Investing with a consciousness of what your money is doing pushes us to ask a few questions.
- Where does money most commonly get invested? What is the structure of the relationship between invested money and other things I care about?
- If I don’t like the conventional investing options, what are my alternatives?
- If I believe the economy and large corporations are a big part of the problem, how can I be an agent of change with my investments?
- If you’re a person of moral conviction, or a person of faith, a final question might take shape. How do I do faith-consistent or ethical investing?
I’ll offer my quick take on each and some links.
1. Analyzing Structure: Capital Supremacy or Reciprocity?
Most money gets invested in the stock market (also called public equities) and often divided into large cap, mid-cap, and small cap (referring to the size of the companies), and sometimes between domestic (U.S.) and international. All of these firms structure their relationship with the investment capital (your dollars, if you choose to invest) as one where everything else in the business is subordinate to capital’s interests.
The goal for the business is to help you money make more money in the short and long term.
As you probably know (and most financial advisor / investor folks like to point out), the stock market has done pretty well over the past 70-90 years, consistently returning a long-term average of 6.5% annual real returns, which, when compounded over 30-40 years adds up pretty nice.
While the structure of this system works out pretty nice for investors — you may have noticed our system, capitalism, also has some problems. And that’s probably why you’re here.
There is good news.
We can structure capital’s relationship differently.
We can summarize the way most money gets invested as “Capital Supremacy“.
The alternatives are:
- Capital Reciprocity (sharing governance and ownership power between capital and non-capital stakeholders)
- Capital Solidarity (capital takes a subordinate position to other stakeholder’s interest and only thrives if employees or communities, or another stakeholder that has more power is thriving first).
Basically, when a business is structured with multiple stakeholders in ownership and/or governance, reciprocity between capital’s interests and the interests of the environment (or future generations), and workers (or communities) becomes possible. If there is employee ownership and employee
If a business has an employee ownership structure or trust structure where there is accountability to future generations or producers or customers and where there is democratic governance and the control that investors have is structurally subordinated to other stakeholders, then we think of this as Capital Solidarity.
More of my posts that discuss this further are under this “Cooperative Capital” tag here.
Okay, that was the theoretical stuff.
Now let’s get practical.
2. What are my Alternatives?
The How. Usually, most people’s money is tied up in 401k, 403b, Traditional IRAs or Roth IRAs. If that’s you, then most likely, your options in those tax-advantaged structures are significantly limited to Capital Supremacy options from the conventional investing folks (Vanguard, Fidelity, ETrade… ). The good news is you can roll over any of these funds into something called a Self-directed IRA (NerdWallet definition, Investopedia guide, Next Egg / SELC ).
Self-directed IRAs allow you to direct your tax advantaged employer or retirement money to alternative and direct investments that the traditional investing platforms don’t yet have.
The What. There is a wide and growing variety of alternatives (impact investments) from ESG rated funds to “no harm” to “Sustainable” to “Regenerative” investing. The question is which are the right ones for you? To help you discern, I think it’s helpful to see the options laid out on a spectrum.
2-min video overview of this first spectrum.
You might even want to consider the color of your current portfolio — and your hoped for portfolio:
Or here’s a different spectrum that integrates your charitable giving / philanthropy — to help you see that you have a whole spectrum of capital that you can deploy, now that you’ve begun focusing on more than just the financial and are considering how much impact you might want to have.
Starting with ESG, you can find your stock market / capital supremacy / current investment options and how they compare, by using this “Invest Your Values” tool from As You Sow. This helps you see some of the best and worst funds that are still public equities (have a capital supremacy structure)) on a number of issue areas:
You may also want to consider:
- Engine No. 1’s funds (that take a more activist approach to being engaged as a shareholder and trying to change company governance)
- Carbon Collective that takes the Project Drawdown framework (the low carbon future we need) as it’s starting point and invests in a index-like fund, but rebalances it by first removing 20% of the most GHG intensive parts of our economy and replacing them with the folks that are leading the way on transitioning.
If you’re ready to take one step further from the far left (Red / Extractive) towards the Blue / Livable future, you might want to consider a wide sloth of impact funds recommended by the Global Impact Investing Network.
If you want to move into No Harm, Sustainable Investing, and even impact-first investing, I have more options for you:
- Kachuwa Impact Fund – an impact-first investment cooperative that tries to be an alternative to a mutual fund (providing highly diversified holdings, with 60% impact real estate, and 40% impact companies — and seeking long-term sustainable returns in the 5.5-8% range). (This is my personal favorite and where I have the largest chunk of my portfolio.)
- Direct investments are where you go directly to the company or fund you’re investing in and you don’t go through an intermediary fund (or secondary market).
- Investibule or other impact-first social investing platforms — like Small Change: https://smallchange.co/
- Slow Money — find a chapter near you.
