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By Ben Bingham, 3 Sisters Sustainable Management
Thanks for the chance to say a few words to the IC community. First, I would like to honor my brother, Hiram (Tony) Bingham who passed away not so long ago, who was a pioneering IC member, and who broke the rules in ’93 and gave me the IC Directory, introducing me to this wonderful network and kicking off my career in finding, fostering and funding socially relevant businesses.
Tony had named and led Caithness away from Uranium and Gold to Geothermal and his first investment was a home-run both financially and in terms of energy efficiency: the geothermal plant in Coho Springs has provided electricity to LA while providing, I understand, multiple returns to the early investors for decades. When he left Caithness to found Davenport Ventures, we did some work together and he liked to say that the secret to successful early stage investing was to have 20 investments out at any one time, with the expectation that 1/3rd might fail, 1/3rd might just break even and 1/3rd might do well. In the top 1/3rd it was obviously helpful to have at least one home-run (like Coho Springs) that would lift all the numbers to the level one might hope for. This idea stuck with me and still affects my thinking about venture and private equity. The Patient Capital Collaborative is a welcome beginning to meet this need for a diversification process within IC and early stage positive investing in general.
Second, I would like to honor another IC pioneering member, Terry Mollner, who has been a witness and a driver of many changes in what is generally called socially responsible investing. In his inimitable way he has recently come to an important aha! moment that the evolution of this space is a maturing process that may be helped by one potent question we can ask ourselves or each other: “Are we prioritizing the common good?” I am part of a group of financial professionals rallying around that simple bird-call with the goal of working for investors who also prioritize the common good. This is not to be seen as a new division but a unifying principal for this movement. My firm, 3Sisters Sustainable Management will offer investment products to this emerging consortium of advisors and wealth managers, including a private equity fund of funds launching this spring under the new Scarab group of private pooled funds that will be managed by 3Sisters. One day I hope this will include a fund to match my brother’s formula with 20 investments vetted by the Patient Capital Collaborative!
For the last 12 years I have been engaged in creating diversified portfolios, at first within the brokerage setting and in the last five within the context of a Registered Investment Advisor. I am convinced that the 99% cry of anger against the 1% can just as well be directed against the many innocent middle class investors who have 99% of their retirement money invested in companies who profit from extraction, mass producing of toxic waste and otherwise taking advantage of consumers, not to mention promoting war. US SIF has documented the scaling of investments that have brought so much good change through shareholder activism in companies whose products and services might be inherently negative in terms of social or environmental impact.
Another way to “prioritize the common good” in investing is to apply the four point decision tree of the Natural Step, developed by Swedish scientists with the hope of ending environmentally caused cancers by changing general behaviors. The first three steps are normally presented like negative screens: 1) avoid extraction, 2) avoid chemical compounds and 3) avoid environmental degradation. At 3Sisters and on our commonspace research site, wikipositive.org, we prefer to take a positive approach by favoring companies who recycle, reduce, reuse instead of extracting, who create natural solutions rather than chemical ones, or who find ways to enhance the biosphere rather than degrade it. But the last step is the first and most important in our research process: 4)Meet human needs!... How obvious, and yet how complex it is to decide what is truly needed. Looking at all industries and enterprises, both public and private, we narrow our goals down to something simple that saves researchers endless hours of data processing to see which companies are “less bad.” For healthcare: wellness; for financials: community; for consumer basics: wholeness etc.
We have seen great improvement in the vetting of companies for IC in the last years. I also challenge the great people doing this work to ask that simple question: “Is this company consciously serving the common good?” My guess is that the quality of firms chosen to present may improve even more!