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Let’s Make A Civic $tewardship League U NLOCKING C IVIC I NVESTMENT A$$ ET $: Building Social & Economic Equity and Civic Fiduciary Pride, Strengthening.

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Presentation on theme: "Let’s Make A Civic $tewardship League U NLOCKING C IVIC I NVESTMENT A$$ ET $: Building Social & Economic Equity and Civic Fiduciary Pride, Strengthening."— Presentation transcript:

1 Let’s Make A Civic $tewardship League U NLOCKING C IVIC I NVESTMENT A$$ ET $: Building Social & Economic Equity and Civic Fiduciary Pride, Strengthening a Free and Vibrant Internet, and Reinvigorating Democracy Submitted to Knight NewsChallenge From Marcy Murninghan, Ed.D. 18 March 2014

2 It’s time for us to build a national Civic Stewardship League, with local chapters and multiple overlapping parts. Its purpose: Make tax-exempt institutional investors, big companies, and capital markets more accountable to sustainable prosperity and the public interest. Its process: a series of Web-enabled projects that educate, empower, and engage. Its outcomes: more informed decisions about how the money power can advance sustainable prosperity and the public interest, in a pluralist representative democracy.

3 Problem: Companies and capital markets are capable of doing more to reduce social and economic equity gaps while improving the environment, democracy and the Common Good. Meanwhile, the average person feels powerless and maybe even apathetic and/or alienated. Current Opportunity: Lots of cool things happening to help companies and capital markets achieve more sustainable prosperity and Common Good priorities, but very little public education, engagement, or empowerment to inform it.

4 Historic Precedent: Not only that, history is on our side. The term “ public interest” appears 316 times in the original SEC enabling legislation affecting corporate disclosure, market regulation, and investment management—almost always in the same sentence as "protect shareholders"

5 The term “public interest” appears 34 times in the Securities Act of 1933; 223 times in the Securities Exchange Act of 1934; and 59 times in the Investment Company Act of Securities Act of 1933Securities Exchange Act of 1934 Investment Company Act of 1940 ●●●

6 The thing is, most people don’t realize this. Most people think that the sole purpose of financial markets is to make money. But that’s wrong. Financial markets exist in service to society. They’re embedded in social, cultural, political, historical— even religious—beliefs about “prosperity” and “happiness”, about “ethics” and “virtue”. That’s what “equity” and “fiduciary duty” are about.

7 F or example, here are some of the major players in the corporate and financial accountability ecosystem that are changing the way we interpret “fiduciary duty”. In 1972, there were only 3. In 2014, there are many!

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10 Social Clubs s S TRATEGY : Direct nonprofit investment assets toward reducing social and economic equity gaps, to strengthen sustainable prosperity and the public interest. Hospitals Museums Schools Private Foundations Public Charities Fraternal Societies War Veterans Posts HMOs, Managed Care Or gs Business & Sports Leagues Labor Unions Farm Bureaus Social Welfare Orgs s Community Foundations Alumni Clubs Country Clubs Cemetery Companies Insurers

11 Identify billions of $$$ in “civic assets” (~$2.7 trillion nationwide) embodied in tax-exempt investment portfolios, and leverage that fiduciary power toward social and economic equity, sustainability, and the public interest—where it belongs. Sounds great, but what kind of organizations are we talking about?

