Impact Investment

Socially Responsible Investment (SRI)

Socially Responsible Investment (SRI) is a generic term covering ethical investments, responsible investments, sustainable investments, and other investment processes that combine investors’ financial objectives with environmental, social and governance (ESG) concerns to minimise risks and negative impact. For people interested in directing their capital towards ecologically and socially sound, “people and planet” friendly projects the avoidance of controversial companies and initiatives can however be enormously problematic; most of the popular SRI funds on the market include a large amount of investment that is the wrong kind to foster an economy based on environmental sustainability and social justice. The overall impact of SRI on sustainable development remains unproven and many argue that SRI is so broad that it is meaningless. In terms of financial returns the research to date on SRI funds shows a wide variety of findings and therefore tends to support any view on the topic. Some studies confirm that SRI funds under-perform in the wider market while plenty of others conclude the opposite.

Transition to Strong Sustainability

Impact Investment and Strategic Sustainable Investment (SSI) have emerged as a response to the limitations of traditional, accounting-driven investment analysis and SRI to address ecological threat and promote a more equitable global society. As an approach SSI is proactive rather than reactive. A premise of the DPC approach to selecting companies and initiatives for SSI is the inevitability of the need to transition fully to a world economy that is ecologically sustainable and that promotes social justice. Several overlapping economic development models do promote these objectives, including: the Green Economy, the Blue Economy, Ecological Economics and Steady-State Economics. Only the latter model however fully describes an economy no longer considered apart from the global ecosystem and that functions in equilibrium with nature. As a precautionary principle DPC supports a mitigation program of lowered economic growth - at least until permanent solutions can be found - to address the current crisis of economy, energy and environment.

Investing in the Ecological Economy

To inform its investment activities DPC adopts the following definition of strong sustainability:-

· Sustainability means preservation of the integrity of all ecological systems in recognition of the
   limits to the level of possible substitution of certain critical natural capital;
· Sustainability is the prerequisite and foundation of any human development, whether social
economic or technological;
· A sustainable human society lives and develops as an integral part of ecosystems that have
     ecological integrity;
· Ecological integrity means the ability of an ecosystem to recover from disturbance and
   reestablish its stability, diversity and resilience;
· A sustainable human society would foster six broad values: equity, or fair and just outcomes;
   solidarity, or consideration and mutual respect among all people; diversity
   of outcomes which would benefit all people; participatory self-management, or involvement in
   decisions to the extent that one is affected by their outcomes including institutional and
   employment contexts (DPC 2010).

DPC "House" Criteria and Funds

DPC introduces exciting mass market additions to the investment arena that make it very easy to invest for “strong sustainability” with very small sums of investment. It employs a set of in-house quantitative performance “metrics” to measure the performance of its portfolio. These cover a range of indicators that are designed to quantify sustainability improvements including cost-savings. It proactively identifies new investment and financing opportunities that boost the productivity of natural capital and promote sustainable livelihoods. DPC targets sub sectors such as renewable energy, sustainable agriculture, clean technologies, water management and environmental commodities. Investing in a Steady State Economy does not imply a “non-profit” or static economy. Rather it is investment in those business models that operate dynamically within the limits of the earth’s biophysical regenerative constraints, ensuring the planet's regenerative and waste assimilative capacities are not compromised. Financial profit remains possible because the economy continues as a dynamic subset of the ecosystem: companies themselves still grow and wane but the overall economy does not. The focus is on durability and cradle-to-cradle manufacturing to replace the industrial design concepts of disposability and built-in obsolescence. Provided consumed or worn out goods are replaced by new goods exhibiting higher-benefit yielding qualities it is possible to boost the productivity of “natural capital” and even raise living standards to alleviate poverty. In investment terms this means addressing “material lifecycles” that ensure closed loop recycling is achieved by developing mechanisms to capture and stream waste back into new products. In the new paradigm the theoretical framework and knowledge structure of investing is redefined: “natural capital” risks and costs are directly factored into valuation models.

Democratic Planet Capital * Phone: + 44 794 375 1635