3. Agent for Change
If you’re looking to do even more (Because you see and feel deeply the structural problems of the global economy and are ready to go faith and values first), then you can work with an advisor, or a group of friends / peers on the journey to start moving your whole portfolio this direction.
I recommend ReValue Investing for this — as they have a great community investing education center and lots of options for you. They also have various options where you don’t have to move all your assets to them, you can pay as much as you feel like you’re getting value and access a lot of their helpful tools.
Balanced Rock and Chordata Capital are also other ones I like.
You can also chose to be in relationship to Social movements with your investments through Adasina Social Capital and their Adasina ETF (ticker: JSTC).
You can chose to invest in community development with notes like from Calvert Impact or CNote — https://mycnote.com/ — 2.5% interest – this invests in community development and women-led & women-owned enterprises. — highly liquid — you can take it out when you want it
You can shift as much as you want to community investing and social movement investing, and cooperatives and employee owned businesses — and with more of us together, this will have a huge impact.
- My List of Shared Ownership Funds
- My post of Investing Resources here
- More of my posts on Impact Investing
My hope is that by clarifying where we are on the Livable Future Investing spectrum, and moving more of our assets towards regenerative, Livable Future investments, we can indeed shift the industry and the dominant paradigm. But it’s gonna take a lot of us.
4. Faith and Ethics and Investing
Most faith-consistent investing takes the current investment paradigm as the starting point and tries to make it more faith-consistent.
There are many problems with this approach:
- It fails to look at the structural and systemic problems underpinning in our conventional investing paradigm (doesn’t see capital supremacy and extraction)
- Doesn’t see the Toxic Assumptions inherent in our current approach (see Eve Poole’s book.)
- Names preference maximization and believes that if we all maximize our own individual interest, we get to the common good (pareto efficiency). It doesn’t see that the assumptions of perfect information, perfect competition aren’t feasible. It doesn’t see monopoly power and the tendency of our current system towards concentration and centralization of power and wealth (industry consolidation / mergers).
- Neoclassical economics versus alternative schools of thought in economics.
[At a more basic level, the problem is pleonexia (the post links to a 20-min conversation I had with Luke Bretherton).]
Starting with faith yields an opportunity that feels more meaningful because it begins with purpose.
What is the purpose of our lives?
- To love God and love our neighbor — the Golden Rule — primarily to see that we must first seek right-relationship with God and nature and our neighbors — a sense of solidarity — an integral ecology ethic — something that we can’t fully understand, but yet that we feel there is a God / divine force in our lives, and we seek that God / divine power for guidance, wisdom, consolation and support.
- To seek the common good, which is to see first that the needs of the least of us are met first (option for the poor) and then we will be able to achieve the common good. To get to this, we need to structure a commitment to neighbor (least of us) in not just our going to church and tithing, but also in the enterprises of our life — our businesses — especially the ones we invest in (or chose to become owners in hoping they grow…).
- To seek to uphold the Human Dignity of all. Inclusion. That we respect each person enough to give them the dignity to make decisions about their life. The Dignity of work — and that at work, we respect each person’s dignity such that we practice subsidiarity — where decisions are made a the lowest level appropriate (the opposite of extreme hierarchy).
To me, the aim to love God and our neighbor invites us to structure a commitment to God and neighbor by actually caring deeply about human dignity, practicing solidarity, option for the poor, and seeking subsidiarity and the common good.
This line of inquiry (a faith-first approach, not a finance-first approach to our investments), raises big questions that our conventional financial advisors and investment ecosystem doesn’t wrestle with.
- Is it right for the aim of my life to have $300,000 or $500,000 or $1.5 million stored up so that I can live off the returns during retirement?
- Is leaving $200k or $500k to my kids an yet burdening them with an increasingly unstable and unlivable world the right approach?
- What does it mean for me to be a good ancestor?
- If I don’t want to define my worth as a person, parent, creature on this planet in terms of the $$ I have and accumulate, then how do I want to think about what I’m passing on?
- What are the traditions, rituals, relationships, legacy stories that make up the good life? The life I seek?
The 3-minute video on Money Transforms.com begins to get to these questions and points to alternative paths.
Resource Generation provides a community of people with wealth or access to get in touch with their money stories.
Wisdom and Money offers wonderful guided small groups that offer some theological, spiritual reflection.
There are many other groups as well. These are just ones I’ve come across and heard good things about.
The movement I’m hoping to go about building with others is one that has small groups that help lean into the practical work of moving our money.
For more: My Investing Journey, My Money Transformation in 8 Steps, What is Catalytic Capital & how I redefined my own expectations for my portfolio, Faith-First Investing)
{Note: Let me know if you’re interested, and what you’re taking away from this post so that I can continue to refine how I synthesize what I’ve been learning to make it more digestible and actionable for future readers.}