Making capital work for the betterment of the planet
During my years in Hong Kong in the 1990s I remember getting together with a number of locals to clean up some beaches of plastic, and by that I mean not picking up a few straws and cups. Many beaches were literally covered in plastic and the assault on the city state’s beautiful natural environment was one of the things that prompted Irene and myself to eventually move to Vancouver at the end of that decade. Yet it took another good decade and a half for deep changes in attitudes around the environment to take hold and prompt drastic action, in the West, but in China too. When we left the prosperous Sino-British free market enclave the lingering question in my mind was: “what if we are able to generate so much wealth, but are not able to enjoy it in a clean environment? What is the point?
Joel Solomon, the now well-known founding partner of Renewal Funds and champion of investing in clean and sustainable businesses, asks more or less the same thing in his book 'The Clean Money Revolution': “How much is enough?” He tracks his journey from a kid with health issues in Tennessee to organic farming in British Columbia to becoming an investor and relentless promoter of clean investing and helping to create what we now know mostly as ‘impact’ or ‘clean’ investing. His thesis is very simple: capitalism in its present form is destroying the way we live, so we need to reinvent it such that the power of capital is used to create a better and cleaner world. The argument is to not only divest from all businesses that steadily destroy the planet, but also from the ones that ravage communities and exact a deep toll on humans, physically and emotionally. Rampant consumerism is what needs to be addressed and the book posits that while we may be winning the money game, we are losing access to meaning and end up deeply unhappy. I would go even further and argue that we are currently losing both the money and mental well-being games.
Solomon tracks the origins of this thinking back to the 1970s and 1980s and notes that it took a while to organize, channel and get traction with well-to-do investors to move their money from ‘traditional’ investments into ‘clean’ opportunities. Many of these clean deals became successful and it is good to read up on the success of Stonyfield Farms – probably the best and creamiest yoghurt on the planet where Solomon was an early investor – and of course Ben & Jerry’s icecream. Such ventures that are based around clear values and focus on health and sustainability are able to change the way we consume and moreover, can change and impact the values of the larger firms that eventually acquire these smaller firms. The proceeds of these acquisitions get reinvested into new clean deals and that helps to grow an ecosystem that will cast its net wider and wider and eventually change the way we live and consume.
One of the things in the book struck me. As we have abandoned the church in the West we have replaced it with a deep worship for consumption and money, which, as we are finding out, leads to depression and, judging from social media, an endless quest for meaning. Solomon realizes in his book that this worship for money has run its course as we are not only wrecking the planet but our mental and physical selves. He points to a journey where we can learn to do with less, but also with products that are better and have more quality. And we can do this while preserving our system of free-markets and making money, we are just allocating this in a different direction. The one aspect in this argument that needs some elaboration, and it may well be outside the scope of his book, is the non-physical part. If we stop worshiping money and consumption but move to a cleaner state, what values will we be living by, and will they bring us the meaning we seek in life? Solomon dives into a description of Hollyhock, a centre for learning, connection and cultural transformation which gives a bit more context to the ‘meaning’ part which is great, but it falls short of what social-political and moral structures will underpin a world where clean money will come to rule.
There are some parallels with Steve Jobs who spent his early days hanging around organic farms and promoting the same wholeness message that we find in Solomon’s book. Yet the incredible success of Apple is now a story of what I call ‘hyper capitalism’ with manufacturing in low cost centres in China, totally overpriced products, quarterly earnings calls (a practice Solomon frowns upon) and spawning a culture of call centres across the globe where employees ensure Apple’s cashflow is given a further boost. Amazon and Facebook fall in the same category of course. This dichotomy makes it clear that even the cleanest and most idealistic businesses will eventually resort to the hard-core extractive capitalism that Solomon so detests. This is not a criticism, but merely a logical question coming out of the book and one that has to be addressed as we move forward.
Although not overly political, the book picks Reagan as the one who has helped unleash the forces that are now ravaging the planet. It is a pity that Solomon does not recognize that the Reagan era brought in the free market reforms and the appeal to individualism and entrepreneurship that are creating the very companies that are now driving the clean money revolution. And it was the former president himself who always said that capitalism was an imperfect system, and we simply had not been able to come up with something better. Solomon envisions a not materially different capitalist structure of society, only steered in a different direction and focusing on different outcomes. No one could have foreseen what the liberalization of markets in the 1980s, combined with Asia’s emergence as an economic powerhouse would mean for the environment and the way we now live.
When I moved to Vancouver in 1999 the quest was to find a different way of living in an environment where the quality of life would be better than in other centres across the globe. Solomon points to Vancouver as a success story as one of the greenest cities on the planet, but as we are learning now Canada’s west coast paradise is a basket case when it comes to fostering some measure of economic equality and creating opportunity. It may be green, but it often feels more like the playground for the uber-wealthy with an almost irrational reverence for money and property values, a very limited framework to build growth for all.
The book really hits it when it talks about entrepreneurship and early stage investing and Solomon’s lessons are applicable to beyond just clean money. He takes the smart approach by investing small amounts, taking minority positions and working closely with the entrepreneur making it clear that building relationships and collaboration lead to far better outcomes than banging the shareholder dogma ‘I need a return on my money’ routine. He is prepared to take a loss and hones in on the key question when investing in entrepreneur-led companies; “how will this person function in a crisis?” Reframing the relationship between investor and founder/entrepreneur is key and the case studies in the book underline these lessons in detail. Investing is not strictly a numbers game, it is above all a people’s game.
In the end, Solomon makes the right arguments on how to move forward (including finding ways to slow population growth), but for them to really go mainstream they need to be socialized across society and the political spectrum. The new approaches will need to part ways with government-enabled neoliberal politics and market dominant theories. The emergence of new political movements on both the left and right is evidence there is growing ‘intellectual room’ to move things forward in a new direction while preserving freedom of choice. Joel Solomon’s book is a great contribution to this discussion and at the same time a great work of reference for those who want to track the origins of clean impact investing.