Prepared for the K NIGHT F OUNDATION N EWS C HALLENGE : How might libraries serve 21 st century information needs? March 2016

Opportunity: Create new structures, platforms, and entry points so that concerned citizens can use their voice and power to leverage billions of dollars in tax-exempt financial capital toward public priorities such as jobs, quality public education, clean energy, infrastructure, good food, transparent and honest government, and more. Problem: Widening social, racial, and economic equity gaps create instabilities and threaten democracy’s promise and planetary well-being. Meanwhile, the average person feels powerless, apathetic, maybe even angry and alienated.

Question: If you had more than $50 BILLION here in Boston to invest in outcomes you believe are important to the community, what would they be?

Question: There are so many public needs, but how do we know where to start? How can we prioritize them? Answer: The City of Boston has several planning outreach efforts underway. This project will draw upon and enhance them.

Sounds good, but there’s not enough tax money to pay for these things. Where’s the money you’re talking about?

Right here, surrounding us! 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 In Suffolk County alone, the top 64 tax-exempt institutional investors have financial assets under management of more than $51 Billion. (FY 2011, 2012) Total Asset Value: $ 51,004,893,354 Source: National Center for Charitable Statistics (NCCS): php?prog=geoCounties&param=q php?prog=geoCounties&param=q

Within and across these diversified portfolios—which include different asset classes with different opportunities for positive and negative impacts—this financial capital can be leveraged to strengthen other capitals: human, natural, social, intellectual, built environment, even “civic moral.” That makes sense—because after all, taxpayers underwrite these tax-exempt institutions, so they could be viewed as “beneficiaries.” A ND WHEN THEIR VOICES ARE HEARD, THEIR SENSE OF COLLABORATIVE POWER, ACROSS VARIOUS SOCIAL, RACIAL AND ETHNIC FAULT LINES, IS TRANSFORMED.

Historic Precedent: 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“.

Primary Purpose: Identify billions of $$$ in AUM (~$2.7 trillion nationwide) held in civil society (e.g., tax-exempt) institutional investment portfolios, and leverage those assets, collectively and separately, toward outcomes that advance social, racial, and economic equity, sustainability, and the public interest. That’s a form of capitalism that works for all. Sounds great, but what kind of civil society investors are we talking about?

These are the kinds of organizations that, if they’re wealthy enough to have a portfolio of financial assets to invest, are classified by the Internal Revenue Service as follows:

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

For each of these diversified portfolios, within each asset class there are different kinds of investment tools “civic fiduciaries” can use for positive impact. That’s a “whole portfolio approach” that’s both ethical and integrated.

Leverages portfolio investments across asset classes, consistent with values, mission, and material ESG&E risks and opportunities. Recognizes importance and impact of business innovation, strategy, and multiple capitals to value creation—financial, human, social, environmental, built environment, and intellectual—that also advance 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 / A GRICULTURE 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

The thing is, most people don’t realize this. They 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.

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 6. In 2016, there are many! And these don’t even count the service providers, such as Goldman Sachs or Blackrock.

Landscape of Corporate and Investor Accountability Initiatives — 2016

Empow er Educat e Engag e Bridge Build New Structures / Mesh Networks: Civic Stewardship League Chapters + Civic Fiduciary Councils = Platforms, Outlets for Voice and Agency, Fiduciary Accountability to Civic Priorities Pedagogy + Tech for Communities of Practice & Social Learning: ESG&E Curriculum, Lexicon, C$L Digital App, Online Mapping Project Existing and emerging infrastructures: Inclusive, Distributive, Polycentric Accountability to Sustainable Prosperity & Public Interest Divisions: Economic, Cultural, Political Equity Gaps; Sustainability Professionals & Everyone Else; Generation Gaps “Post-Piketty” Reality: Shared Vision of Social, Racial & Economic Equity (“Common Capitals”), Civic Fiduciary Pride, Democracy’s Promise New (Old) Framework: Civil Society (e.g., tax-exempt) Institutional Investors as “Ethical, Integrated Fiduciaries” Accountable to Civic Priorities and the Public Interest

4 M’s for Reducing Social, Racial & Economic Equity Gaps and Restoring Civic Fiduciary Accountability, Well-Being Map civil society (e.g., tax-exempt) investment assets in a given locale (metropolitan Boston, or the whole Commonwealth), across all nonprofit categories (not just universities and colleges, or foundations), and make that information openly available in categories that average people can understand. Make Meaning of how different asset classes, by institution and collectively, can be leveraged to address local, state, regional, national, and global priorities. Motivate development of whole portfolio investment policies and practices that reflect material ESG&E priorities impacting the Multiple Capitals—financial, human, natural, social, intellectual, built environment—and the Public Interest (e.g., civic moral capital) Monitor full use of fiduciary power, including impacts on material ESG&E priorities, Multiple Capitals, and the Public Interest Q. So, what’s the strategy for building Civic Financial Literacy? A. Carry out the 4 M’s, via an ongoing process of civic education, empowerment, and engagement in libraries, schools, churches, local media.

Map 1 Identify top civil society institutional investors in each region to determine the size and diversification (asset class allocation) of portfolio holdings 2 Identify their investment policy, process, holdings, and how much they pay 3 rd party advisers 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? How much do they pay in management fees?) 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

Make Meaning 1 Learn the key concepts, vocabulary, tools available to integrate multi-capital risk and opportunities into investment decision making 2 Learn what the key players are doing at local, regional, national, and global levels 3 Collaborate with local planners, groups to assess local priorities, determine alignment

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” risk, 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 modelssocial license to operate 4 Identify social purpose or Impact Investing opportunities, aimed at community economic development and growing the “real economy” 5 Publicly disclose stewardship policy and values governing investment practice—including voting guidelines and activity, how conflicts of interest are addressed, use and payment of intermediaries, continuing education / adaptive learning, and so on

Civic Financial Literacy Project Monitor 1 Educate and engage the public about how fiduciary capitalism can advance material local, regional, national, and international ESG&E priorities 2 Help assure that public interest and material ESG&E risk and opportunities are woven into civil society institutional investor 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, Common Capitals, and material ESG&E priorities

Final thoughts: Economic inequality and institutional corruption can be addressed as citizens become aware of their own voice and 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 civil society institutions that advance racial and economic justice help strengthen the real economy while restoring trust in competitive markets and our democracy.

Make Money Power Accountable (e.g., billions of $$$ in tax-exempt institutional investor assets) Build Social, Economic Equity Fulfill Democracy’s Promise