12 U.S. Nonprofit Organizations, (c)(6) Business Leagues 72,582 organizations 501(c)(6) Business Leagues 72,582 organizations 501(c)(4) Social Welfare Orgs 111,561 organizations 501(c)(4) Social Welfare Orgs 111,561 organizations 501 (c)(3) Organizations Civic Associations Service Clubs Advocacy Organizations HMOs and Managed Care Plans Many others Civic Associations Service Clubs Advocacy Organizations HMOs and Managed Care Plans Many others Chambers of Commerce Business Associations Boards of Trade Professional Sports Leagues Chambers of Commerce Business Associations Boards of Trade Professional Sports Leagues 501(c)(3) Public Charities 998,758 organizations 501(c)(3) Public Charities 998,758 organizations Large Organizations (Form 990 filers) Hospitals Colleges Human Services Museums Community Foundations Many others Large Organizations (Form 990 filers) Hospitals Colleges Human Services Museums Community Foundations Many others Small Organizations (Below revenue / asset threshold to file 990) Community Theaters Neighborhood orgs New Organizations Many others Small Organizations (Below revenue / asset threshold to file 990) Community Theaters Neighborhood orgs New Organizations Many others Congregations (Registration optional) Congregations (Registration optional) 501(c)(3) Private Foundations 118,368 organizations 501(c)(3) Private Foundations 118,368 organizations Grantmaking Foundations Family, Corporate, Independent Foundations Grantmaking Foundations Family, Corporate, Independent Foundations Operating Foundations Unregistered Organizations — Total Unknown 501(c)(5) Agricultural, Horticultural & Labor Organizations 56,269 organizations 501(c)(5) Agricultural, Horticultural & Labor Organizations 56,269 organizations 501(c)(7) Social & Recreation Clubs 57,030 organizations 501(c)(7) Social & Recreation Clubs 57,030 organizations 501(c)(8) Fraternal Beneficiary Societies & Associations 58,166 organizations 501(c)(8) Fraternal Beneficiary Societies & Associations 58,166 organizations Fraternal Organizations Lodges Benefit Providers Insurers Many others Fraternal Organizations Lodges Benefit Providers Insurers Many others Country & Golf Clubs Fraternities & Sororities Athletic Clubs Alumni Clubs Many others Country & Golf Clubs Fraternities & Sororities Athletic Clubs Alumni Clubs Many others Farm Bureaus Labor Unions Labor Organizations Many others Farm Bureaus Labor Unions Labor Organizations Many others 501(c)(10) Domestic Fraternal Societies & Associations 20,301 organizations 501(c)(10) Domestic Fraternal Societies & Associations 20,301 organizations 501(c)(13) Cemetery Companies 10,121 organizations 501(c)(13) Cemetery Companies 10,121 organizations Other Exempt Organizations 32,251 organizations Other Exempt Organizations 32,251 organizations 501(c)(19) Post or Organizations of War Veterans 34,155 organizations 501(c)(19) Post or Organizations of War Veterans 34,155 organizations Source: National Center for Charitable Statistics, 2014National Center for Charitable Statistics

13 Civic Stewardship League American Endowments Type#Asset Value Colleges & Universities 4,599 $ 356 B Foundations101,438 $ B Religious o ICCR Coalition300 $ 100 B o Various faith traditions 222,145 $ 25.2 B Health & Hospitals 38,512 $ B Social Purpose (mix of advocacy, civic clubs) / Other (business leagues; social & recreational clubs) N/A Source: pps/profileDrillDown.php?state=US &rpt=PC pps/profileDrillDown.php?state=US &rpt=PC Lots of Types!! Select Group of Top 64 Tax- Exempt Institutional Investor Assets Under Management for Suffolk County, MA (FY 2011, 2012) Total Asset Value: $ 51,004,893,354 (See attached listing) Source: National Center for Charitable Statistics (NCCS): php?prog=geoCounties¶m=q php?prog=geoCounties¶m=q Lots of Dough!!

