Free to Choose...ESG

V.2, N.49

Jun 06, 2024

I admire traditional conservatives for many principled positions, but their recent attacks on ESG are not among them. In case you’ve been asleep for the last few years, ESG stands for ‘environmental, social, and governance standards.’ Millions of investors, commanding tens of trillions of dollars, want to make sure their money is only going into companies that meet high ESG standards. They rightfully worry about investing in fossil fuels, for example, when renewables are becoming the cheapest energy option. Or about investing in banks that continue to redline poor communities, which could expose them to expensive lawsuits. Or about investing in companies that claim to be diverse but have all-white, all-male boards, that are unlikely to attract the brightest young people as employees.

Conservatives are understandably annoyed with these investors’ defections. And if they were smart, they would do a better job of explaining why their favorite companies that score poorly on ESG metrics are nevertheless great investments. Instead, they have convinced state legislators to pass a wide range of anti-ESG bills to shoot the messengers. According to Pleiades Strategies, between 2021 and 2023, conservative legislators in 38 states introduced 318 bills trying to punish, restrict, or divest from ESG investments.

Our first article is by Andrew Behar, from an organization called As You Sow, who leads a coalition of investors to fight these senseless anti-ESG efforts.

Those states that passed anti-ESG bills have now seen the results: Huge unexpected losses. A recent piece in Forbes reports that borrowing costs for Oklahoma municipalities have gone up 15.7%. The Freedom to Investment Campaign keeps an inventory of these impacts, and the list is mind-boggling. The Arkansas Public Employees Retirement System sees itself losing $30-40 million per year. Texas calculates that its laws have cost the state $700 million and 3,000 jobs. Kansas projects losses of $3.6 billion over the next decade. Indiana fears its losses will exceed $6.7 billion.

Smart conservatives would do well to remember the philosophy of the great economist Milton Friedman. In 1980, he published his magnum opus called “Free to Choose.” Friedman underscored that a bedrock conservative principle is that consumers, investors, workers, and companies should have the freedom to make their own market choices. And if an investor chooses to invest in handgun manufacturing, so be it; if she chooses offshore wind energy, so be that, as well. That’s what freedom of choice is all about.

Of course, there’s another critique of ESG that many of you, dear readers, will be more sympathetic to. This entire fight is playing out in global securities markets. And if ESG perpetuates the inefficiency and inequality of traditional capital markets, how useful a concept is it? The fix may be to start applying these standards to local investments. The local investment movement needs its own Moody’s that rates local companies on traditional economic terms and cutting-edge ESG terms.

In other news this week:

Not to be outdone by KKR (a private equity firm that launched Ownership Works to promote worker ownership), Blackstone, another private equity firm, has announced that it will integrate providing equity to the employees of the firms it buys out.
But not everything associated with private equity these days is unicorns and roses. If you’re wondering why your local Red Lobster is shutting down, the culprit is not “all you can eat” shrimp but rather the greed of the private equity firm that took over the chain. The ugly details are in a piece we link to from The American Prospect.
In Portland, Oregon, a nonprofit called Feed the Mass is using investment crowdfunding to double its capacity from 4,000 to 8,000 meals per week.
In our last issue, we reported on the collapse of Mainvest, one of the more community-friendly crowdfunding portals. You can read about one reason for its demise—namely, the failure of one of its financial partners, Synapse.
And a good news story: You can read about how the Kensington Corridor Trust is reviving neighborhoods in Philadelphia.

We finally want to draw attention to our own economic well-being. To support the continued success of The Main Street Journal, we’re dipping our toes into the pool of advertising and sponsorships. You will notice our first ad in this issue. We value all our readers and are eager to hear your thoughts about this change. Let us know what you think. And if you want to sponsor an issue yourself, please reach out!

As always, if you want more news, please subscribe to the MSJ Extra! through this link.

~ Michael Shuman, Publisher

NEWS

Common Cause for Climate Action, ImpactAlpha (June 3)
Blackstone Adopts Employee Ownership as Part of US Buyout Strategy, ImpactAlpha (May 23)
The Raiding of Red Lobster, The American Prospect (May 22)
Rare Use of Reg CF: Nonprofit Issuing Bonds, The Shack Business Stage and Studio (May 20)
Synapse Failure Impacts Crowdfunding Platforms, Crowdfund Insider (May 21)
The Kensington Corridor Trust: The First Four Years, The Philadelphia Citizen (May 22)

Thank you to this issue’s sponsor:

American Independent Business Alliance

AMIBA is building a strong local economy movement. Attend one of their upcoming free virtual events: Artisans Cooperative – Crafting a Member-Owned Cooperative and How Small Businesses Can Raise Capital from the Crowd.

