Fennel

A year ago, we started building an investing app to bring power back to the stakeholders. Back then, we were just a handful of people — activists, engineers, grad students, and retail investors — who felt jaded by the system. We felt like we were being used by other investing platforms. When multiple platforms <a class="au lj" href="https://www.theverge.com/2021/2/1/22254656/robinhood-gamestop-stonks-trade-freeze-class-action-lawsuits" target="_blank" rel="noopener ugc nofollow">paused trades during the GameStop saga</a>, it seemed like the system was rigged. When we learned that companies were profiting off <a class="au lj" href="https://www.protocol.com/fintech/payment-for-order-flow-explained" target="_blank" rel="noopener ugc nofollow">payment for order flow</a> and securities lending, it seemed like we were being bought and sold. We wanted an investing platform where the cards weren’t stacked against us. So, we built our own. We designed an investing app that we’d actually want to use. One where you can invest in stocks and ETFs, know more about a company’s impact on the world, and have a say in the companies you invest in. We wanted to discover companies that care about the same things that we do — whether that’s a diverse workforce, renewable energy usage, or human rights protections — and, from there, decide whether or not to invest in them. So we integrated Environmental, Social, and Governance (ESG) tools to help people understand a company’s impact and its corporate structure. On top of that, we wanted to highlight shareholder voting as a direct line for retail investors to lobby for meaningful change in companies. So we built a platform that shines a light on past and upcoming shareholder votes. This way, we, as shareholders, can advocate for everyone who has a stake in the game — from workers, to investors, to the rest of our global community. <h4 class="pw-post-body-paragraph kl km ja kn b ko kp kq kr ks kt ku kv kw kx ky kz la lb lc ld le lf lg lh li it gc">What's at stake</h4> Companies often take shortcuts in order to maximize profits. There are many examples of large companies that have built their supply chain on <a class="au lj" href="https://www.nytimes.com/2019/12/16/business/fashion-nova-underpaid-workers.html" target="_blank" rel="noopener ugc nofollow">unethical working conditions</a>, dumped <a class="au lj" href="https://www.newyorker.com/news/news-desk/a-whistle-blower-accuses-the-kochs-of-poisoning-an-arkansas-town" target="_blank" rel="noopener ugc nofollow">toxic chemicals into the environment</a>, or knowingly <a class="au lj" href="https://www.npr.org/2014/03/31/297312252/the-long-road-to-gms-ignition-switch-recall" target="_blank" rel="noopener ugc nofollow">sold dangerous products</a>. They may not do these things explicitly to hurt people — but people end up hurt. The government can intervene through laws to hold companies accountable for these actions. But regulation is a slow process and often happens after the damage is already done. We need additional ways to hold companies accountable — that’s where shareholder voting comes in. Shareholder voting enables us to raise concerns to company leadership and engage them in conversations about what matters to us. Owning shares of a publicly traded company can allow you to vote on important company decisions during annual shareholder meetings. These votes help companies determine things like board appointments and internal audits. But they can also help companies make decisions that directly affect us. For example, shareholders can vote on whether a company should: <ul class=""> <li id="c378" class="ml mm ja kn b ko kp ks kt kw mn la mo le mp li mq mr ms mt gc" data-selectable-paragraph=""><a class="au lj" href="https://www.sec.gov/Archives/edgar/data/789019/000119312521298757/d189481ddef14a.htm#toc189481_35" target="_blank" rel="noopener ugc nofollow">Report on gender and racial pay gaps</a></li> <li id="95d5" class="ml mm ja kn b ko mu ks mv kw mw la mx le my li mq mr ms mt gc" data-selectable-paragraph=""><a class="au lj" href="https://www.sec.gov/Archives/edgar/data/1754301/000119312521276133/d181730ddef14a.htm#rom181730_41" target="_blank" rel="noopener ugc nofollow">Disclose money spent on political lobbying</a></li> <li id="47f9" class="ml mm ja kn b ko mu ks mv kw mw la mx le my li mq mr ms mt gc" data-selectable-paragraph=""><a class="au lj" href="https://www.sec.gov/Archives/edgar/data/1467858/000119312521143594/d22375ddef14a.htm#rom22375_40" target="_blank" rel="noopener ugc nofollow">Tie executive compensation to greenhouse gas reduction</a></li> <li id="4bc5" class="ml mm ja kn b ko mu ks mv kw mw la mx le my li mq mr ms mt gc" data-selectable-paragraph=""><a class="au lj" href="https://www.sec.gov/Archives/edgar/data/1652044/000130817921000256/lgoog2021_def14a.htm#lgooga056" target="_blank" rel="noopener ugc nofollow">Add civil rights leaders to the board of directors</a></li> <li id="992d" class="ml mm ja kn b ko mu ks mv kw mw la mx le my li mq mr ms mt gc" data-selectable-paragraph=""><a class="au lj" href="https://www.sec.gov/Archives/edgar/data/1166691/000120677421001222/cmcsa3829211-def14a.htm#d382921a021" target="_blank" rel="noopener ugc nofollow">Report failed sexual harassment interventions</a></li> <li id="09d1" class="ml mm ja kn b ko mu ks mv kw mw la mx le my li mq mr ms mt gc" data-selectable-paragraph=""><a class="au lj" href="https://www.sec.gov/Archives/edgar/data/1326801/000132680121000022/facebook2021definitiveprox.htm#ic3434e614c6d4661abc9f5e608f438ab_58" target="_blank" rel="noopener ugc nofollow">Hold itself accountable for online child exploitation</a></li> <li id="d54d" class="ml mm ja kn b ko mu ks mv kw mw la mx le my li mq mr ms mt gc" data-selectable-paragraph=""><a class="au lj" href="https://www.sec.gov/Archives/edgar/data/1090727/000120677421000883/ups3861781-def14a.htm#d386178a053" target="_blank" rel="noopener ugc nofollow">Report on steps taken to reduce its carbon footprint</a></li> </ul> If these examples seem specific, it’s because they are all actual proposals that were voted on in shareholder meetings last year — and not one of them passed. So what gives? Don’t people care about reducing carbon emissions and promoting social equity? Of course they do. But whether or not they actually vote on these proposals is another story. <a class="au lj" href="https://www.broadridge.com/_assets/pdf/broadridge-proxypulse-2020-review.pdf" target="_blank" rel="noopener ugc nofollow">One report</a> found that only 28% of shares held by retail investors were used to vote in 2020. Meanwhile, 92% of shares held by institutional investors were used to vote that year. This means, it’s the hedge funds, mutual funds, large banks, and financial institutions voting on these issues — not everyday people. Our goal is to make it easier for more people like you and me to vote on these issues. We believe, if more people are engaging with the companies they invest in, those companies will be incentivized to act, or face backlash from their stakeholders. That’s just the beginning. We think that this process can have a ripple effect on the ways companies address things like climate change and human rights. It’s up to all of us to hold these companies accountable. The engaged shareholder movement is here. Will you be a part of it?

Fennel

Hi, We're Fennel

A year ago, we started building an investing app to bring power back to the stakeholders.

Fennel

18 Jul, 2022

4 min read

20 months ago I had a simple idea: What if capital markets could change? What if capitalism (the same system that has driven us towards infinite growth at the cost of environmental devastation, wealth inequality, exploitation of workers, marginalization of people, and a sense of deriving one’s very purpose by the value of their productivity) could be used to solve the same problems it’s created? But I had my doubts. Maybe I was just being naive. It was September 2020. At the time, I was living in the Bay Area. The fires in California were so bad that I couldn’t see the sun through all the smoke. I was getting my PhD in physics, trying to find dark matter with 200 of the smartest people I’ve ever met. We were trying to solve one of the universe’s biggest mysteries — but something didn’t feel right. The world around us seemed to be disintegrating. Maybe I was just getting older and my eyes were starting to focus on the reality of the world I was living in. Was discovering dark matter really the problem I wanted to spend my time on? It couldn’t be. It felt so far away. There were more pressing issues that filled me with a sense of dread, like those thick gray clouds casting gloomy shadows on what should’ve been a sunny, late summer day. Then something interesting happened. The Governor of California announced that the state would <a href="https://www.cnn.com/2020/10/03/cars/california-2035-zev-mandate/index.html">end the sale of all gas-powered cars by 2035</a>. Then, New Jersey <a href="https://www.nj.com/news/2020/10/only-electric-cars-sold-by-2035-heres-how-nj-gets-there.html">announced</a> that it too would end the sale of gas-powered cars. And then <a href="https://www.caranddriver.com/news/a35104768/massachusetts-ban-new-gas-cars-2035/">Massachusetts</a> made a similar pledge. It seemed like <a href="https://www.reuters.com/article/us-climate-change-eu-transport/eu-to-target-30-million-electric-cars-by-2030-draft-idUSKBN28E2KM">other countries</a> were aiming for the same goal too. Even China <a href="https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/china-aims-for-evs-to-account-for-50-of-all-car-sales-by-2035-60954964">pledged</a> to make electric vehicles account for 50% of all new car sales by 2035. Politicians across the world came together, and pledged to reach a seemingly impossible goal. I asked myself, “Why now?” Then, not long after, <a href="https://electrek.co/2021/02/04/ford-doubles-electric-vehicle-investment-22-billion-through-2025/">Ford</a> and <a href="https://www.cnbc.com/2020/11/19/gm-accelerating-ev-plans-with-additional-7-billion-announces-new-pickup.html">GM</a> both announced that they were doubling down in the EV space. It clicked. When Tesla’s valuation had skyrocketed, it sent a message to the rest of the world that something was changing. A new generation of investors didn’t care if Tesla’s business was profitable or not, they just knew that a world without EVs wouldn’t exist in 25 years. It was that simple. The concept of “value” was changing for the younger generation. What a company did for the planet mattered more than the profit it made. I thought, “Wow, wouldn’t it be great to live in a world where every companies’ mission was aligned with the values of their investors?” I wondered how we could get there. I still had my doubts. Money was at the heart of this movement (these were for-profit businesses, after all). How could that be sustainable? But something else happened around the same time. Investment firm Engine No. 1 <a href="https://www.reuters.com/article/exxon-shareholders-engine-no-1/exxon-faces-proxy-fight-launched-by-new-activist-firm-engine-no-1-idUSKBN28H1IO">launched a bid</a> to take over 4 of the 12 board seats within Exxon Mobil, with the sole intent of reducing the company’s carbon emissions. <a href="https://www.nytimes.com/2021/06/09/business/exxon-mobil-engine-no1-activist.html">They succeeded</a>. How did they succeed? The boardroom challenge caught the attention of BlackRock, Vanguard, and State Street — some of the most powerful asset managers in the world — who all voted in favor of Engine No. 1’s board members during the Exxon meeting. These giant funds understood that there was an environmental and economic risk for the continued neglect of unmonitored carbon emissions. I went to <a href="https://www.proxymonitor.org/">Proxy Monitor</a>, a site dedicated to tracking shareholder votes, to see all of the votes taking place besides the Exxon Mobil one. What I saw shocked me. I saw shareholders voting on things like whether <a href="https://www.sec.gov/Archives/edgar/data/789019/000119312521298757/d189481ddef14a.htm#toc189481_35">Microsoft should report on its gender pay gap disparity</a> or whether <a href="https://www.sec.gov/Archives/edgar/data/1326801/000132680121000022/facebook2021definitiveprox.htm#ic3434e614c6d4661abc9f5e608f438ab_58">Facebook should report on the sexual exploitation of children on its platform</a>. These were big issues that impacted real people, but the proposals weren’t getting enough votes to pass. Would these proposals only succeed if an activist group like Engine No. 1 was backing them? What would it take to get the big institutional firms like BlackRock and Vanguard to show support again? I was beginning to lose hope that this would happen, that is, until a movement started among retail investors (the everyday people buying stocks as an investment in their financial future). Retail investors began entering the stock market in droves throughout 2020 for a variety of reasons, which seemed to reach a climax during <a href="https://www.youtube.com/watch?v=p3xj0EJ8fxk">the GameStop short squeeze</a> in early 2021. Not only were average people getting involved in capital markets like never before, these same retail investors were beginning to wise up to the system that was built around them. In the aftermath of the initial GameStop squeeze, retail investors began learning about things like payment for order flow and securities lending. They were paying attention to how hedge funds and market makers were processing their transactions. Their scrutiny even helped push these issues <a href="https://www.cnn.com/business/live-news/robinhood-gamestop-reddit-hearing-congress/index.html">to the floor of congress</a>. This group of retail investors — millions of people who are just like you and me — could be the ones who help push large corporations towards meaningful change. After all, it was our lives that were impacted by the decisions of these companies. But this was just the tip of the iceberg. The more retail investors found out about the system, the more they were motivated to reform it. I was right there too. After starting my personal investing journey a few years ago, I went deeper down the rabbit hole in 2020, and even further in 2021. Eventually, I learned that my shares — and the shares of other retail investors too — could be lent out without me knowing. That’s because brokerage firms <a href="https://www.sonnlaw.com/faq/can-my-broker-lend-my-shares/">are able to lend out the shares</a> that their retail investors buy, if that investor signed up for a margin account and agreed to <a href="https://www.sec.gov/news/public-statement/staff-fully-paid-lending">“fully-paid securities lending”</a> in the terms and conditions. This throws a major wrench in the retail investing movement, because if retail investors’ shares are lent out, they lose the ability to vote with those shares. Without the ability to vote, retail investors can’t be the voting bloc that pushes companies towards meaningful change during shareholder meetings. I knew something had to be done. Retail investors had to band together and use the system in order to change it. It was time to create something for this world that could allow people to truly help it. That’s what led to <a href="https://www.fennel.com/">Fennel</a>. Just like when I was researching dark matter, I surrounded myself with a team of intelligent people in order to tackle this mission. This time, it was a group of tech developers, financial professionals, and retail investors who felt motivated to make an impact as much as I did. Together, we aimed to build a brokerage that had the interests of retail investors in mind. But more than that, we wanted to build a platform where people could come together and stand up for what they believe in. A place to fight for the planet, for our communities, and for the very society we all worked to build up. I hope that this platform motivates more people who align with our vision. Join us and be part of this growing community. We hope to grow so big that our voices can no longer be ignored. Until every company truly understands the wishes of those who support them, Fennel will be there to fight alongside you. Thank you to all of those who have joined me in this journey so far, and to all of you who have worked hard to make something truly special.   See you all soon.   Daniel Naim

Fennel

A Note From Our Founder

20 months ago I had a simple idea: What if capital markets could change?

Daniel Naim

19 Jul, 2022

6 min read

The name “Fennel” is inspired by <a class="au li" href="https://www.worldhistory.org/Prometheus/" target="_blank" rel="noopener ugc nofollow">the ancient Greek myth of Prometheus</a>. In Greek mythology, Prometheus was one of the titans — a race of giant deities that predated the Olympian gods. When Zeus and the other Olympians fought to overthrow the primordial titans, Prometheus (whose name means “forethought”), knew that Zeus would win the war with the titans, and sided with the Olympians. After fighting for 10 years, the Olympian gods did win the war, and they banished most of the titans to the depths of the underworld. However, Prometheus and his brother Epimetheus were spared. Zeus, with his newfound power, tasked Prometheus and Epimetheus with the creation of life on earth. Together the brothers created all forms of animal life, and gave each animal a unique gift. Birds were given the gift of flight. Fish were given the ability to swim. Some animals were given size and strength, others were given sharp teeth and claws. But when it was time to give humans their gift, Prometheus wanted them to have something special. Prometheus had handcrafted the humans out of clay, and was very fond of them. So fond that he wanted to give humans the most powerful gift he could think of — the ability to wield fire. Prometheus snuck into the workshop of gods Hephaistos and Athena and stole their sacred fire. Prometheus then hid the flame in a hollow stalk of Fennel, and smuggled it down from Mt. Olympus to the humans on earth. The gift of fire was a boon to humankind. With fire, they were able to keep warm, cook their food, and forge metal weapons and tools. The gift of fire set humans apart from other animals by allowing them to harness the power of the natural world and create societies. That fire represented the birth of technology, and with it they were able to build civilizations. However, the gods weren’t happy when they found out about this. Zeus punished Prometheus by chaining him to a boulder, and sending an eagle to peck out his liver. Every day the eagle would feed on Prometheus’ liver, and every night it would grow back. Since Prometheus was immortal, Zeus left him to suffer this punishment for eternity. Although Prometheus had to endure this perpetual torment from the gods, he was seen as a hero by the humans, and a martyr for his sacrifice. We <a class="au li" href="https://fennel.com/" target="_blank" rel="noopener ugc nofollow">named our company Fennel</a> after the fennel that Prometheus used to smuggle fire. While fire was the central focus of the story, it was fennel that functioned as a vessel for the fire. One hollow stalk of fennel contained the flame that enabled humans to build the world we know today. Without it, humans would still be in the dark. In the myth, fire was a tool that could have benefited the masses, but access to it was limited to the powerful. This serves as an important metaphor for us. There are many different “fires” in our world today — things like education, natural resources, technology, and wealth. In Fennel’s case, we believe that the power of capital markets is one of those fires. Environmental, Social, and Governance (ESG) data, financial tools, and shareholder voting are all things that could be used for the greater good if they were made more accessible to everyone. So how do you make these things more accessible? With a hollow stalk of fennel, of course. We built Fennel to make it easier to use these resources. But our platform is just one piece of technology providing access to a handful of things. There are plenty of other fires out there being guarded, and many stalks of fennel that need to be carried. What’s important is to keep Prometheus’ mission alive. To capture the proverbial fire and give it as a gift to all of humanity — so everyone can use it. Because once the fire is in your control, what to do with that power is up to you.

Fennel

Where Does the Name Fennel Come From?

The name "Fennel" is inspired by the ancient Greek myth of Prometheus.