14 Leverages portfolio investments across asset classes. consistent with values and mission. Recognizes importance of business innovation, strategy, and multiple capitals to value creation—financial, human, social, environmental, built environment, and intellectual—that also impact the public interest. The Ethical, Integrated Fiduciary D OMESTIC & I NTERNATIONA L S HAREHOLDER R ESOLUTIONS C ORPORATE D IALOGUE I NTEGRATED R EPORTING / ESG&E Risk Measures S USTAINABILITY C ONTEXT / Threshold Investing & Net Positive I NDUSTRY ALLIANCES on public interest themes C LIMATE B ONDS S OCIAL I MPACT / S OCIAL P OLICY B ONDS C OMMUNITY D EVELOPMENT L OAN F UNDS M UNICIPAL B ONDS S CHOOL BUILDING / REHABILITATION BONDS I NFRA - STRUCTURE R EPAIR & U PGRADE C OMMUNITY B ANK D EPOSITS S PECIAL F UNDS FOR C OMMUNITY P URPOSES C OMMUNITY F IBER -O PTIC C ABLE P RE -K EDUCATION J OB D EVELOPMENT U RBAN F ARMING P UBLIC E QUITY F IXED I NCOME A LTERNATIVE S HORT -T ERM / C ASH P OOLED P RIVATE E QUITY LBOs M EZZANINE (hedge funds, absolute return, event-driven) V ENTURE C APITAL P RIVATE E QUITY R EAL E STATE S USTAINABLE E NERGY & N ATURAL R ESOURCES

15 Civic Stewardship League 3 M’s for Reducing the Social & Economic Equity Gap and Restoring Civic Fiduciary Accountability Map tax-exempt investment assets in your region that need unlocking, across all categories (not just universities and colleges) Motivate development of whole portfolio investment policies and practices that reflect sustainability values impacting the Multiple Capitals—human, natural, social, intellectual, built environment— and the Common Good (e.g., civic moral capital) Monitor full use of fiduciary power, including impacts on Multiple Capitals and the Common Good Q. So, what’s the strategy? A. Carry out the 3 M’s

16 Civic Stewardship League Map 1 Identify top tax-exempt institutional investors in each region to determine the size and diversification (asset class allocation) of their portfolio holdings 2 Identify their investment policy, process, and (if possible) specific holdings Identify their investment policy, process, and (if possible) specific holdings via public records search, surveys to chief investment officers (CIO) or treasurers. (For example, What’s their policy for voting shareholder proxy resolutions, which include critical issues such as political spending, lobbying, climate risk, human rights/decent work, privacy protection, and Internet freedom? How do they vote these proxies? What discrepancies exist between their institutional missions and voting records?)which include critical issues such as political spending, lobbying, climate risk, human rights/decent work, privacy protection, and Internet freedom 3 Engage members of their Board of Trustees and senior officers to discuss opportunities, find common ground 4 Collaborate with State Attorney General Office of Charities because they have oversight, along with folks at IRS via Form 990

17 Civic Stewardship League Motivate 1 Avoid those entities that clearly violate institutional values, civic moral principles, and ethics—so-called “sin stocks” or harmful derivatives 2 Screen and select investments for suitability, from both financial and “multiple capitals / common good” performance perspectives 3 Actively engage portfolio companies to change their ways and improve their “social license to operate” through a variety of tactics affecting products, processes, and business models. They include: filing shareholder resolutions; corporate dialogue; boycotts and campaigns; and so forthsocial license to operate 4 Identify social purpose or Impact Investing opportunities, aimed at community economic development and growing the “real economy”

18 Civic Stewardship League Monitor 1 Educate and engage the public about the money power that can advance positive local, regional, national, and international priorities. 2 Help assure that public interest and ESG priorities are woven into endowment investment decision making policy and practice, consistent with fiduciary duty. 3 Help assure that the impact of investment decisions advance fiduciary aims, which include public interest and ESG priorities

19 Civic Stewardship League Final thoughts: Economic inequality and institutional corruption can be addressed as citizens become aware of their own power to make a difference. That’s good for democracy—without it, our form of self-governance doesn’t stand a chance. What’s at stake involves growing a healthy democracy in a hyper- connected global context, where ecosystems and economies are intertwined and institutional corruption and climate change pose significant threats. Investments made by tax-exempt institutions that advance the Multiple Capitals and the Common Good help strengthen the real economy while restoring trust in competitive markets and our democracy.


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