it’s not feasible, you won’t make much in returns, it’s unstable… I don’t understand. I have money now in a Sustainable Climate Class mutual fund, how can it not be making returns? Energy is turning towards sustainable energy, it’s the latest ‘fad’ in our society to be making good ‘eco’ choices. But there is so much that not only do I not understand, but that I have no control over. It’s very frustrating and I do not want to be investing even my small amounts of money into the large amoral corporations. I constantly struggle with the mentality that “we can’t get off the train so why bother? It’s pointless.” as stated above. Thank you for putting these concerns into words, you have very clearly articulated exactly the dilemma I am going through as well.