Fennel

25 Jul, 2022

4 min read

<div class="is it iu iv iw"> Modern capitalism has ushered in the greatest era of innovation, globalization, and sheer economic output in human history. However, the incentive structure, which rewards short-term gains over long-term sustainability, has come at the expense of fair labor and fair trade practices, human rights, and our planet’s delicate ecosystems. Social scientists have long recognized these shortfalls inherent to our system, but all external efforts — government intervention, a thriving philanthropic sector, protest movements, etc. — have not done enough to curb the destruction of this capitalist machine. Even <a class="au lj" href="https://money.cnn.com/2013/09/17/news/economy/occupy-wall-street-fizzled/" target="_blank" rel="noopener ugc nofollow">Occupy Wall Street</a>, the largest anti-capitalist protest movement in modern history, failed because our corporations are ultimately beholden to no other stakeholder than their own shareholders. So if corporations are doing this on the behalf of their shareholders, maybe it’s up to the shareholders to help put an end to this. Shareholder activism is a channel to create impact by influencing company policy from within. It can be a method for socially- and environmentally-conscious advocates to voice their concerns from the perspective of shareholders who want to increase the value of their ownership by promoting sustainability. As the conservationist David Brower liked to say, “There is no business to be done on a dead planet.” Shareholder activists are bullish on <a class="au lj" href="https://www.sustain.ucla.edu/what-is-sustainability/" target="_blank" rel="noopener ugc nofollow">sustainability</a> because they realize the massive upside potential of infusing compassion into business practices: positive press, fewer boycotts, fewer fines, fewer lawsuits, fewer labor strikes, more productive employees, more consumer demand, and the benefits of increasingly-progressive legislation. Even Founder of BlackRock Larry Fink — a pro-market authority — praised shareholder activism in his <a class="au lj" href="https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter" target="_blank" rel="noopener ugc nofollow">2022 Letter to CEOs</a>. This letter, written from the perspective of the shareholders of Corporate America, did not attack capitalism but instead implored executives to reframe and repurpose capitalism to achieve a wider array of society’s ambitious goals. “Capitalism has the power to shape society and act as a powerful catalyst for change,” Fink wrote. Over the past few decades, there have been a handful of organizations that have formed in order to support sustainable action through the current capitalist system. Organizations like <a class="au lj" href="https://www.asyousow.org/" target="_blank" rel="noopener ugc nofollow">As You Sow</a>, <a class="au lj" href="https://www.greencentury.com/" target="_blank" rel="noopener ugc nofollow">Green Century Funds</a>, and <a class="au lj" href="https://impaxam.com/" target="_blank" rel="noopener ugc nofollow">Impax Asset Management</a> have used shareholder activism to put forward shareholder proposals that aim to push companies in the direction of environmental sustainability or social good. Why push for change through shareholder proposals? If you own stock in a company, you are entitled to vote your shares at annual shareholder meetings. Typically, shareholders vote on anything that might affect the stock price, such as the makeup of the Board of Directors, mergers & acquisitions, stock splits, and executive compensation. But many investors are also proposing measures that support ESG (Environmental, Social and Corporate Governance) initiatives, asserting <a class="au lj" href="https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line#:~:text=The%20triple%20bottom%20line%20is,%3A%20profit%2C%20people%2C%20and%20the" target="_blank" rel="noopener ugc nofollow">triple bottom line</a> benefits to people, the planet, and profit. Institutional investors and activist hedge funds have leveraged shareholder activism to make great impact, such as <a class="au lj" href="https://engine1.com/" target="_blank" rel="noopener ugc nofollow">Engine №1</a> who were able to <a class="au lj" href="https://www.thedeal.com/activism/activist-investor-rankings-for-2021/" target="_blank" rel="noopener ugc nofollow">vote three environmental activists</a> onto the Board of Directors of Exxon Mobil in 2021. Retail investors, too, can be a part of this movement. If you own stock in a publicly-traded company, you can participate in the shareholder voting process by looking up that company’s Definitive Proxy Statement, which is filed to the Securities Exchange Commission in the Schedule 14A. You may search for upcoming shareholder proposals and the proxy voting materials of your stocks through the SEC’s <a class="au lj" href="https://www.sec.gov/edgar/search/" target="_blank" rel="noopener ugc nofollow">EDGAR database</a>, which is free and open to the public. Disruptive technology such as investing apps have democratized access to the stock market, increasing stock trading by retail investors from diverse socioeconomic backgrounds. Thus, it is exceedingly important for retail investors not to leave their power on the table but to exercise their rights as shareholders and vote at these meetings. <a class="au lj" href="https://www.proxymonitor.org/Default.aspx" target="_blank" rel="noopener ugc nofollow">ProxyMonitor.Org</a> has a watchlist of the upcoming votes of Fortune 250 companies and allows users to sort by social impact. It is famously theorized that capitalism has within it “the seeds of its own destruction.” Under a capitalist system, social classes are defined in their relation to their control over the means of production. But in the context of shareholder activism, democratized stock ownership and proxy voting allow for a more inclusive control over the means of production. Shareholder activism will allow more people to negotiate the value of corporate sustainability — a perspective that has been stifled in the past. This movement can bring about a new notion of what capitalism is and who it serves. Every vote in favor of ESG goals is another seed planted in the unemotional, hyper-rational capitalist paradigm, so that future generations can reap the benefits of a protected natural ecosystem and a compassionate corporate culture.   </div> <div class="o dy lk ll ie lm" style="padding-left: 440px;" role="separator">∙ ∙ ∙</div> <div class="is it iu iv iw"> The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member <a class="au lj" href="https://www.finra.org/" target="_blank" rel="noopener ugc nofollow">FINRA</a> <a class="au lj" href="https://www.sipc.org/" target="_blank" rel="noopener ugc nofollow">SIPC</a>. </div>

Shareholder Activism

What's the State of Shareholder Activism?

Shareholder activism is a channel to create impact by influencing company policy from within.

Sultan White

08 Aug, 2022

4 min read

How many times have we followed a trend just to fit in with the “cool kids” even if meant being untrue to ourselves? The reality is, many of us have fallen prey to peer pressure at some point. But individuals aren’t the only ones who conform to a trend to stay relevant. Businesses do too, and because ESG (Environmental, Social, and Governance) and sustainability are the hot topics of today, many companies partake in something called “greenwashing.”    <h4>Why greenwash?</h4> <a href="https://earth.org/what-is-greenwashing/">Greenwashing</a> is defined as the process of making misleading statements, in order to market a company or its products as being environmentally sustainable. <a href="https://corporatefinanceinstitute.com/resources/knowledge/other/greenwashing/">Some examples of greenwashing are</a>:  <ul> <li aria-level="1">Making vague or false environmental claims that are not backed up by hard evidence or third-party certifications </li> <li aria-level="1">Placing emphasis on irrelevant issues (for example, saying a phone is “CFC-free” when CFCs are already banned by law) </li> <li aria-level="1">Hiding “trade-offs” — essentially, highlighting small environmental victories in order to mask a larger, potentially more concerning issue (for example, banks advertising their issuing of sustainable bonds while financing companies that harm the environment) </li> </ul> Greenwashing is <a href="https://www.nasdaq.com/articles/are-companies-as-green-as-theyd-have-you-believe-2021-06-21">on the rise</a> as companies that boast of high ESG scores and sustainable practices are gaining traction in both financial and non-financial aspects. We’ve seen the S&P 500 ESG Index beat the S&P 500 Index <a href="https://www.spglobal.com/spdji/en/indices/esg/sp-500-esg-index/#overview">since the first market slump in early 2020</a>, <a href="https://www.reuters.com/business/sustainable-business/global-sustainable-bonds-see-record-issuance-jan-sept-2021-2021-10-12/">record issuance</a> of sustainable bonds in the year 2021, <a href="https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Strategy%20and%20Corporate%20Finance/Our%20Insights/Five%20ways%20that%20ESG%20creates%20value/Five-ways-that-ESG-creates-value.ashx">studies</a> that show ESG factors drive consumer preference, and customers <a href="https://www.forbes.com/sites/gregpetro/2022/03/11/consumers-demand-sustainable-products-and-shopping-formats/">willing to pay a premium to go green</a>. As a result, many companies may try to emulate this success by exaggerating how environmentally sustainable they really are. Some companies resort to greenwashing as they come under pressure to comply with environmental industry standards or regulatory requirements. One such example is when <a href="https://www.bbc.com/news/business-34324772">Volkswagen admitted to cheating</a> government-required emissions tests by fitting various vehicles with “defeat devices.”   <h4>The rewards of being truly sustainable are sustainable</h4> What companies sometimes forget is that greenwashing is not sustainable (pun unintended). Those who greenwash risk getting exposed by an informed consumer or a gatekeeping group, which can backfire on the company’s reputation. A recent example would be when <a href="https://www.dezeen.com/2019/08/02/hm-norway-greenwashing-conscious-fashion-collection-news/">H&M launched its “green” clothing line called Conscious</a>. In this instance, the retailer claimed to use organic cotton and recycled polyester, but didn’t provide enough evidence to back up its marketing. The company then faced criticism for misleading claims In the case that the truth behind an organization’s greenwashing claims goes uncovered, it is still at a loss as it only enjoys the superficial benefits of being a “responsible” business. It doesn’t reap the added value that actual sustainable business can receive — like <a href="https://www.bain.com/insights/sustainability-your-brands-next-cost-saving-weapon/">lower operational costs</a>, <a href="https://www.globenewswire.com/news-release/2019/01/10/1686144/0/en/CGS-Survey-Reveals-Sustainability-Is-Driving-Demand-and-Customer-Loyalty.html">loyal customers</a>, or <a href="https://www.cfachicago.org/wp-content/uploads/2020/10/Blog_-Managing-Risk-with-ESG-Investing.pdf">positive shareholder returns</a>.   <h4>Greenwashing faces legal implications in the future</h4> Most importantly, responsible ESG practices minimize regulatory and legal interventions, which in turn means less negative publicity and fines. This is exemplified in Volkswagen’s case, wherein the car manufacturer was fined $125 million for its emissions scandal, and saw further losses as a result of having to recall close to 12 million of its cars worldwide. The spiral translated into <a href="https://fortune.com/2020/10/06/volkswagen-vw-emissions-scandal-damages/">business losses</a> and <a href="https://fortune.com/2015/09/23/volkswagen-stock-drop/">negative shareholder returns</a>. The greenwashing crackdown will continue with new environmental laws being written. The <a href="https://research.hktdc.com/en/article/MTAzNDU1OTc0Nw">EU has decided to amend its new consumer rules</a> to address greenwashing concerns, requiring producers to provide greater transparency on product information to avoid misleading claims. The UK is also targeting greenwashing with the Competition and Markets Authority’s <a href="https://www.whitecase.com/publications/alert/uk-clampdown-greenwashing">Green Claims Code</a>. Organizations are driven towards greenwashing because of peer, consumer, or legal pressures. However, by doing so these businesses miss out on the true benefits of being sustainable.They also might expose themselves to the threat of legal action as more legislation is being drafted against greenwashing. As a result, these companies risk reputational damage, financial losses, and negative returns for stakeholders. Until regulators catch up to all the companies engaging in greenwashing, it’s up to us to be on the lookout for common greenwashing tactics, and stay fully informed about the purchases and investments we make.   ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member <a href="https://www.finra.org/">FINRA</a> <a href="https://www.sipc.org/">SIPC</a>.

ESG

Environmental

What Is Greenwashing?

Greenwashing is a superficial and sometimes misleading way companies claim sustainability.

Shivani Hemnani

15 Aug, 2022

3 min read

With financial markets around the world still reeling from muddled efforts to curb a global pandemic, one financial notion seems to be gaining fresh support: ESG. However, much about ESG remains unexplored. Are ESG and risk management practices related? How can ESG be used to benefit organizations and investors from a risk standpoint? Does one of the three ESG pillars play a bigger role in terms of generating financial returns, utility, and risk management?   Some investors have a hypothesis that ESG investments generate stronger, more sustainable returns over the long term, and this has been exemplified in the past couple of years. ESG investments, indices, and companies that keep considerations of the three factors at the forefront of their culture have bounced back higher than unbothered counterparts; for example, the S&P 500 ESG Index has beat the S&P 500 Index <a href="https://www.spglobal.com/spdji/en/indices/esg/sp-500-esg-index/#overview">since the first market slump in early 2020</a>, sustainable bonds have seen <a href="https://www.reuters.com/business/sustainable-business/global-sustainable-bonds-see-record-issuance-jan-sept-2021-2021-10-12/">record issuance in the year 2021</a>, and organizations with good ESG ratings <a href="https://www.cfachicago.org/wp-content/uploads/2020/10/Blog_-Managing-Risk-with-ESG-Investing.pdf">have displayed strong financial resilience</a> since the economic downturn. How can this phenomenon be explained? The answer lies in the fact that <a href="https://www2.deloitte.com/ie/en/pages/financial-services/articles/esg-risk-management-framework.html">ESG can work as a risk management strategy</a>; not just in financial terms, but also in view of management conditions and meeting regulatory requirements. A <a href="https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Strategy%20and%20Corporate%20Finance/Our%20Insights/Five%20ways%20that%20ESG%20creates%20value/Five-ways-that-ESG-creates-value.ashx">report published by McKinsey</a> tells us that good ESG practices could potentially lead to positive cash flows, as well as hedge financial and reputational risks due to the following reasons: <ul> <li>ESG drives consumer preference as some customers are <a href="https://www.forbes.com/sites/gregpetro/2022/03/11/consumers-demand-sustainable-products-and-shopping-formats/">willing to pay a premium to go green</a>. McKinsey also found that companies that use sustainable practices in their supply chain are able to cut costs.</li> <li>Responsible reporting minimizes regulatory and legal interventions, which generates less negative publicity for an organization.</li> <li>Having generous social policies in place helps motivate and retain staff, as well as increase employee productivity, which has been found to <a href="https://www.sciencedirect.com/science/article/abs/pii/S0304405X11000869">positively correlate with shareholder returns.</a></li> <li>ESG practices help optimize investments and capital expenditures. One way to get ahead of the curve is to consider making investments into assets that take advantage of sustainability tailwinds. For example, China’s efforts to curb air pollution is estimated to create <a href="http://www.chinadaily.com.cn/a/201804/18/WS5ad69dc6a3105cdcf6518f2c.html">over $3 trillion in investment opportunities across various industries</a> through 2030.</li> </ul>   <h4>Integrating ESG in business practices doubles as good risk management, which goes on to generate brand equity for companies and attract investors.</h4> Research has <a href="https://www.mdpi.com/2071-1050/12/1/254">found a positive relationship</a> between ESG scores and brand equity value of S&P 500 companies. Good ESG incorporation mitigates reputational risks for an organization, and that is where investor confidence is built. In turn, investors manage financial risks by keeping exposures to ESG investments in their portfolios, which also helps them derive utility as they are inclined to feel that their investment decisions are part of a bigger movement to do better for the world.   <h4>It's the Social and Governance factors that actually push away the risks.</h4> We constantly hear a lot of buzz surrounding the Environmental aspect which dominates sustainable investment allocations, but the value of the Social and Governance aspects which have a determining impact on sustainable practices, and as a result, risk management within an organization, are rarely ever given recognition. Taking a deep-dive into how the “S” and “G” areas are equally at play as the “E” in contributing to sound risk management within a company and yielding positive returns for investors, we delve into some research on how the three factors impact financial performance on an absolute basis. A <a href="https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwi9kr_i48b3AhWTQc0KHfB2DUAQFnoECAYQAQ&url=https%3A%2F%2Fjournals.vgtu.lt%2Findex.php%2FJBEM%2Farticle%2Fdownload%2F12725%2F9980&usg=AOvVaw1dAd8rRWX31GFeB0IY3x9v">recent study</a> examined the overall and individual influences of corporate E, S, and G conduct on economic performance of S&P 500 firms. A breakdown of the scores for each aspect across companies from different industries and their correlation with the respective companies’ economic performances were looked at. The results may be surprising at first look: Corporate “E” conduct does not have any significant effect on firm economic performance, while conduct for “S” and “G” significantly influences firm economic performance. The Social and Governance components are key to the general practices of risk management; aiming to do justice to these elements in the day-to-day course of running a business ensures responsible and skilled management structures, risk ownership, and compliance with regulatory requirements. Here we covered reasons to explain these occurrences in the market — that ESG is an exceptional risk management tool for organizations internally, and also for investors in financial terms. More importantly, we saw that “S” and “G” are crucial to building optimal risk practices within a firm, which when combined with “E”, enhance the attractiveness of businesses and generate solid returns over the long term for investors.   References Ajour, E. et al. (2020). The Role of Sustainability in Brand Equity Value in the Financial Sector. MDPI. Retrieved April 29, 2022, from <a href="https://www.mdpi.com/2071-1050/12/1/254">https://www.mdpi.com/2071-1050/12/1/254</a> BNP Paribas SA Group (2021). BNP Paribas recognized by EcoVadis and FTSE4Good extra-financial ratings. BNP Paribas. Retrieved May 06, 2022, from https://group.bnpparibas/en/news/bnp-paribas-recognized-by-ecovadis-and-ftse4good-extra-financial-ratings Cek, K. & Eyupoglu, S. (2020). Does environmental, social and governance performance influence economic performance? Scopus. Retrieved April 29, 2022, from <a href="https://www.scopus.com/record/display.uri?eid=2-s2.0-85087457813&origin=inward&txGid=4864f78cdc725470874f18fec147c309&featureToggles=FEATURE_NEW_DOC_DETAILS_EXPORT:1">https://www.scopus.com/record/display.uri?eid=2-s2.0-85087457813&origin=inward&txGid=4864f78cdc725470874f18fec147c309&featureToggles=FEATURE_NEW_DOC_DETAILS_EXPORT:1</a> Cheasty, G. (2019). Asset Management: Integrating ESG Risk into a Risk Management Framework. Deloitte. Retrieved April 22, 2022, from <a href="https://www2.deloitte.com/ie/en/pages/financial-services/articles/esg-risk-management-framework.html">https://www2.deloitte.com/ie/en/pages/financial-services/articles/esg-risk-management-framework.html</a> Dorobantu, S., Henisz, W. & Nartey, L. (2022). Spinning gold: The financial returns to stakeholder engagement. Wiley Online Library. Retrieved May 09, 2022, from <a href="https://onlinelibrary.wiley.com/doi/abs/10.1002/smj.2180">https://onlinelibrary.wiley.com/doi/abs/10.1002/smj.2180</a> Edmans, A. (2011). Does the stock market fully value intangibles? Employee satisfaction and equity prices. ScienceDirect. Retrieved May 09, 2022, from <a href="https://www.sciencedirect.com/science/article/abs/pii/S0304405X11000869">https://www.sciencedirect.com/science/article/abs/pii/S0304405X11000869</a> Henisz, W., Koller, T., and Nuttall, R. (2019). Five ways that ESG creates value. McKinsey Quarterly. Retrieved May 09, 2022, from https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Strategy%20and%20Corporate%20Finance/Our%20Insights/Five%20ways%20that%20ESG%20creates%20value/Five-ways-that-ESG-creates-value.ashx Lawrence, E., & Zlatkova, S. (2020). Managing risk with ESG investing - CFA society chicago. Northern Trust Asset Management. Retrieved April 26, 2022, from <a href="https://www.cfachicago.org/wp-content/uploads/2020/10/Blog_-Managing-Risk-with-ESG-Investing.pdf">https://www.cfachicago.org/wp-content/uploads/2020/10/Blog_-Managing-Risk-with-ESG-Investing.pdf</a> Murugaboopathy, P., & Dogra, G. (2021). Global sustainable bonds see record issuance in Jan-Sept 2021. Reuters. Retrieved April 26, 2022, from <a href="https://www.reuters.com/business/sustainable-business/global-sustainable-bonds-see-record-issuance-jan-sept-2021-2021-10-12/">https://www.reuters.com/business/sustainable-business/global-sustainable-bonds-see-record-issuance-jan-sept-2021-2021-10-12/</a> S&P Global. (2022). S&P 500 ESG Index. S&P Dow Jones Indices. Retrieved April 22, 2022, from <a href="https://www.spglobal.com/spdji/en/indices/esg/sp-500-esg-index/#overview">https://www.spglobal.com/spdji/en/indices/esg/sp-500-esg-index/#overview</a>   ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member <a href="https://www.finra.org/">FINRA</a> <a href="https://www.sipc.org/">SIPC</a>.

