Earlier this week, JUST Capital marked its five-year anniversary of the JUST ETF with a panel series at the New York Stock Exchange. The ETF was launched in 2018 in partnership with Goldman Sachs Asset Management to track the top 50% of Russell 1000 companies according to the priorities of the American public.
At the event, CNBC’s Leslie Picker moderated a riveting conversation titled “The Value of Investing in Just Business” featuring Priscilla Sims Brown, CEO of Amalgamated Bank, the financial institution self-described as “America’s socially responsible bank” with $7.8 billion in assets and $53.6 billion in custody and investment assets under management, as well as Roy Swan, Director of Mission Investments at the Ford Foundation, one of the largest private foundations in the U.S. with a $16 billion endowment and a commitment to addressing inequality. (Note: Ford Foundation is a JUST Capital Foundation Partner).
Brown and Swan delivered multiple key insights on how CEOs and business leaders can create shareholder value while also prioritizing other stakeholders like workers, communities, and the environment.
Lean into the investor case for “patriotic capitalism”
CNBC’s Picker kicked off the discussion by asking Brown and Swan to weigh in on the bottom-line case for just business behavior.
Swan discussed how prioritizing workers and communities is at the heart of American capitalism. He explained that visionary economist and “Wealth of Nations” author Adam Smith’s theory of the “invisible hand” was not intended to keep markets completely unchecked, but to advance the success of the economy through self-interest that creates mutually beneficial, interdependent outcomes.
Swan added that he uses the phrase “patriotic capitalism” to encapsulate the business case for just corporate behavior.
“Patriotic capitalism is a capitalism that puts the interest of country, democracy, and the common good first,” he said. “It is enlightened self-interest that understands that capitalism is best optimized and sustained when our country, democracy and the common good are prioritized. Otherwise, there is no American economy.”
Amalgamated Bank CEO Brown agreed that value for workers and their families lies at the center of American capitalism.
“At Amalgamated Bank, we’re a living experiment of doing well by doing good. And it’s working,” she said.
“We’re making the business case by taking stands on a few core issues like gun violence in America and reproductive rights. We’re transparent in our values, you can read about them on our website. That transparency is key to driving good business and financial outcomes,” she added.
Both Brown and Swan underscored the importance of leveraging more data to continue building the case for just business behavior.
“The more we show the numbers underscoring the business case for doing good, the stronger the case becomes,” Brown said. “We need more research and data, especially on costs and controls for externalities.”
Swan cited research showing how prioritizing workers, specifically worker engagement, results in shareholder value. Loyal, engaged workers produce more, are out sick less, and have lower turnover, research has shown. That translates into “billions of dollars in profits” for a corporation and its shareholders, he explained.
The phrase “ESG” might be in question, but the theory and framework is not
Swan and Brown agreed that ESG and impact investing have come under intense scrutiny over the past several months, and acknowledged that it’s creating more questions for CEOs. However, both leaders agreed that the move toward transparency and corporate disclosure is here to stay.
“The term ‘ESG’ has been weaponized by polarizing opportunists who want to divide us,” Swan said. “A lot of arguments against ESG are actually arguments against impact investing which, unlike ESG disclosures, actually does seek specific outcomes.”
He explained that while impact investing might want to increase the number of good jobs for workers, or increase the number of companies that produce renewable alternatives to fossil fuels, ESG is a disclosure framework. “The movement of governments around the world who value a framework to disclose non-GAAP information isn’t going away.”
Brown added that she’s hopeful about the future of just corporate behavior. Swan concurred, citing JUST Capital’s recent newsletter highlighting a shift among some Republicans toward embracing a stakeholder model, pointing to what he calls a potential “thawing” of the movement against what’s been labeled “woke capitalism.”
“Call it ESG. Don’t call it ESG. Call it global warming. Don’t call it global warming,” Brown said. “The point is – keep pushing forward on issues that matter on a values level.”