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✔️ MSJ Extra! Teaser

✔️ News from NC3

✔️ Partner News & Voices

✔️ Events

✔️ Jobs Board

WHAT YOU MISSED IN LAST WEEK’S MSJ EXTRA!

Over the next few months, Local Return plans to launch a new local investment fund in Rhode Island. One of the founding board members, Jessica David, has lots of suggestions about how other communities might get started.

MS: Tell us about Local Return. When did you start it, and what does it do?

JD: Six of us began meeting in 2020, focused on the idea that wealth was largely missing from local conversations around COVID—but also opportunity and equity more broadly. We founded Local Return the following year with the mission to build community wealth, particularly in neighborhoods that have experienced historical or generational disinvestment, through community ownership and investment. The name was suggested by one of my co-founders, Josh Daly: “Local” for obvious reasons, and “Return” to suggest investment return, the circular economy, and returning to a focus on local.

From the beginning, we focused on building our community investment ecosystem. We hosted your workshops and loosely mapped the community’s local assets. For the past three years, we’ve been working on the community investment fund, which I know we’ll talk more about. Local Return also advocates for local policies and practices that support a vibrant and just local economy. For example, we proposed using $50 million of state ARPA funds to create neighborhood trusts, an idea that didn’t get enacted. And we work with local and national partners to increase community consciousness around strong, resilient local economies.

MS: I first became aware of your work in 2021 when you organized an online workshop, Local Investment 101, that I led. In retrospect, was the educational deep dive into local investment an important prerequisite for launching a fund?

JD: Yes, those workshops were the first time we went out into the community to gauge interest in local investing. It was a really important milestone for us because it suggested that people were eager and enthusiastic—but that they also needed to feel supported. You also provided us with a foundation of knowledge and a vocabulary to talk with each other. Our community was all over the map in terms of our awareness of and knowledge about community investing, so this was a way of creating a common baseline among a core group.

Also, because our goal has always been to build out the ecosystem rather than just create a single fund or program, it was really useful to start with the investor perspective. Of course, a lot of this was revealed in hindsight; at the time, it just seemed like a good way to do something!

MSJ Extra!

The Big Vision in America's Smallest State

May 30

Rhode Island was the first colony to establish an explicitly secular government, the first to call for a Continental Congress, and the first to renounce the British crown. Now, two and a half centuries later, residents are pioneering an ambitious statewide investment fund. In this issue of

Read full story

SPONSOR CORNER

The National Coalition for Community Capital (NC3) is dedicated to educating, advocating, and activating community capital—and serves as MSJ's fiscal sponsor. Thank you for being a part of a growing movement! Be sure to reach out to us for support integrating local investing in your work: info@nc3now.org.

NC3 UPDATES AND ANNOUNCEMENTS

NC3's first group of Summer Interns began in mid-May, and they are already contributing greatly to the community capital movement! Lyla Miller, a student at Duke University, is focused on NC3's educational materials and programming, supporting our research and development of educational materials for the full range of community capital practitioners. Jenna Sahlab, a student at Michigan State University, is supporting NC3's communications by enhancing the pages of our website, creating promotional materials for upcoming events, and supporting future NC3 publications. Garrett Jin, also a student at Michigan State University, will spend his time researching and supporting our advocacy work. We are incredibly grateful for the additional capacity this group lends to NC3 and we look forward to sharing their contributions with all of you through the coming months!
NC3 will co-present with Crowdfund Better this month at the IEDC Economic Future Forum in Spokane, Washington. Kathleen Minogue and Chris Miller will conduct a session on Democratizing Community Development, where they will present information about the work both organizations are doing and will take the room through an interactive community capital project development process simulation.

PARTNER NEWS & VOICES

Celebrating 8 Years of Regulation Crowdfunding, Crowdfund Capital Advisors (May 17)
The Power of Diversified Community Investment Funds, Superpowers for Good (May 14)

NOTABLE NEW RESOURCES

Community Capital Live with Andrea Golder of PODER Emma, Mindful Marketplace (June 5)
Scottish Employee-owned Business Census, Co-operative Development Scotland (May 22)
Alternative Ownership Enterprises Models: Deep Dive, Transform Finance (May 16)
Inclusive Business Investing Guide, International Finance Corporation (May 13)

FEATURED EVENT

World Localization Day: An annual celebration of the worldwide localization movement convened by Local Futures - Worldwide: June 21

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The Main Street Journal aims to catalyze the movement of $50 trillion from Wall Street to Main Street to facilitate economic development and economic justice. It’s sponsored by the National Coalition for Community Capital, with grants from the Heron Foundation, Wallace Global Foundation, and the Bondi Foundation. We welcome feedback about everything, from our design to content. Also, we welcome suggestions of other groups to involve as partners and additional information to include. Please send ideas to Jen Risley at jen@main-street-journal.com.

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