ESG

Investing

How Does ESG Relate to Risk Management?

Some investors have a hypothesis that ESG investments generate stronger, more sustainable returns over the long term.

Shivani Hemnani

25 Aug, 2022

4 min read

I arrived at Harvard as a first-year student in the fall of 2018. I was passionate about climate justice even as an incoming freshman. So you can imagine my surprise when I found out that my own university was also a corporation actively investing in the destruction of the homes of me and my peers, and the future of our society. This is not hyperbole. Harvard is governed by the <a class="au li" href="https://www.harvard.edu/about/leadership-and-governance/harvard-corporation/" target="_blank" rel="noopener ugc nofollow">Harvard Corporation</a>, which manages a $52 billion endowment fund that up until recently included holdings in the fossil fuel companies driving the climate crisis. Like me, many students enter college with little to no idea of what endowments are or just how vast a social and political impact universities have through them. Endowments are large pots of money that universities invest to generate income. They are <a class="au li" href="https://www.insidephilanthropy.com/explainers/what-is-an-endowment" target="_blank" rel="noopener ugc nofollow">set up to ensure the financial future of a university</a> and enable it to provide for generations of students, faculty, and community members to come. But when invested in fossil fuel companies, the only futures these funds safeguard effectively are those of the extractive industries wrecking our planet, as well as the vested interests behind them. Divestment, or the act of removing one’s investment, <a class="au li" href="https://www.theguardian.com/environment/2015/jun/23/a-beginners-guide-to-fossil-fuel-divestment" target="_blank" rel="noopener ugc nofollow">works</a> to change that paradigm. It helps transform endowments from instruments of corporate finance into reflections of the needs, interests, and concerns of the university and broader community. Simply put, an institution of higher education cannot realize its espoused commitments to climate action, social justice, and preparing young people to be tomorrow’s leaders while investing in a status quo that prevents this from happening. Prestigious and wealthy universities have a unique responsibility to be leaders in divestment, and some have taken steps towards doing so. Harvard finally <a class="au li" href="https://www.thenation.com/article/activism/harvard-fossil-fuel-divestment-won/" target="_blank" rel="noopener ugc nofollow">moved</a> to divest in fall 2021 after years of tireless student organizing and massive public pressure. But other well-known universities, <a class="au li" href="https://www.washingtonpost.com/education/2022/02/16/college-fossil-fuel-divest-legal-action/" target="_blank" rel="noopener ugc nofollow">like Stanford</a>, have yet to divest. Fossil fuel investments and other ties to the fossil fuel industry also <a class="au li" href="https://www.teenvogue.com/story/fossil-fuel-divest-harvard-complaint" target="_blank" rel="noopener ugc nofollow">create</a> an inherent conflict of interest that <a class="au li" href="https://www.project-syndicate.org/commentary/institutional-investors-must-divest-from-fossil-fuels-by-bevis-longstreth-1-and-connor-chung-2021-11" target="_blank" rel="noopener ugc nofollow">jeopardizes</a> universities’ core academic and <a class="au li" href="https://fossilfreeresearch.com/" target="_blank" rel="noopener ugc nofollow">research missions</a>. Consider, for instance, how many universities continue to <a class="au li" href="http://www.unkochmycampus.org/rsc-report" target="_blank" rel="noopener ugc nofollow">accept</a> <a class="au li" href="https://www.theguardian.com/education/2021/dec/11/uk-universities-took-89m-from-oil-firms-in-last-four-years" target="_blank" rel="noopener ugc nofollow">vast sums</a> of fossil fuel <a class="au li" href="https://tinyurl.com/fossilfuelties" target="_blank" rel="noopener ugc nofollow">funding</a> for climate change-related research, despite a <a class="au li" href="https://pubmed.ncbi.nlm.nih.gov/9605902/" target="_blank" rel="noopener ugc nofollow">well-documented</a> <a class="au li" href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6187765/" target="_blank" rel="noopener ugc nofollow">pattern</a> of <a class="au li" href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1360-0443.1997.tb02863.x#references-section" target="_blank" rel="noopener ugc nofollow">distorted</a> research outcomes resulting from funding by companies with an oppositional agenda. <a class="au li" href="https://www.ft.com/content/16091645-98b3-4041-9ca2-053fb60181ba" target="_blank" rel="noopener ugc nofollow">No</a> major fossil fuel company is <a class="au li" href="https://priceofoil.org/2020/09/23/big-oil-reality-check/" target="_blank" rel="noopener ugc nofollow">truly aligned</a> with the demands of climate science or justice. Many continue to launch concerted campaigns <a class="au li" href="https://www.climatechangecommunication.org/america-misled/" target="_blank" rel="noopener ugc nofollow">spreading</a> climate misinformation and <a class="au li" href="https://unearthed.greenpeace.org/2021/06/30/exxon-climate-change-undercover/" target="_blank" rel="noopener ugc nofollow">opposing</a> climate action. So it is clear that the industry cannot be a trustworthy partner in the production of public knowledge and ultimately, policy, on climate. By <a class="au li" href="https://www.latimes.com/opinion/story/2022-04-03/climate-change-research-funding-fossil-fuels" target="_blank" rel="noopener ugc nofollow">allowing</a> fossil fuel companies to use their credibility — whether through investments that sustain these companies’ core business model or research partnerships that <a class="au li" href="https://www.thenation.com/article/environment/university-climate-research-fossil-fuels/" target="_blank" rel="noopener ugc nofollow">bolster</a> their <a class="au li" href="https://www.theguardian.com/environment/2022/feb/16/oil-firms-climate-claims-are-greenwashing-study-concludes" target="_blank" rel="noopener ugc nofollow">greenwashing</a> — universities make themselves complicit in climate breakdown and <a class="au li" href="https://www.timeshighereducation.com/blog/fossil-fuel-research-ties-undermine-universities-climate-change-response" target="_blank" rel="noopener ugc nofollow">undermine</a> their own potential for urgently-needed climate leadership. Already, asset managers controlling nearly <a class="au li" href="https://www.stand.earth/advisory/divestment-40-trillion" target="_blank" rel="noopener ugc nofollow">$40 trillion</a> worth of funds have pledged to divest from fossil fuels because they recognize the need to align their financial practices with their principles. They also recognize the overwhelming <a class="au li" href="https://ieefa.org/major-investment-advisors-blackrock-and-meketa-provide-a-fiduciary-path-through-the-energy-transition/" target="_blank" rel="noopener ugc nofollow">evidence</a> that divestment <a class="au li" href="https://www.nytimes.com/2021/10/26/opinion/climate-change-divestment-fossil-fuels.html" target="_blank" rel="noopener ugc nofollow">works</a>. And they know that without taking a bold stance against fossil fuels and other industries undermining our sustainable future, they’ll lose the chance to have young people like myself as potential customers, employees, supporters, and so on. Regardless of the reason, the choice to divest must be applauded. But to truly lead on climate, institutions like Harvard must take the next step of severing remaining fossil fuel industry ties, by doing things like banning fossil fuel research money and recruitment on campus, or <a class="au li" href="https://www.thenation.com/article/environment/harvard-yale-fossil-fuel-divestment/" target="_blank" rel="noopener ugc nofollow">reinvesting</a> in community-based and renewable energy solutions. Still, some asset managers and fund trustees (unsurprisingly, some with <a class="au li" href="https://yaledailynews.com/blog/2022/02/24/four-yale-trustees-accused-of-conflict-of-interest-for-fossil-fuel-ties/" target="_blank" rel="noopener ugc nofollow">personal</a> <a class="au li" href="http://harvardcorplovesfossilfuels.divestharvard.com/" target="_blank" rel="noopener ugc nofollow">ties</a> to the fossil fuel industry) continue to make the same tired and bad faith arguments about the value of engaging with the fossil fuel industry as shareholders. We know that such engagement <a class="au li" href="https://impakter.com/harvard-from-apartheid-to-the-climate-crisis-the-limits-of-shareholder-engagement/" target="_blank" rel="noopener ugc nofollow">does not</a> <a class="au li" href="https://www.commondreams.org/views/2021/11/22/shareholder-engagement-fossil-fuel-companies-failure-climate-change" target="_blank" rel="noopener ugc nofollow">work</a> when the core business model is the problem. And it cannot work when the fossil fuel industry makes it <a class="au li" href="https://www.newsweek.com/fossil-fuel-companies-are-undermining-our-future-opinion-1609813" target="_blank" rel="noopener ugc nofollow">abundantly clear</a> that it’s unwilling to let this model go so long as any potential profit remains — no matter the cost to the environment or human life. That is why young people must continue leading the way in calling for total divestment. It is not an option but the only option for moneyed institutions to play a positive role in combating climate change. Actions and dollars, too, speak louder than words. Ending fossil fuel finance and other forms of social license-giving to the fossil fuel industry is vital for remaking our energy and economic systems in favor of people and the planet. The case is as strong as ever: with Russia’s war on Ukraine <a class="au li" href="https://www.newyorker.com/news/daily-comment/this-earth-day-we-could-be-helping-the-environment-and-ukraine" target="_blank" rel="noopener ugc nofollow">making</a> the instability of a global fossil fuel economy uniquely clear, we need to push our institutions to be champions of this remaking, instead of dragging their heels.   ∙ ∙ ∙ <div class="ir is it iu iv"> The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member <a class="au li" href="https://www.finra.org/" target="_blank" rel="noopener ugc nofollow">FINRA</a> <a class="au li" href="https://www.sipc.org/" target="_blank" rel="noopener ugc nofollow">SIPC</a>. </div>

Environmental

Investing

Why Are Students Pushing Universities To Divest?

Some universities are using endowment funds to invest in the oil industry.

Ilana Cohen

06 Sep, 2022

5 min read

Fennel is joining forces with We The Investors to provide engaging educational content to help retail investors learn more about capital markets. This introduction is the first post in an ongoing series.   The main reason we launched Fennel was to ensure that we, as retail investors, are represented in capital markets. As a result, we pay close attention to other groups advocating for the same ideals, which is how we learned of <a href="https://www.urvin.finance/advocacy">We The Investors</a> (WTI), a grassroots organization pushing for market reforms on the behalf of retail investors. Earlier this year, WTI <a href="https://www.urvin.finance/advocacy/we-the-investors-pfof-sign-on">wrote a letter</a> to the SEC asking the agency to address payment for order flow (PFOF) and excessive off-exchange trading. Both of these practices are legal in the US, but their questionable ethics have <a href="https://www.bloomberg.com/news/articles/2022-06-08/sec-chief-takes-aim-at-payment-for-order-flow-in-sweeping-plans#xj4y7vzkg">led to increased scrutiny</a> by regulators. Many of us at Fennel signed WTI’s SEC letter, along with more than 71,000 other retail investors. Inspired by this action, we reached out to two of WTI’s founders, Dave Lauer and Alex Cohen, to learn more. “In the world of social media, the largest companies in history have attained their size by productizing their users. They pitted their interests against the interests of their users, through selling user data and exploiting their market power. I think we see a lot of the same things in capital markets,” We The Investors co-founder Dave Lauer told Fennel. He continued, “People need to think about [payment for order flow] like they do with big tech. If you’re paying for a tech service with your privacy, you might think that’s not an explicit cost, but it very much is. It’s just like payment for order flow. You might think you're getting free trading because there's no explicit cost. But implicit costs can add up to be even more than the explicit costs you’d pay otherwise.” This stance and the support it received has helped WTI <a href="https://twitter.com/UrvinTerminal/status/1534927667761491974">get meetings</a> with the SEC chairman Gary Gensler, and allowed them to advocate for change <a href="https://twitter.com/UrvinTerminal/status/1539230563659239424">in front of Congress</a>. But this is just one initiative spearheaded by the group. We The Investors aims to help individual investors learn about how structural issues with capital markets affect their daily lives. Through this education, the group encourages investors to push for reform in order to create fairer markets. Lauer and Cohen are also co-founders of <a href="https://www.urvin.finance/">Urvin Finance</a>, a startup that is building a market data platform called <a href="https://www.urvin.finance/mission">The Terminal</a>, which aims to give individual investors professional-quality data analytics, educational resources, and tools. “I think the answer to a lot of problems in markets is more transparency. That's always been a guiding principle of the reforms I've been pushing for,” Lauer explained. “As a capitalist, I believe in transparency and competition. I think if you put everyone on a level playing field and open things up, that tends to give you the best outcomes.”  WTI has put together an <a href="https://www.urvin.finance/advocacy#preamble1">Investor Bill of Rights</a> with several guiding principles to organize its advocacy efforts and directions for possible reform. The principles include: <pre> </pre> <ul> <li aria-level="1">Transparency: Investors should be able to gather all important information regarding their brokers’ practices, including costs, how their securities are held, and more</li> </ul> <pre> </pre> <ul> <li aria-level="1">Simplicity & Fairness: Markets should be easier to understand and trust, without unnecessary complexity and excessive intermediation.</li> </ul> <pre> </pre> <ul> <li aria-level="1">Choice & Control: Investors should have control over their orders, trades, accounts and investments.</li> </ul> <pre> </pre> <ul> <li aria-level="1">Best Execution: Brokers must be held to a true best execution standard, not a “good enough” standard. Conflicts-of-interest must be fully disclosed or eliminated.</li> </ul> <pre> </pre> <ul> <li aria-level="1">Better Settlement & Clearing: Investors should be offered a choice about how their purchase orders are settled. Barriers that affect an investor’s choice should be removed.</li> </ul> <pre> </pre> These five principles are meant as guidelines to make markets fairer, and WTI identifies different issues that need to be addressed in order to push for each one. The organization also helps walk retail investors through the process of how they too can help, like sending their own letters to the SEC or members of Congress. Reaching out to government representatives is one way to advocate for systemic change, but it can also be intimidating if you’ve never done it before. That’s why WTI walks people through the process, with <a href="https://www.urvin.finance/advocacy-issues/comment-letters">a guide on how to write an SEC comment letter</a> and <a href="https://vimeo.com/683960170?embedded=true&source=video_title&owner=168392146">a helpful video</a>. The SEC is required by law to read these comment letters, which is why WTI encourages people to write them. WTI’s resources are valuable assets for investors who want fairer markets, and for those who want to get directly involved in reform. As Lauer puts it, “Let's just get the right information into people's hands so that they can make good decisions.” That’s why in collaboration with We The Investors, Fennel will be publishing a series of articles exploring topics such as the difference between investing and trading, forms of risk, and how markets function. Through these articles, we hope to give retail investors a better understanding of how capital markets work and ways they can improve. Keep an eye out for more educational content and check out We The Investors website to <a href="https://www.urvin.finance/advocacy">join the movement</a>.

Fennel

An Introduction to We The Investors

Fennel is joining forces with We The Investors to provide engaging educational content to help retail investors learn more about capital markets.

Fennel

12 Sep, 2022

3 min read

<a href="https://www.history.com/topics/19th-century/labor#:~:text=Origins%20of%20The%20Labor%20Movement,-The%20origins%20of&text=The%20earliest%20recorded%20strike%20occurred,union%20organization%20among%20American%20workers.">Labor unions</a> have existed in the United States since the nation’s founding, with the concept first brought to America by the European immigrants who settled in the New World. Labor Unions are groups of workers who come together to collectively advocate for safer working conditions, higher compensation, better hours, and reasonable benefits. <a href="https://www.encyclopedia.com/law/law-magazines/philadelphia-cordwainers-trial-1806">The Federal Society of Journeymen Cordwainers</a> is regarded as the first labor union born in the US, officially forming in 1794. The formation of this union was the shot heard around the country, sparking unions across different industries and cities. As companies gained power throughout the 1800s, consolidating multiple types of tradespeople in single factories, unions began forming alliances amongst each other — unions of unions. These groups of workers fighting for their rights would become the working class’ greatest hedge against exploitation.  As union membership grew into a significant voting bloc, union members began pushing for legislation to protect their labor rights. The creation of the U.S. Department of Labor and federal civil rights legislation is partly due to the advocacy efforts of labor unions. Of these “unions of unions,” the AFL-CIO is by far the largest and one of the most influential. The organization traces its roots back to the formation of the AFL in 1886, and it’s still heavily engaged in <a href="https://www.influencewatch.org/labor-union/afl-cio/#:~:text=In%20the%20AFL%2DCIO's%202016,the%20union's%20political%20action%20committee).">political spending and lobbying</a> today. Recently, the AFL-CIO has deployed yet another means of achieving large-scale progressive change: <a href="https://fennel.com/blog/whats-the-state-of-shareholder-activism" target="_blank" rel="noopener">shareholder activism</a>. Labor unions use many techniques to advance their goals. One of the most well known techniques is striking, in which union members refuse to work until their demands are met. When employers treat workers like they’re disposable, strikes try to prove to them that they are not.  What makes labor strikes so effective is a process called “collective bargaining” — which involves union members banding together in order to put more weight into their demands. Ultimately, collective bargaining plays a part in all union negotiations, which means it can also be used to accomplish things through shareholder activism. In 2021, <a href="https://www.corporatesecretary.com/articles/shareholders/32544/sec-says-rooney-rule-proposals-are-micromanagement">AFL-CIO submitted shareholder resolutions</a> to several major companies — including Amazon, Activision Blizzard, and Electronic Arts — aiming to reform hiring practices in order to increase diversity in the workforce. These resolutions came fresh off the heels of the <a href="https://www.aljazeera.com/features/2020/12/31/2020-the-year-black-lives-matter-shook-the-world">2020 racial justice movement</a>, while many institutions were reckoning with criticisms of racial discrimination, including the AFL-CIO. The AFL-CIO’s proposal is similar to <a href="https://operations.nfl.com/inside-football-ops/diversity-inclusion/the-rooney-rule/">the “Rooney Rule”</a> adopted by the NFL, which requires hiring managers to interview at least one non-white and non-male candidate for open positions. Unfortunately,  these resolutions were rejected on the grounds that they constituted “micromanagement.” While the AFL-CIO was not able to pass the reform they were hoping for, they still made incremental progress by directly negotiating for other diversity policies after the shareholder proposals were dropped. This signaled that shareholder activism could be an effective tool for labor unions to use in conjunction with their existing collective bargaining methods.  In 2022, the AFL-CIO went after Amazon again, this time with a shareholder proposal aimed to address the <a href="https://operations.nfl.com/inside-football-ops/diversity-inclusion/the-rooney-rule/">unfair and unsafe conditions</a> that factory workers must endure. <a href="https://www.iccr.org/sites/default/files/page_attachments/afl-cio_-_employee_turnover_-_final.pdf">In the statement</a>, the AFL-CIO calls for a report on Amazon’s exceedingly high turnover rate, citing not only negative effects on the company’s worker acquisition costs, but also the fact that their “human capital management practices” are misaligned with Jeff Bezos’ goal to be the <a href="https://www.aboutamazon.com/news/operations/update-on-our-vision-to-be-earths-best-employer-and-earths-safest-place-to-work">“Earth’s Best Employer.”</a> This second attempt at shareholder activism errs on the side of caution — pushing the business case rather than just the social justice case.  As shareholder activism matures, we are likely to see more economic framings of social issues. Of course, labor unions exist to look after the best interests of their workers,  but it’s important to keep in mind that the success of the employer is critical to a well-paid and well-benefited employee. While treating employees well is the right thing to do from a humanitarian standpoint, it’s the costs associated with a high turnover rate and the potential gains of happier, more loyal, and more productive employees that get the message across to the companies. As the old saying goes, money talks. ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member FINRA SIPC.

Shareholder Activism

Labor Unions Are Using Shareholder Advocacy to Push for Workers’ Rights

Shareholder activism is one of the tools in a union's arsenal.

Sultan White

13 Oct, 2022

3 min read

Entrepreneurship occurs when an individual launches a new business venture to address a problem in the hope of making a profit. The lesser-discussed <a href="https://mitsloan.mit.edu/ideas-made-to-matter/intrapreneurship-explained">intrapreneurship</a> occurs when employees of existing companies innovate new products and services from within their organization. Many great ideas came from intrapreneurship. For example, <a href="https://lemelson.mit.edu/resources/art-fry-spencer-silver">the Post-it note</a> was imagined by an inventor at 3M, <a href="https://www.referenceforbusiness.com/biography/F-L/Kutaragi-Ken-1950.html">the PlayStation</a> was invented by a Sony engineer after a deal with Nintendo fell apart, and <a href="https://www.cbsnews.com/news/great-intrapreneurs-in-business-history/">the Java programming language</a> spun out of technology company Sun Microsystems. Together, entre- and intrapreneurship drive innovation at multiple levels. However, big companies have a tendency to get bogged down in existing systems and processes that can limit the autonomy, creativity, and adaptivity that incubate innovation. Furthermore, as companies grow older, investors become more conservative, managers less risky, and overall inertia sets in alongside the comfort of steady, stable growth. Lastly, the two approaches to innovation have quite different considerations regarding risk and reward. Entrepreneurs use their own resources, bear the risk of an initiative’s failure and reap a lion’s share of the rewards. Intrapreneurs — seeking potential career promotions or demotions — leverage their companies’ resources to achieve financial rewards for the companies which bear all the risk. Older companies are beginning to <a href="https://www.forbes.com/sites/georgedeeb/2016/02/18/big-companies-must-embrace-intrapreneurship-to-survive/?sh=2b3cb88148ab">embrace the workplace culture of intrapreneurship</a> and <a href="https://www.interaction-design.org/literature/article/what-is-design-thinking-and-why-is-it-so-popular">design thinking</a> common among their startup counterparts. Unlike the top-down organizational change methods like transformational leadership or majority shareholder advocacy, intrapreneurship stems from the treasure trove of human capital embedded in companies’ own workforces. Employees often work more closely with the problems, consumers, and on-the-ground stakeholders than upper management, and they benefit from those lived experiences and insights. Google, for example, implemented the now-famous <a href="https://www.inc.com/bill-murphy-jr/google-says-it-still-uses-20-percent-rule-you-should-totally-copy-it.html">“20 Percent Rule”</a> allowing employees to pursue their own inventions and innovations for a portion of their workweek. The 20 Percent Rule has led to many of Google’s most popular products and services, <a href="https://time.com/43263/gmail-10th-anniversary/">including Gmail</a>. But workers and employees can push the needle even further, by becoming <a href="https://movingworlds.org/social-intrapreneurship">social intrapreneurs</a> to create new products and services that reap social, environmental, and economic benefits. Social intrapreneurs use iterative <a href="https://www.techtarget.com/whatis/definition/build-measure-learn-BML">build-measure-learn</a> processes to test their interventions at the nexus of profit, people, and the planet. <a href="https://link.springer.com/article/10.1007/s11365-018-0552-1">Career satisfaction</a> is positively associated with intrapreneurship, as employees feel dignified in the pursuits of their various passions, uncovering new meaning in their work. <a href="https://www.aspeninstitute.org/wp-content/uploads/2020/04/Unlocking-the-Potential-of-Corporate-Social-Intrapreneurship.pdf">Notable social intrapreneurs</a> include: - Kevin Thompson, drawing from his experience at the Peace Corps, convinced IBM in 2007 to launch a Corporate Service Corps, which promotes corporate citizenship via international leadership development and service opportunities. - Michelle Edkins, Global Head of Investment Stewardship at BlackRock, who in 2011 launched the first ESG initiative at the largest asset management firm in the world subsequently mainstreaming the sustainable investment movement. - Zia Zaman, who helped underserved families in Asia achieve greater access to their MetLife insurance by using blockchain to simplify enrollment and payout. You don’t have to quit your job to change the world. In fact, intrapreneurship can be an effective way of nurturing more world-changing ideas. Employees with great reputations and strong relationships at their companies can see an easier time pitching to upper management than untested entrepreneurs pitching jaded, hyper-critical venture capitalists or startup accelerators. Our ideas need ample mind-to-market channels so we can address humanity’s greatest problems — a rapidly deteriorating ecosystem, widespread inequality and injustices, and deep-seated ideological divisions tearing apart our communities. Social intrapreneurship is another tool that empowers employees to reverse these social and environmental ills, which may have been caused by the very companies they work for. Social intrapreneurship can be used to leverage the resources of these companies, as people strive to collectively reform capitalism for the better.   ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member FINRA SIPC.

Social

Employees Use Intrapreneurship To Make Organizational Change and Create Impact

Intrapreneurs create innovation from within their company.

Sultan White

20 Oct, 2022

4 min read

Are you an investor who cares not only about the performance of your portfolio, but also how your investments affect the environment, society, or humanity as a whole? If you do, you’re not alone. There are many investors who invest based on their own morals, what they think is ethical, or to achieve a certain social goal. In fact, this type of investing is so popular that there are a handful of different terms that refer to the practice of aligning your investments with your values. You may have heard of impact investing, sustainable investing, socially-responsible investing, or ESG, but what do all these terms actually mean? And how do they differ?   Let’s define some of the commonly used terms:   ESG — Stands for <a href="https://fennel.com/fennel101/esg">Environmental, Social, and Governance</a>. A framework for assessing companies beyond solely financial data, by looking at that company’s impact on the environment, its impact on society, and how that company is organized. ESG is about better understanding a company by taking into account this information.   ESG investing — Involves incorporating ESG data in order to make investment decisions. Traditionally, ESG investing is <a href="https://fennel.com/blog/how-does-esg-relate-to-risk-management">viewed as a form of risk management</a>, where ESG is used to identify companies that are managed sustainably and avoid those that could face regulatory scrutiny. However, ESG investing is often grouped together with socially responsible investing or sustainable investing — even though technically those refer to different strategies.   Ethical investing — Using your personal code of ethics to determine what to invest in. This differs from investor to investor. One person may think ethical investing involves divesting from companies that test on animals, while another person may not care about animal testing and instead focus on avoiding companies that benefit from child labor.   Impact investing — According to the <a href="https://thegiin.org/impact-investing/need-to-know/#what-is-impact-investing">Global Impact Investing Network</a>, impact investing refers to making investments “with the intention to generate positive, measurable social and environmental impact alongside a financial return.” Impact investing is a broad term, but in order to qualify as impact investing the investor should have the desire to create a positive, the ability to measure that impact, the evidence to inform that investment decision, and the goal of also generating returns in the end.   Socially responsible investing (SRI) — Involves investing in something based on how that investment impacts the environment, society, or the greater good. The concept of SRI has been around for decades (at least) and is sometimes used interchangeably with ethical investing and sustainable investing.   Sustainable investing — According to <a href="https://online.hbs.edu/blog/post/sustainable-investing">Harvard Business School</a>, sustainable investing refers to “a range of practices in which investors aim to achieve financial returns while promoting long-term environmental or social value” — emphasis on long-term. Sustainable investing often is associated with investing in green energy or environmentally-friendly practices because the word “sustainable” is often used in that setting   Values-based investing — Similar to ethical investing, values-based investing involves making investment decisions based on a person’s own set of values. Sometimes those values reflect a person’s morals or religion, and other times they reflect a more generalized set of beliefs. Regardless of what those beliefs are, a values-based approach depends on the individual investor.    <h4>Which approach is best for you?</h4> After going through all of these terms, you may have noticed that there are a lot of similarities. Sometimes the differences between these approaches depend on the intention or end goal, other times it just comes down to semantics. Hopefully, next time you hear one of these terms get tossed around you’ll have a better understanding of what it means. This understanding may help you make your own investing decisions going forward.   * * * The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member <a href="http://finra.org">FINRA</a> <a href="https://www.sipc.org/">SIPC</a>.

ESG

Investing

ESG vs SRI: What Do All the Terms Mean?

There are a lot of terms used in the world of impact investing, what do they all mean?

Fennel

01 Nov, 2022

2 min read

<div class="ir is it iu iv"> The <a class="au li" href="https://www.investopedia.com/terms/i/industrial-revolution.asp" target="_blank" rel="noopener ugc nofollow">Industrial Revolution</a> led to an unprecedented rise in economic activity as businesses leveraged new technologies and manufacturing processes. The U.S. GDP, the average standard of living, and even the population size grew rapidly between 1760 and 1840. But this era saw one other innovation that would forever alter the business-society relationship: the large-scale adoption of incorporation. The word “corporation” has etymological roots with the Latin word corpus, meaning body, thus the term itself gives businesses a human form. Incorporation — the legal act of forming a corporate entity — established businesses as persons with their own legal rights. Businesses in the Industrial revolution grew quickly, but they needed capital to fuel that rapid expansion. Incorporation created a new company structure that allowed businesses to attract investors as company shareholders, giving companies access to outside capital. But adding shareholders into the mix meant businesses were now bound to the wants of their investors. So many companies began limiting the liability of shareholders. By doing so, business managers were free to take risks that encouraged innovation and entrepreneurship, but in some cases, it also meant they could conduct destructive business practices with little worry of reprehension. Incorporation narrowed the scope of business from then on; the great economist <a class="au li" href="https://www.theguardian.com/news/2006/nov/17/guardianobituaries.politics" target="_blank" rel="noopener ugc nofollow">Milton Friedman</a> held that since business managers legally are agents of the shareholders, to do anything other than to maximize profits would essentially be stealing from them. There is even a case law, <a class="au li" href="https://h2o.law.harvard.edu/cases/3472" target="_blank" rel="noopener ugc nofollow">eBay v. Newmark</a>, in which shareholders sued managers for not maximizing profits. Shareholders can also vote to terminate managers who do not uphold their fiduciary duties. Considering these systemic conditions, a strictly-monetary incentive structure can lead to the destruction of our natural environment, a record-high wage gap, and other consequences that benefit the interests of the corporation in the short term at the expense of others. Greed is rewarded while goodness can be punishable. The entire concept of “corporate personhood” ushered in decades of accumulating wealth and power used to influence Justices and members of Congress. Corporations today are granted “rights” that embolden them to impede upon the rights of ordinary citizens. For example, in <a class="au li" href="https://publicintegrity.org/politics/the-citizens-united-decision-and-why-it-matters/" target="_blank" rel="noopener ugc nofollow">Citizens United v. FEC</a>, the Supreme Court ruled that corporate dollars used to persuade politicians are protected as “free speech,” which corporations exploited in order to flood our legislative branch and regulatory agencies with lobbyists peddling the interests of their businesses. American citizens fed up with this corporatocracy are presented with two different paths of systemic change — the path of revolution or the path of renaissance. On one hand, revolution is represented by extrinsic forces of change toppling one institution to prop up another. Conflict is inherent. On the other hand, renaissance is an intrinsic and internal force of change, in which these “corporate persons” adopt more sustainable business practices of their own volition and by the will of the shareholders. Shareholder activism is an intrinsic force of change. It can mold corporations to serve the interests of all stakeholders, including our Earth’s ecosystems. In the past couple of years, many shareholder activists have advocated for the adoption of <a class="au li" href="https://www.law.cornell.edu/wex/public_benefit_corporation#:~:text=A%20public%20benefit%20corporation%20is,a%20responsible%20and%20sustainable%20manner." target="_blank" rel="noopener ugc nofollow">public benefit corporations</a> (PBCs), a new type of corporate entity that requires the board of directors to create value for the planet and the greater community, in addition to seeking profits. In 2020, Delaware — by far the most popular state to incorporate businesses — made it easier for an existing corporation to become a <a class="au li" href="https://corpgov.law.harvard.edu/2022/02/18/converting-to-a-delaware-public-benefit-corporation-lessons-from-experience/" target="_blank" rel="noopener ugc nofollow">PBC</a> by lowering the required shareholder vote from a two-thirds to a simple majority. Shortly after, <a class="au li" href="https://www.businesswire.com/news/home/20210113005967/en/Veeva-Becomes-First-Public-Company-to-Convert-to-a-Public-Benefit-Corporation" target="_blank" rel="noopener ugc nofollow">Veeva Systems</a> and <a class="au li" href="https://ir.unither.com/news/press-releases/press-release-details/2021/United-Therapeutics-Converts-to-a-Public-Benefit-Corporation-Following-Shareholder-Approval/default.aspx" target="_blank" rel="noopener ugc nofollow">United Therapeutics</a> became the first two public companies to convert from C-Corps into public benefit corporations. By making these changes, Veeva Systems and United Therapeutics, codified into their corporate governing documents a steadfast commitment to social and environmental responsibility. Now, <a class="au li" href="https://www.kiplinger.com/investing/esg/603598/what-are-public-benefit-corporations-pbcs" target="_blank" rel="noopener ugc nofollow">their decisions are made</a> in the context of <a class="au li" href="https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line" target="_blank" rel="noopener ugc nofollow">the triple bottom line</a>, forever imbuing these “corporate persons” with a stronger ethical and moral code. Shareholder activists’ co-opting of the public benefit corporation legal structure is a relatively new tactic, and we have yet to see the full extent of its effectiveness, but it is one strategy in which changing a corporation’s identity could change its motivations for the better. Holding similar goals, the shareholder activism and PBC movements can combine forces to achieve greater awareness and impact — a coalition of intrinsic forces of change, reimagining the purpose of doing business, and turning corporations into good people.   </div> <div class="o dx lj lk id ll" style="padding-left: 400px;" role="separator">∙ ∙ ∙</div> <div class="o dx lj lk id ll" style="padding-left: 440px;" role="separator"> </div> <div class="ir is it iu iv"> The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member <a class="au li" href="http://finra.org" target="_blank" rel="noopener ugc nofollow">FINRA</a> <a class="au li" href="https://www.sipc.org/" target="_blank" rel="noopener ugc nofollow">SIPC</a>. </div>

Shareholder Activism

How Shareholder Activists Are Turning Corporations Into Better People

Companies are reprioritizing their values by becoming public benefit corporations.

Sultan White

09 Nov, 2022

4 min read

Financial advisors aim to provide their clients with less risky, higher returns in the equity markets than the client would achieve on their own— even after the professional fees. The financial planning industry places a lot of emphasis on the client-advisor relationship, which is something that’s sometimes lacking with new technologies like robo-advising and self-directed trading apps. Many investors prefer the friendly and cordial relationships they form with licensed professionals, which could be why wealth managers handle over <a href="https://www.investopedia.com/articles/professionals/111115/how-big-wealth-management-and-financial-advisor-industry.asp">$103 trillion in assets under management</a> worldwide.  But lately, clients have begun demanding other types of returns on their investments, namely, environmental and social impact. This demand is pushing financial advisors to increase exposure to Environmental, Social, and Governance (ESG) investments, while others are simply <a href="https://www.investmentnews.com/financial-advisers-hone-focus-esg-strategies-211318">rebranding</a> existing funds as sustainable. As a younger, more socially-responsible generation of investors entrust their money with financial advisors and expect ESG returns, it is important that they know which financial professionals are qualified to give advice.  The Certified Financial Planner (CFP) Certification is one of the most recognized designations in the field, with <a href="https://prod-sitefinity-library.kappro.com/docs/default-source/kfe-documents/32630-1-kfe---cffp---survey-of-trends-report-2022---report-flipping-book---final-220324.pdf?_ga=2.177507680.478076054.1652781443-1303717597.1650695050&_gac=1.254568314.1652781443.CjwKCAjwj42UBhAAEiwACIhADnJvXjlO6Y8eK2pj5aQSMOLe8CDhDvhlqoEcYp1TcQIBAR39PWNYPRoCH8MQAvD_BwE">35% of professional advisors holding the certification</a> according to The College of Financial Planning’s recent survey. According to the survey, certifications like the CFP help financial professionals develop a deeper understanding of their work, a higher client pool, increased earning potential, and greater career satisfaction. But the CFP is just one type of certification. And as client demands transform over time — like the growing demand for ESG investing — new certifications are helping financial advisors stay with the times. The Chartered Socially Responsible Investing Counselor (CSRIC®) Designation was <a href="https://www.ussif.org/courses_csric">developed in partnership with the Forum for Sustainable and Responsible Investment</a> and is meant to market an advisor’s ability to identify growth trends in sustainable investment, engage in shareholder advocacy, and apply ESG strategies across a mix of asset classes. To qualify for this mark, candidates must successfully complete the specialized course and pass a test, abide by ethical standards, comply with self-disclosure requirements, and complete continuing education within the two-year authorization period. Currently, only 2% of advisors hold the CSRIC designation, signaling an extraordinary opportunity for advisors to capitalize on <a href="https://www.finextra.com/pressarticle/92266/wealth-advisors-failing-consumers-on-esg">outsized consumer demand for ESG guidance</a>. The market is already adjusting as <a href="https://300hours.com/csric-chartered-sri-counselor/">CSRIC certified graduates have grown 122% annually since 2019.</a> While there are many financial professionals well-versed in ESG who do not hold the CSRIC designation, if you are a potential client looking for trained advisors with shared values, the designation could aid in your search. In fact, <a href="https://www.earthequityadvisors.com/team/">some wealth management firms</a> have truly leaned into the ESG movement by boasting fully-CSRIC-credentialled teams and company-level sustainability designations like the <a href="https://www.bcorporation.net/">B Corp</a>.  Beyond pairing impact investors with SRI advisors, these credentials help advance the movement by legitimizing and socializing ESG concepts into the industry mainstream.   ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member <a href="http://finra.org">FINRA</a> <a href="https://www.sipc.org/">SIPC</a>.

Investing

Socially Responsible Investing Gets Legitimized With CSRIC Designation for Financial Planners

More people are paying attention to socially responsible investing.

Sultan White

17 Nov, 2022

2 min read

There are several different ways to incorporate <a href="https://fennel.com/fennel101/esg">ESG</a> into your portfolio, because ESG investing isn’t a one-size-fits-all approach. ESG investing involves using a company’s environmental, social, and governance data to guide investing decisions. But a lot of information falls into those three buckets, and which data points to focus on and how to use that data may vary from investor to investor. On top of that, different investors may have different reasons they’re using ESG. Maybe they hope to <a href="https://fennel.com/blog/how-does-esg-relate-to-risk-management">use ESG as a form of risk management</a>, by looking for long-term business viability and avoiding businesses that may face regulatory liabilities. Or maybe they want to use ESG to invest in companies that align with their personal values. One of the popular ways investors incorporate ESG data into their portfolios is through <a href="https://fennel.com/blog/how-does-esg-relate-to-risk-management">ESG screening</a>, which involves including or excluding companies based on their ESG performance. However, this approach differs from a technique many impact investment funds do — active ownership. Let’s examine these two different ESG investing approaches to better understand the pros and cons of each. <h4>The Positives and Negatives of Screening</h4> ESG screening comes in two different forms — positive screening and negative screening. Both approaches are relatively straightforward. Positive screening involves investing in companies based on certain ESG factors, while negative screening involves excluding companies from your portfolio or divesting. Positive and negative screening are really just two sides of the same coin, and can be done in tandem. In order to incorporate screening into your portfolio, all you need is relevant ESG data and a personal strategy of what you want to invest in or avoid. For example, if you want to construct a portfolio of women-led businesses, you need access to the gender breakdown of a company’s board of directors or leadership team. That way you can positively screen women-led companies into your portfolio. If you see that some of the companies already in your portfolio have no women in leadership positions, then you may want to negatively screen them out. Provided that you have the proper ESG data, it’s relatively easy to incorporate ESG into your portfolio this way. Screening can help investors who are using ESG from a risk management perspective. If they believe the global transition to renewable energy will benefit green energy companies and hurt traditional fossil fuel companies, they can use ESG screening to make sure their portfolio aligns with that hypothesis. Screening can also help investors who want to make sure their investments are aligned with their personal values. This sort of investing happens all the time, whether it’s <a href="https://fennel.com/blog/why-are-students-pushing-universities-to-divest">universities divesting from oil companies</a> after student pressure, protesters <a href="https://michiganintheworld.history.lsa.umich.edu/antivietnamwar/exhibits/show/exhibit/military_and_the_university/dow_chemical">divesting from napalm manufacturers</a> during the Vietnam War, or <a href="https://www.robeco.com/en/key-strengths/sustainable-investing/glossary/sin-stocks.html">religious investors divesting from “sinful” industries</a> like gambling or drug use. Screening is popular in <a href="https://financebuzz.com/values-based-investing">values-based investing</a> and <a href="https://www.nerdwallet.com/article/investing/ethical-investing">ethical investing</a>, which have both been around for a long time. But what if you’re an impact investor who wants to use their investment to promote some sort of change? Sure, positive screening may help promote the companies you do invest in, but negative screening can leave you out of the conversation for the companies you may want to change, which could create an echo chamber effect. That’s why some impact investors are turning to a more hands-on approach known as active ownership (or active engagement). <h4>What Is Active Ownership?</h4> Active ownership involves using one’s position as a shareholder to push a company towards positive change. This can be done through things like <a href="https://fennel.com/fennel101/shareholder-voting">shareholder voting</a>, attending annual shareholder meetings, putting forward shareholder proposals, and so on. A famous example of active ownership at work is Engine No. 1’s <a href="https://www.reuters.com/business/little-engine-no-1-beat-exxon-with-just-125-mln-sources-2021-06-29/">board takeover of ExxonMobil</a>. In 2020, Engine No. 1, a relatively unknown activist hedge fund, acquired a small stake in the oil giant ExxonMobil. Although Engine No. 1’s shares only represented about 0.02% of the company, the hedge fund was able to use its shareholder status to put forward a handful of shareholder proposals and nominate new members to Exxon’s board of directors. After getting support from large asset managers like BlackRock, Vanguard, and State Street, Engine No. 1 was able to win <a href="https://engine1.com/transforming/articles/exxon-mobil-one-year-later/">three of Exxon’s board seats</a>. Why did Engine No. 1 care about winning board seats? The hedge fund had three main goals: to bring independent directors with energy experience to Exxon’s board, to promote better long-term capital allocation, and to implement a strategic plan for Exxon’s business in a world that is rapidly moving towards sustainability and decarbonization. Since Engine No. 1’s board takeover, Exxon has <a href="https://engine1.com/transforming/articles/exxon-mobil-one-year-later/">made several commitments</a> to lowering its greenhouse gas emissions and invested billions of dollars into low carbon solutions.   <h4>Implementing Active Ownership Into Your Portfolio</h4> Okay, so all you have to do to implement active ownership into your portfolio is target a multinational company, wage a months-long shareholder campaign, and get some of the largest asset managers in the world to support your cause? Well, not exactly. Screening may seem easy to incorporate into your portfolio because it just involves including or excluding companies based on ESG data. Active ownership may take a little bit more work, but it could be as simple as using your shares to vote. "If you're a shareholder of a company, you should be active. Active ownership is really important,” Yusuf George, Managing Director of Engine No. 1, said at <a href="https://medium.com/fennelapp/a-recap-of-socap-2022-875a0cc53fb">a recent SOCAP event</a>. “Part of the reason [Engine No. 1] talks so much about the energy sector, the transportation sector, and agriculture is because they account for about 75% of greenhouse gas emissions. We want to go where the problems are, because if we don't, nothing will change. And so we believe that it's really important to use any tool you have — it can be voting your shares, showing up at an annual general meeting, whatever tool you have to be an active owner is really important." As Yusuf George points out, leaning into the problem is important because it could help lead to change. While exclusionary screening may work for a risk management approach, active ownership may lead to a greater impact on the company. If your goal as an investor is to have an impact, then it could be worth it to use ESG data to identify opportunities for impact within a company. Then you could use your position as a shareholder to push for change with whatever tools you have — whether that’s voting, putting forward proposals, or just spreading awareness of issues.   Risk Disclosure: Responsible investing incorporates Environmental Social Governance (ESG) factors that may affect exposure to issuers, sectors, industries, limiting the type and number of investment opportunities available, which could result in excluding investments that perform well. ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member <a href="http://finra.org/">FINRA</a> <a href="https://www.sipc.org/">SIPC</a>.

ESG

Shareholder Activism

Screening vs Active Ownership: Different Ways To Incorporate ESG Into Your Portfolio

Active ownership could help ESG investors push for more impactful change.

Fennel

28 Nov, 2022

4 min read

Backed by Jeff Cruttenden, founder of Acorns, Capital Factory, Temerity Capital Partners and more, Fennel has raised over $5M in funding to provide transparent financial and ESG-data to investors.   NEW YORK--(BUSINESS WIRE)--<a href="https://fennel.com/">Fennel</a>, an ESG-focused platform that gives retail investors access to tools to better engage with companies, today launched their mobile investing app with $5M in seed funding. Fennel’s key feature is its in-app ESG data and rankings, which provides useful information to retail investors on public companies’ environmental, social and governance practices. With Fennel, users can invest in publicly-listed stocks and ETFs as they analyze detailed ESG data and further understand how the companies they invest in impact the world they live in. Today, with over 82% of all global retail investors interested in sustainable and socially-responsible investing, and global sustainable fund assets reaching $2.7 trillion by December of last year, the call for ESG-driven investing will keep growing louder as the next generation continually challenges current institutions and power structures. Fennel’s ESG data can also help inform investors ahead of shareholder votes. Shareholder voting creates a communication channel between companies and investors, yet <a href="https://www.cnbc.com/2021/10/12/few-individuals-participate-in-shareholder-voting-but-that-may-change.html">only 28%</a> of shares owned by retail investors were used to vote in 2020. “The retail revolution is only just getting started. The next generation of investors are yearning for their voices to be heard. Today, the shareholder voting process is an overlooked method of invoking positive corporate change. Our mission is to give everyone a voice in the companies they invest in, not just the top 1% with formidable seats at the table,” said Daniel Naim, founder and CEO of Fennel. With Fennel, retail investors can easily invest in alignment with their values and with the ESG-related issues they are passionate about, covering a plethora of issues such as the gender and cultural identity wage gaps, carbon emissions, and climate change. Fennel provides information about past and upcoming shareholder votes in order to show investors how they can play a part in guiding a company’s decisions. It also allows investors to follow specific ballots to track their outcomes. Additional voting features will be rolled out after Fennel’s initial launch. In addition, Fennel does not lend out their users’ securities, ensuring that the investor’s votes follow their shares. Out of principle, Fennel does not participate in payment for order flow (PFOF) either. “Fennel is truly bringing a new model for investing into the marketplace. Most brokerage firms are using two ethically questionable methods, PFOF and doing securities lending, which is what sets Fennel apart. Fennel aims to be a channel for retail investors to organize on a platform and develop investment tribes, surrounding issues from gender equality and zero carbon waste,” said Strategic Business Advisor Hitch McDermid. Fennel was founded by Daniel Naim, a former Physics PhD student and dark matter researcher. Growing up in Beirut, Lebanon, he witnessed firsthand the socioeconomic inequities that fester right under individuals’ noses. Later in his life, his career in the sciences exposed him to the grave threat of climate change. Daniel hopes that he can use Fennel to help address both of these issues. “Investing is about ownership. To have ownership is a special privilege, and to actually make an impact by interacting with companies, not just understanding what you’re buying, is integral to that special privilege,” said Fennel investor and Acorns co-founder, Jeffrey Cruttenden. “Fennel has given everyday investors the tools to evaluate companies from a socially good perspective. It’s an ambitious project but Daniel and his team are the right people to lead the way.” Fennel has raised $5M from a collective of strategic investors and advisors, including Larry Sonsini, founding partner of Wilson Sonsini Goodrich & Rosati, former Managing Director of Trading at Blue River Asset Management Paul Sinsar and John Rundle, Distinguished Professor of Physics and Applied Mathematics at UC Davis. Temerity Capital Partners, co-founder of Acorns and Say Technologies Jeffrey Cruttenden, and Preston Butcher, former board member of Schwab and former Chairman and CEO of Legacy Partners Preston Butcher have also invested in Fennel. About Fennel Fennel is a mobile investing app that helps people understand a company’s impact through digestible ESG data, as well as past and upcoming shareholder votes. With this information, Fennel allows investors to learn more about how companies operate and how they affect the world. Fennel refers to Fennel Markets, Inc., and Fennel Financials LLC. Securities offered through Fennel Financials LLC, member FINRA/SIPC. Disclosures: The information provided is for information purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any investment or financial product. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. The price and value of any the investments referenced and the income from such investments may fluctuate, and investors may realize losses on these investments, including a loss of principal. Past performance is not indicative or a guarantee of future performance. Fennel does not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this communication have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. Fennel Financials LLC is a broker-dealer registered with the U.S. Securities and Exchange Commission, a member of FINRA and a member of SIPC. Contacts Bevel Caden Kinard fennel@bevelpr.com

Fennel

Fennel Launches ESG-Data Driven Investment Platform for Everyday Retail Investors

Backed by Jeff Cruttenden, founder of Acorns, Capital Factory, Temerity Capital Partners and more, Fennel has raised over $5M in funding to provide transparent financial and ESG-data to investors.

Fennel

16 Nov, 2022

3 min read

There is a growing number of investors who aren’t satisfied with just financial returns, they want to know that their investments are creating a better world. This desire to make change is at the core of impact investing. <a href="https://fennel.com/blog/esg-vs-sri-what-do-all-the-terms-mean">Impact investing</a> refers to when investments are made with the intention of generating positive and measurable social or environmental impacts. Typically, an investor will have an idea of what impact they want to have, and then seek out investments to create that impact. This could mean investing in renewable energy companies to promote decarbonization, investing in minority-led companies to promote the work of underrepresented groups, and so on. But what does this look like in practice? Here are a handful of impact investing examples for interested investors   <h4>Example #1: Impact investing in diverse founders</h4> So many startups rely on venture capital funding in order to get up and running. But where that VC cash flows isn’t always equitable. One study found that <a href="https://www.forbes.com/sites/forbesbusinesscouncil/2022/05/26/diversity-the-holy-grail-of-venture-capital/?sh=5b51cec34178">77% of VC dollars</a> go to startups led by white founders. In 2021, a record year for VC funding, <a href="https://news.crunchbase.com/diversity/vc-funding-black-founded-startups/">only 1.3%</a> of all U.S. venture and growth equity financing went to companies led by Black founders. Harlem Capital hopes to close that funding gap. Harlem Capital started in 2015 as a syndicate of angel investors, and evolved over the years into a fully-fledged VC firm. The company debuted with <a href="https://techcrunch.com/2019/12/02/diversity-focused-vc-fund-harlem-capital-debuts-with-40m/">its inaugural $40 million fund</a> in 2019 and plans to invest in 1,000 diverse founders over the course of 20 years. After using that $40M fund to invest in 23 companies, Harlem Capital raised <a href="https://harlem.capital/harlem-capital-134-million-fund/">a $134 million fund</a> to invest in even more diverse founders. These diverse founders are building an array of diverse solutions, from <a href="https://harlem.capital/portfolio/curu">credit platforms that provide wider access to loans</a>, to a <a href="https://harlem.capital/portfolio/agape">relationship wellness app for couples</a>, <a href="https://harlem.capital/portfolio/jobble">gig marketplace for independent workers</a>, and more.  “We fundamentally believe we are a venture fund with impact, not an impact fund. The way we generate impact is to give women and minority entrepreneurs ownership,” Harlem Capital managing partner Henri Pierre-Jacques told TechCrunch.   <h4>Example #2: Impact investing in the oil industry</h4> In late 2020, a small activist hedge fund called Engine No. 1 <a href="https://hbr.org/2021/01/can-a-tiny-hedge-fund-push-exxonmobile-towards-sustainability">acquired a $40 million stake</a> in oil giant ExxonMobil, worth about 0.02% of the company’s shares. The hedge fund then wrote <a href="https://reenergizexom.com/materials/letter-to-the-board-of-directors/">an open letter</a> to Exxon’s board of directors to explain why. In that letter, Engine No. 1 pointed out the ways that Exxon had been struggling and failed to deliver shareholder returns. It also pointed out a four-part strategy for fixing this: 1) refresh the board of directors with people who has experience in the energy industry 2) become more disciplined in managing long-term capital allocation 3) implement a plan for the business to thrive in a world pushing away from fossil fuels, and 4) realign management incentives with creating shareholder value. Engine No. 1 then nominated four new directors for Exxon’s board, and campaigned for them during proxy season. After gaining the support of some of Exxon’s largest shareholders, three out of four of those directors won seats on the board. After that, Exxon started <a href="https://engine1.com/transforming/articles/exxon-mobil-one-year-later/">making measurable advancements</a> towards its new goals. For example, the company committed $15B towards investing in low-carbon solutions over a six year span, announced new scope 1 and scope 2 greenhouse gas targets for 2030, added a low-carbon solutions business unit and got the former head of General Motors’ Cruise to lead it.   <h4>Example #3: Impact investing in response to apartheid </h4> Word about the injustices committed in apartheid-era South Africa spread across the world. While many South African groups fought for their rights, international organizations also joined in to show support in their own way.  By the 1970s and 80s, students at American universities <a href="https://www.universityofcalifornia.edu/news/how-students-helped-end-apartheid">were protesting in solidarity</a> with South African students. Although these American students were thousands of miles away, they thought they could help by pressuring their universities <a href="https://nvdatabase.swarthmore.edu/content/columbia-university-students-win-divestment-apartheid-south-africa-united-states-1985">to divest</a> from companies that supported the apartheid regime. By 1988, <a href="https://www.investopedia.com/articles/economics/08/protest-divestment-south-africa.asp">155 colleges</a> across the US and Canada had divested from South Africa. And soon this movement spread beyond universities. By the end of 1989, 26 states, 22 counties, and over 90 cities <a href="http://richardknight.homestead.com/files/uscorporations.htm">had also created policies</a> against companies doing business in South Africa. This pressure caused many US businesses to pull out of South Africa. From 1985 to 1990, over 200 US companies collectively pulled out of South Africa, resulting in <a href="https://www.investopedia.com/articles/economics/08/protest-divestment-south-africa.asp">a loss of $1 billion</a> in direct investment dollars. Other countries put pressure on their companies to pull out of South Africa too, and by the early 1990s, the South African economy was <a href="http://richardknight.homestead.com/files/uscorporations.htm">feeling the effects of capital flight</a>.   <h4>Example #4: Impact investing in Chicago</h4> Sometimes impact investing is most felt at the local level. The Chicago Community Trust is a foundation that connects philanthropic donors, local organizations, and generous individuals who want to use their money to create a positive impact within the Chicago community. In 2020, the foundation <a href="https://www.cct.org/press-releases/the-chicago-community-trust-launches-impact-investing-platform/">launched</a> an impact investing platform to help facilitate impact-driven investments. The platform also helps investors measure the impact of their contributions by showing if they help low-income neighborhoods, go to businesses run by minority or women owners, help provide affordable housing, or if they provide capital to sustainable energy initiatives.   <h4>Example #5: Impact investing in agricultural development</h4> Lots of people talk about ending world hunger, what are some ways to actually do that? According to Root Capital, by investing in agricultural enterprises in the developing world. Since 1999, Root Capital has been investing in agriculture businesses in Latin America, sub-Saharan Africa, and Southeast Asia. Not only does the organization supply capital, it also provides training to help these companies grow. In addition to creating more steady sources of food, Root Capital also aims to use its investments to help alleviate local poverty, protect the planet, and advance gender inclusion. To date, the organization has <a href="https://rootcapital.org/about-us/">distributed</a> $1.6 billion to over 750 clients, representing 2.3 million farmers and $4.6 billion in economic activity. Risks: Employing ESG strategies may not result in favorable investment performance. The returns on a portfolio consisting primarily of Environmental, Social and Governance (“ESG”) aware, diversity equity and inclusion (DEI), impact investing, or faith-based investments may be lower or higher than a portfolio that is more diversified or where decisions are based solely on investment considerations. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member <a href="http://finra.org">FINRA</a> <a href="https://www.sipc.org/">SIPC</a>.

5 Impact Investing Examples: How Investors Push for Change

What does impact investing look like in practice?

Fennel

21 Dec, 2022

5 min read

NEW YORK, Dec. 14, 2022 – <a href="http://www.eventus.com">Eventus</a>, a leading global provider of multi-asset class trade surveillance and market risk solutions, and <a href="https://fennel.com/">Fennel Financials LLC</a>, which just launched an Environmental, Social and Governance (ESG)-focused platform offering retail investors access to tools to better engage with companies, today announced that Fennel has chosen to deploy the Eventus Validus platform for all of its trade surveillance activities. Fennel will also be using the platform’s anti-money laundering (AML) capabilities. Fennel launched its mobile investing app for equities in mid-November, providing in-app ESG data and rankings to educate retail investors on public companies’ ESG practices. Through the app, users can invest in publicly listed stocks and exchange-traded funds (ETFs) as they analyze the data. Jenn Gatherer, Chief Compliance Officer of Fennel Financials LLC, said: “We want our customers and regulators to know that Fennel has a true culture of compliance and that we have employed best-in-class systems and compliance practices at every level of the business, aligning ourselves with companies that do the same. We will evolve as the landscape evolves, and Validus enables us to do that. I believe having a customizable, automated trade surveillance platform is imperative for a real compliance program.” Eventus CEO Travis Schwab said: “We are delighted to provide the backbone for Fennel’s trade surveillance program as the firm grows its business through a truly innovative investing app. It’s exciting to continually expand into new and creative use cases in equity and other asset classes as our clients chart new territory and financial markets evolve.” Gatherer has been in compliance for decades and has deployed a number of trade surveillance platforms, including Validus when in a previous role. She said: “The customer service at Eventus is second to none. The firm’s commitment to innovating, as well as hearing what’s important to clients and making that a reality are extremely important to me as a partner in compliance. We can tweak reports to our liking, and that ability to act independently or with Validus support is really powerful. Knowing what I need to find and then refining the requirements as we learn how our customers trade makes my job easier and significantly more effective.” Also important to Fennel, Gatherer said, was that Eventus does not rest on its laurels and is constantly evolving to meet the needs of clients. “Many companies create a good system for the time, and they keep moving along with that system and really don’t adjust it or engage with clients. If they do, it’s often very slow to make those changes happen. The speed with which Eventus can make the changes is really impressive. If something needs addressing, the firm has demonstrated it can get that done instantaneously.”   <h4>About Eventus</h4> Eventus is a leading global provider of multi-asset class trade surveillance and market risk solutions. Its powerful, award-winning Validus platform is easy to deploy, customize and operate across equities, options, futures, foreign exchange (FX), fixed income and digital asset markets. Validus is proven in the most complex, high-volume and real-time environments of tier-1 banks, broker-dealers, futures commission merchants (FCMs), proprietary trading groups, market centers, buy-side institutions, energy and commodity trading firms, and regulators. The company’s rapidly growing client base relies on Validus and Eventus’ responsive support and product development teams to overcome its most pressing regulatory challenges. For more, visit <a href="http://www.eventus.com">www.eventus.com</a>.   <h4>About Fennel </h4> Launched in November 2022, Fennel is a mobile investing app that helps people understand a company’s impact through digestible ESG data, as well as past and upcoming shareholder votes. With this information, Fennel allows investors to learn more about how companies operate and how they affect the world. Fennel refers to Fennel Markets, Inc., and Fennel Financials LLC. Securities are offered through Fennel Financials LLC, a member of FINRA and SIPC. Fennel Financials LLC is a wholly owned subsidiary of Fennel Markets, Inc. and a registered broker-dealer. For more, visit <a href="http://www.fennel.com">www.fennel.com</a>.   RISK DISCLOSURE: The risk of loss when trading any security can be substantial. You should therefore carefully consider, prior to making any investment decision, whether such a transaction is suitable for you in light of your investment objectives, financial circumstances, your tolerance to risks and your investment experience. Past performance of any securities product does not guarantee future performance or returns.   MEDIA CONTACTS: For Eventus: Ellen G. Resnick Crystal Clear Communications +1 773-929-9292; +1 312-399-9295 (mobile) eresnick@crystalclearPR.com   For Fennel: Caden Kinard Bevel <a href="mailto:fennel@bevelpr.com">fennel@bevelpr.com</a>

Fennel

Fennel Financials turns to Eventus for trade surveillance on new ESG-focused equity investing platform

Fennel Financials joins forces with Eventus.

Fennel

14 Dec, 2022

2 min read

By now, you may already know that some investors use <a href="https://fennel.com/fennel101/esg">environmental, social, and governance (ESG)</a> data to understand a company’s impacts outside of purely financial measurements. But companies pay attention to ESG too, and many try to shape their own ESG impact through something called an ESG policy.   Note: The returns on a portfolio consisting primarily of Environmental, Social and Governance (“ESG”) aware, impact investing, or faith-based investments may be lower or higher than a portfolio that is more diversified or where decisions are based solely on financial considerations. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria.   <h4>What is an ESG policy?</h4> An ESG policy is an official commitment that companies make in order to manage their ESG impacts. A company with an ESG policy will often set goals for how it wants its business to perform across environmental, social, and governance categories. Sometimes, a company will make several official commitments that fall into its ESG policy, like a “sustainability policy,” “sustainable development goals policy,” “corporate social responsibility policy,” or “governance policy.” Although these can be narrow in focus, commitments made in those guidances often affect a company’s overall ESG impact.   <h4>Why have an ESG policy?</h4> In the eyes of ESG advocates, adopting an ESG policy is simply good business practices. But there are a handful of reasons why a company may want to consider instituting an ESG policy. One reason is that it communicates to investors that the company is serious about ESG. Earlier this year, Bloomberg Intelligence analysts <a href="https://www.bloomberg.com/company/press/esg-may-surpass-41-trillion-assets-in-2022-but-not-without-challenges-finds-bloomberg-intelligence/">predicted</a> that global ESG assets could surpass $41 trillion in 2022. Although that number may be off due to this year’s downturn in the market, the report also predicted that number could grow to $50 trillion by 2025 — showing a growing interest in ESG by investors. A company may want to show its ESG worthiness to ESG conscious investors, so adopting an ESG policy could help do that. Another reason to adopt an ESG policy comes down to risk management. Traditionally, good performance across ESG categories <a href="https://fennel.com/blog/how-does-esg-relate-to-risk-management">has been linked</a> to minimizing a company’s exposure to business risks. How? Reducing exposure to fossil fuels can be useful in a rapidly decarbonizing world, adamantly avoiding polluting can help a business steer clear of government fines, appropriate employee management can help companies attract new talent and stay away from scandals, and proper governance can help prevent fraud. Scenarios like these show tangible business reasons for adopting ESG policies — beyond simply “feeling good” about one’s impact.   <h4>What does an ESG policy look like in practice?</h4> It should be no surprise that many of the largest publicly traded companies have already instituted ESG policies. Let’s take a look at some of them to understand what an ESG policy looks like in practice. (Note: the companies included in this list have been picked due to their large market capitalization. This should not be seen as an endorsement of whether or not to invest.)   Microsoft Instead of outwardly calling out a singular ESG policy, tech giant Microsoft discloses <a href="https://www.microsoft.com/en-us/corporate-responsibility">its several commitments to corporate social responsibility</a>. These commitments include <a href="https://www.microsoft.com/en-us/corporate-responsibility/sustainability">a policy on environmental sustainability</a>, which outlines plans to be carbon and waste neutral by 2030, replenish more water than it uses by 2030, as well as a handful of other environmental actions. Microsoft’s CSR strategy also <a href="https://www.microsoft.com/en-us/corporate-responsibility">highlights a handful of social policies</a>, including commitments inclusive to economic growth, protecting fundamental human rights, and earning trust from Microsoft’s customers, employees, and communities. And lastly, Microsoft’s governance policy <a href="https://www.microsoft.com/en-us/Investor/corporate-governance/framework.aspx">establishes a framework</a> for the company’s board of directors to operate under. When all of these commitments are looked at in tandem, they represent a pretty comprehensive ESG policy.   Apple Apple puts together an ESG report every year for its investors. Although an ESG report isn’t exactly the same as an ESG policy — ESG reports detail past progress, while ESG policies are guidelines that are future-facing — the company’s annual report includes many commitments to ESG factors. Apple calls out its specific values in <a href="https://s2.q4cdn.com/470004039/files/doc_downloads/2022/08/2022_Apple_ESG_Report.pdf">the 2022 ESG report</a>, which include accessibility, education, environment, inclusion and diversity, privacy, and supplier responsibility — stating that these values are central to its “ESG approach.” More specifically, the company has also published its policies on things like <a href="https://s2.q4cdn.com/470004039/files/doc_downloads/gov_docs/2020/Apple-Human-Rights-Policy.pdf">human rights</a> and <a href="https://www.apple.com/supplier-responsibility/pdf/Apple_SR_2022_Progress_Report.pdf">doing business with suppliers</a>.   Alphabet Alphabet, the parent company of Google and YouTube (among others), details its ESG policies on its <a href="https://abc.xyz/investor/other/sustainability-and-related-information/">investors relations site</a>. Among these policies are commitments to data security, employee diversity, environmental sustainability, supply chain responsibility, as well as reports disclosing ESG data across its businesses. Alphabet also made a splash when it issued $5.75 billion in sustainability bonds, and in 2022 it <a href="https://www.gstatic.com/gumdrop/sustainability/alphabet-2022-sustainability-bond-impact-report.pdf">outlined</a> how this money will be spent — on things like clean energy, circular economy, affordable housing, and commitments to racial equity. Amazon Amazon has <a href="https://sustainability.aboutamazon.com/">a website</a> dedicated to its sustainability efforts across the environment, society, and its governance. On this page, it calls out several of the commitments it has made. This includes its plans to <a href="https://sustainability.aboutamazon.com/environment/renewable-energy?energyType=true">use 100% renewable energy by 2025</a>, its efforts to <a href="https://sustainability.aboutamazon.com/environment/packaging">create more sustainable packaging</a>, the <a href="https://sustainability.aboutamazon.com/society/employees">benefits it offers to employees</a>, and more.   <h4>What do these ESG policies have in common and how do they differ?</h4> After going through the ESG policies of a handful of companies, you may notice how some of them are similar while others are unique. ESG policies are designed based on the individual operations of a business. That’s why Amazon has a policy about making its packaging more sustainable, while Apple has a policy about how it chooses suppliers for its hardware. These policies help businesses develop more sustainable practices and help set themselves up for success over the long term. They also tell investors and the world that these companies are being proactive about ESG.   ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Employing ESG strategies may not result in favorable investment performance. Securities offered through Fennel Financials, LLC. Member <a href="http://finra.org/">FINRA</a> <a href="https://www.sipc.org/">SIPC</a>.

ESG

What Is an ESG Policy? How Are They Used?

Proactive companies prioritize ESG in their business practices.

Fennel

11 Jan, 2023

4 min read

In today’s tech-focused world, it seems like people’s actions are constantly scrutinized. With this level of self-awareness people often wonder, “Am I doing the right thing?” With existential threats like climate change and social inequality, there is pressure on the individual to contribute back to society, and to speak up for social issues. We eat less meat, take shorter showers, and turn up the thermostat to address our environmental impact. We also watch what we say on social media to address our social impact. Though sometimes we find ourselves (fairly) asking the following question — how do we even know our actions are helping the world around us? Is there any way to quantify the impact of our prudent practices? People aren’t the only ones asking themselves these questions. Many businesses and organizations strive to do the right thing, and look for the right tools to measure their impact. This is especially important because the scale of certain businesses can lead to much greater impacts than the actions taken by individuals. Before we get into the details of this, let’s first understand what “social impact” actually means. Social impact can be defined as the effect of an organization or individual’s actions that brings upon a value-adding change in a community, as a result of attempting to address a social challenge (things like systemic hunger, poverty, or inequality linked to certain demographics). However, it is important to note that pushing for positive change doesn’t always happen in a vacuum. For example, a government pushing to create more jobs for its people can end up causing adverse environmental impacts if it ends up giving grants to companies that do not carry out their business practices in a sustainable manner. As individuals, one way to make informed decisions that create social impact is by opting for products of companies that operate and manage their supply chain in a responsible manner. Many consumers already abide by this, as <a href="https://csis.upenn.edu/news/what-is-social-impact-anyways/">a recent survey</a> found that 90% of millennials are likely to buy products from brands with a “cause” when choosing between two brands of equal quality and price. This shows incentive for businesses to align themselves with such causes. It’s relatively easy for us as individuals to make “greener” shopping decisions in order to support sustainable brands. But individuals can take their support a level further through <a href="https://fennel.com/blog/esg-vs-sri-what-do-all-the-terms-mean">socially responsible investing</a>, which involves investing in companies that work to create positive social or environmental impacts. <a href="https://www.financemagnates.com/forex/what-do-retail-investors-really-think-about-esg-investing/">A survey of DIY traders and investors published by Capital.com</a> found that more than half of the respondents had never selected an investment based on <a href="https://fennel.com/fennel101/esg">environmental, social, and governance (ESG)</a> criteria, with only 7% citing social and environmental reasons as part of their investment strategy. This shows that socially responsible and ESG investing has yet to really take off, potentially showing opportunity for growth. People know that they want to do good, and mission-driven businesses mirror this desire. However, there is still much to be done. Luckily, there are steps that both groups can take in order to create a positive impact. And as long as people work towards these goals, they can hope to make a difference.   ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Employing ESG strategies may not result in favorable investment performance. Securities offered through Fennel Financials, LLC. Member <a href="http://finra.org/">FINRA</a> <a href="https://www.sipc.org/">SIPC</a>.

Social

ESG

How People and Businesses Strive to Create Social Impact

Social impact doesn't always happen in a vaccum.

Shivani Hemnani

02 Feb, 2023

3 min read

When investors want to understand the way a market is performing, they often look at a market index. An index is a tool that is used to measure the performance of a certain group of assets, typically by taking the weighted average of those assets in order to create a representative sample. There are many different types of indices. One that has been in the news a lot recently is the <a href="https://www.bls.gov/cpi/#:~:text=The%20Consumer%20Price%20Index%20(CPI,U.S.%20and%20various%20geographic%20areas.">Consumer Price Index</a>, which measures the average price change over time for a select group of consumer goods and services. People have been paying attention to this index because it provides a useful way to measure inflation in the US, especially in terms of how it’s felt by your average consumer. Some other indices you may have heard of are the <a href="https://www.britannica.com/topic/SandP-500">S&P 500</a> and <a href="https://www.britannica.com/topic/Dow-Jones-average">Dow Jones Industrial Average</a>, which both measure stock market performance by looking at either a group of 500 American publicly traded companies (S&P 500) or a basket of 30 industrial stocks (DJIA). Indices are popular tools to help track markets, regardless of whether those markets are broad or more niche. So it should come as no surprise that some investors use ESG indices in order to follow the performance of companies that prioritize their <a href="https://fennel.com/fennel101/esg">environmental, social, and governance</a> practices.   <h4>What is an ESG index?</h4> An ESG index is a collection of stocks of companies that exhibit high ESG performance. Like other indices, an ESG index is designed to act as a market benchmark, specifically for companies that prioritize ESG within their business operations. These ESG indices can help investors track high-performing ESG companies, compare those companies to the broader market, or provide an investment opportunity through an affiliated ETF or mutual fund. ESG indices are often put together by a company that provides its own ESG rating system, or by a financial institution that tracks the market. Each ESG index has its own method of picking stocks to be included, rebalancing over time, weighing underlying assets, and taking averages. So each ESG index provides a unique benchmark.   Here are some examples of different ESG indices, as well as what makes them unique. (This list is intended for educational purposes only, and should not be seen as an endorsement to invest. Employing ESG strategies may not result in favorable investment performance.)   S&P 500 ESG Index S&P Global’s S&P 500 index provides a market cap-weighted index of 500 large publicly traded companies. As mentioned before, it’s a popular index for investors who want a snapshot of the US stock market. But to turn the S&P 500 into an ESG index, S&P Global analyzed its list of 500 companies to find the top ESG performers and filter out the companies involved in controversial weapons, tobacco, coal production, or companies that had disqualifying UN Global Compact scores. As of 2022, around 300 of the original 500 companies are included in the S&P 500 ESG index. This makes the S&P 500 ESG index a more exclusive list than its parent index. And since the S&P 500 ESG index has significant overlap with the S&P 500, some investors like to compare the two indices to see if companies that prioritize ESG actually outperform their counterparts.   S&P SmallCap 600 ESG Index Similar to how S&P Global took its S&P 500 benchmark and refined it using an ESG lens, the organization did the same thing for its index tracking small cap companies. While the S&P 500 tracks 500 public companies with large market capitalizations, the S&P SmallCap 600 index tracks companies with a market capitalization between $850 million and $3.7 billion. So the S&P SmallCap 600 ESG index uses S&P Global’s same methodology to pick out the top ESG performers from the SmallCap index and exclude companies involved in controversial practices. S&P Global actually has <a href="https://www.spglobal.com/spdji/en/documents/methodologies/methodology-sp-esg-index-series.pdf">a number of different ESG indices</a> that it creates by refining one of its parent indices, or by compiling different ESG indices to create a composite index. These indices are meant to provide benchmarking for companies based on their market cap, geography, and more (as well as their ESG performance).   Refinitiv/S-Network ESG Best Practices Indices ESG data provider Refinitiv has developed a handful of ESG indices that fall under its Refinitiv/S-Network ESG Best Practices Indices umbrella. This includes the Refinitiv/S-Network US Large-Cap ESG Best Practices Index, Refinitiv/S-Network US Large-Cap Environmental Best Practices Index, Refinitiv/S-Network US Large-Cap Social Best Practices Index, Refinitiv/S-Network US Large-Cap Governance Best Practices Index, Refinitiv/S-Network Emerging markets ESG Best Practices Index, and a handful of others. These indices take the ESG rating system developed by Refinitiv and S-Network in order to provide a benchmark that tracks the top ESG performers. Altogether, these indices represent over 11,000 companies, which have been analyzed across more than 630 ESG performance indicators.   The Refinitiv Global Resource Protection Select Index While the Refinitiv/S-Network ESG Best Practices Indices look at ESG performance across more than 630 indicators, the Refinitiv Global Resource Protection Select Index narrows its scope by focusing on companies that perform well under Refinitiv’s “Resource Use” category. This means that companies included in the index have displayed efforts to reduce their materials, energy, or water usage, as well as made an effort to implement more sustainable efforts in their supply chain management.   MSCI USA ESG Select Index Morgan Stanley Capital International put together its MSCI USA ESG Select Index by compiling companies with positive environmental, social, and governance factors that display similar risk and returns metrics to its more broad MSCI USA Index. The index is designed to maximize exposure to ESG factors by providing more weight to companies with high ESG ratings, and less to companies with low ESG ratings.   MSCI KLD 400 Social Index An honorable mention goes to the MSCI KLD 400 Social Index, which evolved from the Domini 400 Social Index — one of the oldest ESG indices that still exists. The Domini 400 Social Index was created in 1990, over a decade before the term “ESG” <a href="https://www.euromoney.com/article/294dqz2h1pqywgbyh3zls/esg/the-united-nations-free-thinkers-who-coined-the-term-esg-and-changed-the-world">was coined</a>. This index was designed to track companies suitable for the “socially-responsible investing” movement, and has since evolved to incorporate the more standardized criteria that ESG provides.   Morningstar Global Markets Sustainability Index Financial services company Morningstar has a handful of ESG indices. Among them is its Morningstar Global Markets Sustainability Index, which is designed to reduce the risk caused by issues related to poor performance in environmental, social, and governance factors. Companies included in the list are from the Morningstar Global Markets Large-Mid Index.   Nasdaq-100 ESG Index The Nasdaq-100 ESG Index is an ESG screened version of the Nasdaq-100, which is a basket of 100 of the largest companies traded on the Nasdaq stock exchange. In order to turn the Nasdaq-100 Index into the Nasdaq-100 ESG Index, the financial organization says it looks at 15 potentially problematic areas of business and excludes them from the ESG index. But Nasdaq also admits that most of the companies in the Nasdaq-100 parent index take ESG seriously. So only 6% of companies in the original index get filtered out to create the Nasdaq-100 ESG Index.   ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Employing ESG strategies may not result in favorable investment performance. Securities offered through Fennel Financials, LLC. Member <a href="http://finra.org/">FINRA</a> <a href="https://www.sipc.org/">SIPC</a>.

ESG

Investing

ESG Index: What Is It and What Are Some Examples?

An ESG index can help you track the performance of certain ESG-vetted companies over time.

Fennel

22 Feb, 2023

5 min read

New York, NY– March 2, 2023, — Fennel, the investing platform that gives retail investors tools to better understand and engage with companies, has been named to Fast Company’s prestigious list of the World’s Most Innovative Companies for 2023. Fennel joins a list of businesses paving the way in innovation and highlighting those at the forefront of their respective industries. These companies are setting the standard with some of the greatest accomplishments of the modern world. Fennel has been recognized as one of the world’s most innovative in Personal Finance by Fast Company. Backed by the founder of Acorns, Capital Factory, Temerity Capital Partners and more, Fennel has raised over $8M in capital and is on a mission to provide retail investors access to market knowledge on the Environmental, Social, and Governance (ESG) impacts of the companies they invest in. In addition, Fennel does not lend out users’ securities ensuring that the individual retains their right to vote during the shareholder voting processes. Out of principle, Fennel does not accept payment for order flow (PFOF), which sets it apart from other commission-free trading apps. “Innovation is at the heart of everything we do at Fennel. Over the last eighteen months we have raised our Seed capital, built our team and launched a full functioning brokerage. It is because of our innovative team and passion in bringing information to retail investors that has allowed us to do so much in such a short period of time,” Fennel CEO and Founder, Daniel Naim, shared. “By providing information about the companies they are investing in, retail investors are able to make lasting change with their money and votes and invest confidently in companies that align with their values. This allows for the retail investor to have true ownership.” In aligning with values, Fennel provides a community for retail investors to organize and develop investment tribes, surrounding the ESG topics most important to them. Fennel provides information about past and upcoming shareholder votes in order to show investors how they can play a part in guiding a company’s decisions. The platform also allows investors to follow specific ballots to track their outcomes. Fast Company’s editors and writers sought out companies such as Fennel making the biggest strides around the globe as well as judged nominations received through their annual application process. The World’s Most Innovative Companies is Fast Company’s signature franchise and one of its most highly anticipated editorial efforts of the year. It provides a firsthand look at the inspiring and innovative efforts of companies across all sectors of the economy. “What a strange and thrilling year it has been to honor this year’s Most Innovative Companies. This year’s list compiles some of the most cutting-edge groundbreakers who are changing our world every single day, from legacy organizations like McDonald’s to upstarts like MrBeast and institutions such as NASA. Everyone on this list does something completely, uniquely different, yet, they all have one thing in common: innovation,” said Fast Company editor-in-chief Brendan Vaughan. About Fennel  Fennel is a mobile investing app that helps people better understand a company’s impact through digestible ESG data, as well as past and upcoming shareholder votes. With this information, Fennel allows investors to learn more about how companies operate and how they affect the world. Fennel refers to Fennel Markets, Inc., and Fennel Financials LLC. Securities offered through Fennel Financials LLC, member FINRA/SIPC. About Fast Company  Fast Company is the only media brand fully dedicated to the vital intersection of business, innovation, and design, engaging the most influential leaders, companies, and thinkers on the future of business. Headquartered in New York City, Fast Company is published by Mansueto Confidential | Prepared by Bevel Ventures LLC, along with our sister publication Inc., and can be found online at www.fastcompany.com. Media Contact Bevel Caden Kinard fennel@bevelpr.com ∙ ∙ ∙   Disclosures The information provided is for information purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any investment or financial product. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. The price and value of any the investments referenced and the income from such investments may fluctuate, and investors may realize losses on these investments, including a loss of principal. The risk of loss when trading any security can be substantial. You should therefore carefully consider, prior to making any investment decision, whether such a transaction is suitable for you in light of your investment objectives, financial circumstances, your tolerance to risks and your investment experience. Past performance is not indicative or a guarantee of future performance. Employing ESG strategies may not result in favorable investment performance. Fennel does not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this communication have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. Fennel Financials LLC is a broker-dealer registered with the U.S. Securities and Exchange Commission, a member of FINRA and a member of SIPC. The World's Most Innovative Companies of 2023 were selected by the editors of Fast Company. Applications were judged on relevancy, ingenuity, and current and potential cultural and business impact. Companies and nonprofits of all sizes were considered. An application fee was not paid to be considered for the award. Contacts Bevel Caden Kinard fennel@bevelpr.com

Fennel

Fennel Named to Fast Company’s World’s Most Innovative Companies for 2023

Fennel has been named to Fast Company’s prestigious list of the World’s Most Innovative Companies for 2023, joining a list of businesses paving the way in innovation and highlighting those at the forefront of their respective industries.

Fennel

02 Mar, 2023

3 min read

<div class="bw-release-story"> NEW YORK--<a href="https://cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Ffennel.com%2F&esheet=53357336&newsitemid=20230307005416&lan=en-US&anchor=Fennel&index=1&md5=77a0ce720bd511dfbf5907accc342203" target="_blank" rel="nofollow noopener" shape="rect">Fennel</a>, the investing platform that gives retail investors access to tools to better understand and engage with companies, today announced the hiring of Michael Capelli as the CEO of its brokerage, Fennel Financials. With over 20 years of experience in the financial services industry, Capelli joins the Fennel executive team to help build a transparent brokerage for retail investors, and to continue pushing for innovation in the financial industry. <blockquote> </blockquote> (Fennel refers to both Fennel Markets and its affiliated brokerage Fennel Financials. Securities offered through Fennel Financials LLC, member FINRA/SIPC. Daniel Naim will continue as the CEO of Fennel Markets, while Capelli joins as CEO of Fennel Financials.) “Michael brings a unique perspective to the Fennel team,” said Daniel Naim, the Founder and CEO of Fennel Markets. “He has the institutional background that is of the utmost importance in building a strong brokerage, but also has an innovative perspective which when paired together will create undeniable change in the retail brokerage industry.” Capelli has a solid track record of integrating technology into the trading process and co-founding multiple companies. The first company Capelli co-founded was BidPay.com, an electronic internet payment service that allowed customers of auction websites, such as eBay, to pay for goods purchased directly on the platform. Capelli was working at ITG, an agency broker dealer, when he co-founded BidPay.com. Eventually Capelli left ITG to join Thales Fund Management, LLC as the Global Head of Trading, where he incorporated automation and performance-based metrics into the trading process. After a stint at Thales, Capelli co-founded Miletus Trading, a quantitative broker dealer which specialized in building customized algorithmic trading solutions for institutional traders. Miletus was eventually acquired by Liquidnet, where he spent 15 years in various roles with the last being the Head of the Execution and Quantitative Servicing team for the Americas. Throughout his career, Capelli saw how technology could provide greater access to financial tools and services. He’s excited to see how the next chapter of fintech will open up access even further, and looking forward to chasing this goal with Fennel. Capelli will run the day-to-day operations of the brokerage while working alongside Naim on strategic vision and direction of Fennel as a whole. “Retail investors are adamant that they want change with the current investment landscape and are demonstrating this desire through their voices and actions. At Fennel, we have an opportunity of providing retail investors with a better platform to foster this change,” Capelli said. “While we are in a competitive market, there are a myriad of ways Fennel is already innovating, with even more to come.” About Fennel Fennel is a mobile investing app that helps people understand a company’s impact through digestible ESG data, as well as past and upcoming shareholder votes. With this information, Fennel allows investors to learn more about how companies operate and how they affect the world. Fennel refers to Fennel Markets, Inc., and Fennel Financials LLC. Securities offered through Fennel Financials LLC, member FINRA/SIPC. Disclosures: The information provided is for information purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any investment or financial product. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. The price and value of any the investments referenced and the income from such investments may fluctuate, and investors may realize losses on these investments, including a loss of principal. The risk of loss when trading any security can be substantial. You should therefore carefully consider, prior to making any investment decision, whether such a transaction is suitable for you in light of your investment objectives, financial circumstances, your tolerance to risks and your investment experience. Past performance is not indicative or a guarantee of future performance. Fennel does not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this communication have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. Fennel Financials LLC is a broker-dealer registered with the U.S. Securities and Exchange Commission, a member of FINRA and a member of SIPC. </div> <div class="bw-release-contact"> Media contact Bevel Caden Kinard <a href="mailto:fennel@bevelpr.com" target="_blank" rel="nofollow noopener" shape="rect">fennel@bevelpr.com</a> </div>

Fennel

Fennel Expands Leadership Team with Key Executive Hire

The ESG-focused retail investing platform hires Michael Capelli to lead its brokerage operations

Fennel

07 Mar, 2023

2 min read

‘Tis the season — the season where some of the largest public companies have their annual general meeting (AGM) and shareholders get to vote on important business decisions. <a href="https://www.finra.org/investors/insights/welcome-proxy-season-primer-proxy-statements-and-shareholder-meetings">AGM/proxy season</a> refers to the couple of months when the highest number of companies have their annual general meetings (sometimes called annual shareholder meetings). Companies tend to have these AGMs in the first half of their fiscal year, and since many companies end their fiscal years on December 31, a lot of AGMs happen between early April and late June, with a high concentration of AGMs occurring in May. Of course, there are plenty of early birds and plenty of stragglers, so it’s good to get mentally prepared for proxy season ahead of time and know what to expect. AGMs give companies the chance to report business progress or plans to shareholders and ask for their input on certain decisions <a href="https://fennel.com/fennel101/shareholder-voting">in the form of shareholder voting</a>. Companies often let shareholders attend these meetings in-person, over the phone, or online. But even if shareholders don’t attend the meetings, they’re allowed to vote “by proxy” by sending in their votes ahead of time. Publicly traded companies are required to send out their proxy statements ahead of their AGM. This proxy statement includes useful information like when the shareholder meeting is taking place, who’s running for the board of directors, information about executive compensation packages, the board’s pick for an auditing firm, company performance, and what shareholder proposals will be voted on. If you own a company’s stock and are eligible to vote, you should receive notice that the shareholder meeting is coming up and be given instructions for how to vote. Depending on your situation, you may receive these materials from the company hosting the meeting, a voting transfer agent, or the bank/broker you invest with. These materials are either delivered electronically, through email, or by mail.   Why should I vote? We get it, these proxy materials are dense documents written in legalese, and therefore, are easy to ignore. But it may still be in your best interest to read through them and vote on ballot measures. It is your shareholder right, after all! If you’re planning on investing in a company over the long term, these annual meetings can provide a temperature check of what that company is planning over the next year. It also gives you an avenue to communicate with the company on what you think the best path forward for the business is. On top of board appointments, executive compensation, and so on, sometimes shareholders are asked to vote on things like dividends, the issuing of new shares, or stock splits. These things can potentially influence a company’s share price, which means you may want to pay attention as an investor. In addition, companies also vote on shareholder proposals that deal with how a company impacts the world. For example, in 2022 Jack in the Box shareholders voted that the company should <a href="https://www.greencentury.com/majority-of-jack-in-the-box-shareholders-support-green-century-packaging-proposal/">speed up its sustainable packaging efforts</a>. Meanwhile, Lowe’s shareholders voted that the company should <a href="https://www.sec.gov/Archives/edgar/data/60667/000119312522105006/d301898ddef14a.htm#toc301898_128">report its racial and gender pay gaps</a>. There’s a moral argument for why these things are important. Sustainable packaging is good for the planet and closing racial and gender pay gaps is good for social equity. But, there is also a business argument that shareholders bring up in these proposals. For the sustainable packaging vote, shareholders brought up that other fast food companies had made commitments to sustainable packaging, which could make Jack in the Box look bad <a href="https://unctad.org/news/un-agencies-cop27-urge-action-tackle-impact-plastic-climate">during a time of record plastic pollution</a>. For the pay gap vote, shareholders <a href="https://www.sec.gov/Archives/edgar/data/60667/000119312522105006/d301898ddef14a.htm#toc301898_128">stated</a> that “actively managing pay equity is associated with improved representation and diversity is linked to superior stock performance and return on equity.” More votes like these will happen in 2023. For example, Disney shareholders will vote on <a href="https://www.sec.gov/Archives/edgar/data/1744489/000119312523033959/d354565ddefr14a.htm">disclosing political contributions</a> on April 3, Kellogg Company shareholders will <a href="https://www.sec.gov/ix?doc=/Archives/edgar/data/55067/000162828023006053/k-20230302.htm#ica54dcf0e22344dda059d9950a115ea0_549755814733">vote on pay equity</a> on April 28, and Eli Lilly shareholders will vote on whether the company should <a href="https://www.sec.gov/ix?doc=/Archives/edgar/data/59478/000005947823000101/lly-20230224.htm#i9aaa0f0598e640239f3876129ce4be9b_1099511632187">disclose the effectiveness of its diversity, equity, and inclusion (DEI) efforts</a> on May 1. If you care about issues that affect the environment or your community, you may want to voice your opinions on these issues and participate in shareholder votes. But even if you don’t care about these issues so much, shareholder votes have the potential to impact the share price or overall business performance of a company you are invested in. So be an engaged shareholder this proxy season. You’ll get to voice your opinions, and may help push the companies in your portfolio to be even better. ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Employing ESG strategies may not result in favorable investment performance. Securities offered through Fennel Financials, LLC. Member <a href="http://finra.org/">FINRA</a> <a href="https://www.sipc.org/">SIPC</a>.

Shareholder Activism

Proxy Season 2023 Is Coming Up, Here's What You Need To Know

‘Tis the season — the season where some of the largest public companies have their annual general meeting (AGM) and shareholders get to vote on important business decisions.

Fennel

14 Mar, 2023

2 min read

<a href="https://fennel.com/blog/proxy-season-2023-is-coming-up-heres-what-you-need-to-know" target="_blank" rel="noopener">Proxy season 2023</a> is coming up, which means investors are getting ready to exercise their rights as shareholders and vote on important business decisions. But before the annual general meetings of 2023 really kick off, let’s take a look back at last year and pick out some of the trends we saw in proxy season 2022. That way, we might have a better idea of what to expect in 2023. Here are some of the highlights from last year’s proxy season:   There was a record number of shareholder proposals in 2022 If your favorite part of proxy season is voting on shareholder proposals, 2022 was your year. Last year broke records in not only the number of shareholder proposals that were submitted to public companies, but also the number of proposals that made it to the ballot and were voted on. According to <a href="https://corpgov.law.harvard.edu/2022/10/27/boardroom-recap-the-2022-proxy-season/">a PricewaterhouseCoopers study</a>, there were 555 shareholder proposals among Russell 3000 companies that were voted on — a 25% increase compared to the previous year. The study says that this is the result of two factors. One, a 17% increase in the number of shareholder proposals that were submitted to these companies. And two, a 40% decrease in no-action requests granted by the SEC (these requests allow companies to drop certain shareholder proposals from their proxy statements). With this record number of proposals being voted on, a record number of proposals also received the majority of votes.   Lots of these proposals centered around ESG issues In this record year of shareholder proposals, there were plenty that were related to ESG. Proxy Preview Project <a href="https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/record-number-of-shareholder-esg-proposals-in-2022-defies-gop-political-backlash-71181308">found</a> 607 instances of shareholder resolutions related to ESG topics in the first half of 2022, which it said was a 22% increase from the year before. This uptick came despite the fact that a 2020 SEC rule made it relatively harder to file and refile shareholder proposals. "The attempt to silence shareholder voices has, instead, prompted them to get louder," Andrew Behar, CEO of As You Sow, wrote in <a href="https://www.proxypreview.org/2022/report-blog">the Proxy Preview report</a>. "This uprising is occurring while investors and fiduciaries increasingly understand that systemic risk affects all players in the capital markets, inspiring leading companies onto the path of serving all stakeholders."   Some of the top ESG issues were: DEI, climate change, and political spending While governance issues remained a popular topic for shareholder proposals, there number of shareholder proposals surrounding environmental and social issues almost doubled among Russell 3000 companies, according to the PwC study mentioned before. However, the study points out that only 41 of the 288 E and S related proposals received the majority of votes. This is a slight uptick from the 36 proposals that got the majority of votes in 2021, but still represents a decline in the percentage of proposals reaching the majority benchmark. The study found that the number of environment-related proposals doubled compared to the year before. These proposals included topics like measuring direct emissions, climate risk management, measuring indirect emissions, and implementing sustainable packaging. Proposals that dealt with direct emissions like greenhouse gas emissions and net-zero targets were more likely to pass (7 out of 14 did) than proposals that dealt with indirect emissions The study also found that shareholder proposals asking for racial equity audits were surprisingly popular, with average support going from 33% in 2021 to 45% in 2022. 8 out of 22 of these proposals passed with the majority of votes. These environmental and social trends build off of what we’ve seen in the past few years. US SIF <a href="https://www.ussif.org//Files/Trends/2022/Trends%25202022%2520Executive%2520Summary.pdf">analyzed</a> shareholder proposals spanning 2020 to 2022 and found that the issues that prompted the most proposals were: labor and equal employment opportunity (with 311 proposals), corporate political activity (with 288 proposals), and climate change (with 265 proposals).   Notable vote: Jack in the Box’s sustainable packaging Speaking of breaking records, one especially notable vote came from the shareholders of Jack in the Box. Investor Green Century Funds put together a shareholder proposal asking Jack in the Box to speed up its sustainable packaging efforts, arguing that the company had fallen behind the sustainable packaging initiatives of other fast food companies. What makes this vote notable is that it passed with 95% of the vote despite Jack in the Box recommending that shareholders vote against it. This is <a href="https://www.greencentury.com/majority-of-jack-in-the-box-shareholders-support-green-century-packaging-proposal/">the largest margin</a> that an environmental- or social-related proposal has passed with a company opposing it — showing that certain investors really care about environmental impact, and are willing to push companies that drag their feet on these issues.   Investors paying close attention to governance Environmental and social issues were in the spotlight, but so was governance. According to <a href="https://www.ey.com/en_us/board-matters/four-key-takeaways-from-the-2022-proxy-season#accordion-content-1941053843-0">EY</a>, shareholders asked for more board oversight and disclosures when it came to ESG issues, and some companies responded by citing ESG in director qualifications. EY also notes that despite the signals that activist investors would challenge more company-picked board nominations, the opposition only went up by a small percentage. The average vote against S&P 500 directors was 4.2% in 2022, which was only up a little bit compared to the 3.9% average in 2021.   Say on pay decline One particularly interesting trend in governance is the decrease in support for company “say on pay” votes. If you look at previous proxy years, you’ll notice that in general, say on pay votes received overwhelming support. But that may be starting to chip away. According to PwC, “Average support at companies in the S&P 500 and Russell 3000 hit record lows since the vote was introduced 11 years ago, at 87% and 90% respectively. In the S&P 500, 21 companies failed their say-on-pay vote, with 207 companies receiving below 70% support. The number of failed votes at Russell 3000 companies hit 71.” While 70% may still seem like a high percentage of the vote, this represents a stark contrast when compared to before. This trend is exemplified by the controversy surrounding Apple’s 2022 say on pay vote for its CEO Tim Cook. Last year, Institutional Shareholder Services (ISS), one of the largest proxy advisory firms, <a href="https://www.reuters.com/technology/apple-shareholder-iss-urges-vote-against-ceo-cooks-bonus-2022-02-16/">asked Apple investors to vote against</a> Tim Cook’s compensation, saying there were issues with how his equity was awarded. Apple’s say on pay vote still received a majority with 64% approval, but this was down from 95% in 2021. In response, Cook <a href="https://www.cnbc.com/2023/01/12/apple-ceo-tim-cook-receives-a-40percent-pay-cut-after-shareholder-vote.html">voluntarily cut his own salary by 40%</a> at the start of 2023. This is potentially a big deal, because if Tim Cook isn’t safe from say on pay opposition — the same Tim Cook that leads the largest US company by market cap, that grew his company’s share price by around 1,000% since becoming CEO in 2011 — this could have big implications for the compensation of other CEOs if their shareholders believe they are being unfairly paid. It could be interesting to see how support for say on pay changes in 2023, or if it changes at all. But all of these trends from 2022 could be worth keeping an eye on in 2023. These trends could just be symptoms of what investors are thinking about during a specific year, or they could be hinting at a larger movement.   • • • The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Employing ESG strategies may not result in favorable investment performance. Securities offered through Fennel Financials, LLC. Member<a href="http://finra.org/"> FINRA</a><a href="https://www.sipc.org/"> SIPC</a>.

Shareholder Activism

ESG

Investing

Highlights From Proxy Season 2022

Let's take a look back at some of the things that happened during last year's AGM season.

Fennel

21 Mar, 2023

5 min read

Corporate Social Responsibility (CSR) is more than a company doing a bake sale to raise money for charity. While bake sales for charity aren’t a bad thing, true Corporate Social Responsibility happens when a company embeds philanthropic, social, or ethical goals into its very business model. <a href="https://www.unido.org/our-focus/advancing-economic-competitiveness/competitive-trade-capacities-and-corporate-responsibility/corporate-social-responsibility-market-integration/what-csr">Corporate Social Responsibility</a> is an instrumental way through which a company achieves and balances its triple bottom line strategy (i.e. its economic, environmental, and social elements), beyond the occasional good deed. So, why would a company want to prioritize CSR? There are a handful of reasons. CSR can be helpful from a risk management perspective. Having sound corporate governance and striving to comply with regulatory requirements can help an organization cope with risks in the face of internal and external adversities. For example, it can help with keeping senior management accountable and having responsible financial reporting. On top of that, effective contingency and business continuity plans can potentially mitigate risks for an organization in case the company is affected by an economic downturn or faces audits or litigations. In turn, this may also protect stakeholders and help the company stay out of controversy, hence keeping away from negative publicity. CSR can also act as a motivational factor for company stakeholders. Many big organizations now encourage employees to take part in CSR initiatives by setting aside employee volunteer hours. This can help motivate employees by helping them participate in causes they care about. Employees do pay attention to the values of the companies they work for, research suggests that nine out of ten employees say they want to work for a responsible company (<a href="https://www.researchgate.net/publication/280546320_CSR_and_Employee_Motivation">Dawkins, 2004</a>). A study involving 2,500 employees conducted across Europe, America, and Australia found that almost one in four respondents who think their organization is environmentally aware have a higher sense of motivation towards making their company succeed, when compared to only eight percent of those who feel their company is not paying sufficient attention to these issues (<a href="https://www.researchgate.net/publication/280546320_CSR_and_Employee_Motivation">Mori, 2006</a>). Moreover, if employees genuinely believe that their company has a solid focus on CSR, there is an indirect added value to the firm’s brand image. That same study of 2,500 employees found that 74% of respondents would believe the word of an employee over a company’s marketing material regarding their contribution to the society and the environment. In recent years, there has been a growing trend in businesses <a href="https://www.sojitz.com/en/csr/supply/pdf/handbook_e.pdf">setting up CSR procurement policies</a> and showing preferential treatment to suppliers who source responsibly. This type of CSR policy helps companies find cost-effective ways to reduce waste or ensure certain quality standards. Additionally, adhering to fair trade and labor policies, can help companies avoid controversies and may help minimize risk exposure. When CSR is deeply rooted into a business’ practices, it can help with a variety of things, whether that’s engaging company stakeholders, managing risk, or something else. That’s in addition to the benefits for the environment and society that CSR strives to create. This is why many companies adopt CSR policies, to try to create value inside and outside of company walls.   Risk considerations: Responsible investing incorporates Environmental Social Governance (ESG) factors that may affect exposure to issuers, sectors, industries, limiting the type and number of investment opportunities available, which could result in excluding investments that perform well.   • • • The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Employing ESG strategies may not result in favorable investment performance. Securities offered through Fennel Financials, LLC. Member <a href="http://finra.org/">FINRA</a> <a href="https://www.sipc.org/">SIPC</a>.

Social

Corporate Social Responsibility — Is There More to It Than Making Companies Look Good?

Corporate Social Responsibility is a hot topic nowadays, but how does it actually benefit companies?

Shivani Hemnani

23 Mar, 2023

3 min read

Want to invest in bonds while having a positive impact on the world? It may be time to get familiar with green bonds, social impact bonds, and sustainability bonds. As a quick recap, <a href="https://www.investopedia.com/terms/b/bond.asp">bonds</a> are essentially loans or IOUs that provide the borrower (such as governments or corporations) with external funds to finance long-term goals. When a person invests in a bond, they’re basically loaning money to that borrower, who will pay back the principal amount plus interest over time. An example of this would be municipal bonds, which local governments issue to finance essential services such as infrastructure projects. Similar to how <a href="https://fennel.com/fennel101/esg">environmental, social, and governance (ESG)</a> has taken over the stock market, impact investors are looking for ways to promote environmental or social good with their investments into the debt market (i.e. bonds). This has led to new asset classes like green, social, and sustainability bonds. Let’s look into these three types of bonds.   Green Bonds A green bond is a type of financial instrument that lends money to finance projects that are meant to help the environment. <a href="https://www.eib.org/attachments/fi/eib-cab-sab-presentation.pdf">The first AAA-rated green bonds</a> were issued in 2007 by the European Investment Bank and World Bank. This capital funded both renewable energy and energy efficiency projects with the goal of climate change mitigation. Since market inception, the green-labeled bond market has ballooned to over $1 trillion cumulative issuance with an average <a href="https://www.climatebonds.net/market/explaining-green-bonds">annual growth rate of 95%</a>. Green bonds are wildly popular and robust, channeling funding towards things like electric transportation infrastructure, research & development of low-carbon technologies, water supply management, wastewater collection and treatment, pollution prevention and control, protection and restoration of biodiversity and ecosystems, and sustainable forest management. There’s even a subcategory of green bonds called “blue bonds” that focuses on clean water and ocean ecosystem preservation/restoration. In one of the first green bond issuances of 2023, <a href="https://www.reuters.com/markets/rates-bonds/hong-kong-raises-58-bln-green-bonds-term-sheets-2023-01-05/">Hong Kong</a> announced that it raised $5.8 billion in green bonds, which is intended to fund the sustainable economic development of the region. Not a bad start to the year.   Social Impact Bonds Social impact bonds are like green bonds, except instead of providing funding to environmental initiatives, they are meant to finance social services and drive positive social outcomes. Geoff Mulgan, then CEO of Young Foundation, is credited with coining the term “<a href="https://efinancemanagement.com/investment-decisions/social-impact-bonds">social impact bond</a>.” The<a href="https://www.oecd.org/cfe/leed/UnderstandingSIBsLux-WorkingPaper.pdf"> first social impact bond</a> launched in 2010 by United Kingdom-based Social Finance Ltd. with the goal of reducing recidivism (which is when someone who served prison time commits another crime). Since then, the market has <a href="https://www.pimco.com/en-us/resources/education/understanding-green-social-and-sustainability-bonds/">expanded the range of possibilities for social impact bonds</a>, addressing issues facing low-income people and the unemployed, migrants, women and/or marginalized genders, people with disabilities, displaced persons, and other communities in need. Social impact bonds finance actions such as improving food security and sustainable food systems, piloting programs around socioeconomic advancement, building affordable housing, increasing access to essential services, and building affordable basic infrastructure. While not as prevalent as green bonds, the market for social impact bonds is still rapidly growing. <a href="https://www.brookings.edu/wp-content/uploads/2020/09/Impact_Bonds-Brief_1-FINAL.pdf">Brookings reported</a> that as of July 2020, at least 194 social impact bonds have been contracted in 33 different countries, representing over $421 Million in upfront investment and over $460 Million in total outcome funding committed.   Sustainability Bonds You can think of sustainability bonds as a combination of green and social impact bonds. Sustainability bonds finance projects that have both positive environmental and social outcomes. The United Nations <a href="https://sdgs.un.org/goals%23history">17 Sustainable Development Goals</a>, adopted by member states in 2015, takes a systems-approach to conceptualizing the interlinking social and environmental themes we need to collectively address in order to achieve peace and prosperity for people and the planet. Sustainable bonds support projects in multiple SDG areas. From <a href="https://www.environmental-finance.com/content/the-green-bond-hub/the-2020s-the-decade-of-sustainable-bonds.html">2017 to 2023</a>, we saw a massive increase in sustainable bond issuance from $200 billion to nearly $1.5 trillion. The green, social, and sustainability bond markets are experiencing rapid growth, and thus have to deal with some growing pains, grappling with finding standardized policies and procedures around transparency, impact measurement, and reporting. But the growth of these bonds are exciting, as they potentially offer a new asset class for impact investors to look into.     Risk Considerations: There is no assurance that a Portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the Portfolio will decline and that the value of Portfolio shares may therefore be less than what you paid for them. Market values can change daily due to economic and other events (e.g. natural disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, you can lose money investing in this Portfolio. Please be aware that this Portfolio may be subject to certain additional risks. Fixed income securities are subject to the ability of an issuer to make timely principal and interest payments (credit risk), changes in interest rates (interest-rate risk), the creditworthiness of the issuer and general market liquidity (market risk). In a rising interest-rate environment, bond prices may fall and may result in periods of volatility and increased portfolio redemptions. In a declining interest-rate environment, the portfolio may generate less income. Longer-term securities may be more sensitive to interest rate changes. ESG strategies that incorporate impact investing and/or Environmental, Social and Governance (ESG) factors could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. As a result, there is no assurance ESG strategies could result in more favorable investment performance.   ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Employing ESG strategies may not result in favorable investment performance. Securities offered through Fennel Financials, LLC. Member <a href="http://finra.org/">FINRA</a> <a href="https://www.sipc.org/">SIPC</a>.

Green, Social Impact, and Sustainability Bonds are Financing Public Benefit

Want to invest in bonds while having a positive impact on the world?

Sultan White

30 Mar, 2023

4 min read

Tax cuts are often <a href="https://abcnews.go.com/Business/tax-codes-rich-richer-tax-laws/story?id=78182056">criticized</a> for helping the rich more than the poor, and further increasing wealth and income inequality in America. The <a href="https://www.law.cornell.edu/wex/tax_cuts_and_jobs_act_of_2017_(tcja)">Tax Cuts and Jobs Act of 2017</a> (TCJA) faced these same criticisms. A <a href="https://www.policygenius.com/taxes/who-benefited-most-from-the-tax-cuts-and-jobs-act/">2021 study</a> found that needy families received the least savings as a proportion to their income, while wealthy families received the most. Corporations, on the other hand, were by far the biggest winners from these tax cuts, according to that study. An <a href="https://www.brookings.edu/policy2020/votervital/did-the-2017-tax-cut-the-tax-cuts-and-jobs-act-pay-for-itself/">analysis by the Brookings Institute</a> found that the TCJA also led to a budget shortfall for the federal government, which can hinder the government’s ability to provide important economic programs for millions of struggling Americans. When the TCJA passed, most of the media focused on these tax cuts, however, the new law also had one provision that flew under the radar: the creation of <a href="https://opportunityzones.hud.gov/">Opportunity Zones</a>. The “Qualified Opportunity Zone” designation is a label that local governors give to economically-distressed areas, in order to get investors to invest in that community. They incentivize investors to do this by giving them <a href="https://www.irs.gov/credits-deductions/businesses/opportunity-zones">the tax benefit</a> of deferring their capital gains taxes. Opportunity Zones could provide socially-conscious investors with a new avenue to create impact, and may prove to be a silver lining to what critics feel was an out-of-touch policy in TCJA. However, the true potential is yet to be seen. After TCJA passed, state and local governments were tasked with designating which low-income communities would become Opportunity Zones based on US Census data. Many local governments strategically selected their Opportunity Zones to overlap with other census-tract-based economic development programs like <a href="https://www.cdfifund.gov/programs-training/programs/new-markets-tax-credit">New Market Tax Credits</a>, a program which also attracts private capital to distressed communities.   <h4>How does one invest in an Opportunity Zone?</h4> Numerous <a href="https://www.nerdwallet.com/article/investing/qualified-opportunity-funds">Qualified Opportunity Funds</a> (QOF) were set up in order to help facilitate investments in small businesses and real estate developments located within these Opportunity Zones. (You check out a database of Qualified Opportunity Funds <a href="https://opportunitydb.com/funds/">here</a>). But these funds have a few rules. All investments in either small businesses or property developments must be equity-based. Real estate developments must include substantial rehabilitation — a Qualified Opportunity Fund cannot simply buy up distressed properties and leave them as such, they have to improve these areas. “Sin businesses,” such as liquor and tobacco stores are not eligible investments. These rules are partially why many Qualified Opportunity Funds <a href="https://www.costar.com/article/936063478/opportunity-zone-fundraising-seen-surging-to-record-10-billion-this-year">opt to invest in real estate</a> over small businesses, despite the fact that investing in small businesses <a href="https://eig.org/opportunity-zones/">has the potential</a> to create a larger impact in economically-distressed areas by providing services and jobs. Regardless, there is still an opportunity to drive impact. So how do investors get involved? Remember, the Opportunity Zone designation has tax benefits for capital gains, so an investor who wants to get those benefits can <a href="https://www.irs.gov/newsroom/opportunity-zones">transfer recent capital gains proceeds</a> into a Qualified Opportunity Fund. According to <a href="https://www.irs.gov/newsroom/opportunity-zones">the IRS</a>, this is the tax benefit of doing so: “If the investor holds the investment in the QOF for at least 10 years, the investor is eligible to elect to adjust the basis of the QOF investment to its fair market value on the date that the QOF investment is sold or exchanged.” That may be a little complicated to decipher, but it essentially means that investors who hold their Opportunity Fund Investment for at least 10 years don’t have to pay any capital gains produced through their investment. Of course, paying no capital gains tax is a big incentive for investors. Some research has shown that this <a href="https://www.bloomberg.com/news/articles/2020-06-25/opportunity-zones-don-t-work-can-they-be-fixed">has invited bad actors to exploit the benefit</a> for its tax purposes, without caring much about the impact of their investments. Qualified Opportunity Funds that focus too much on cutting costs and maximizing profits run the risk of leading to slumlords doing the legal bare-minimum to stay operational. Alternatively, some well-meaning funds may fail to involve community stakeholders, and inadvertently lead to gentrification or lead to families being priced out of their neighborhoods. Many argue for a <a href="https://www.americanprogress.org/article/new-research-adds-to-evidence-that-opportunity-zone-tax-breaks-are-costly-and-ineffective/">policy update</a> that puts up guardrails, increases transparency and accountability, and shifts the benefits of this policy, so it’s not only the wealthy investors who have something to gain. Still, there are a few Qualified Opportunity Funds that hold themselves to higher standards of triple bottom line impact. Efforts by<a href="https://www.businesswire.com/news/home/20220829005695/en/Arctaris-Releases-Annual-Impact-Report-Achieving-Record-Growth"> Arctaris Impact Investors,</a> Woodforest CEI-Boulos Opportunity Fund, <a href="https://www.revozcapital.com/news/2021/1/13/revoz-capital-announces-1b-social-impact-initiative-and-leadership-council">Revitate</a>,<a href="https://eig.org/eig-oz-webinar-series-evaluating-the-impact-of-opportunity-zones-investments/"> Catalyst Opportunity Fund, and JTC Americas</a> show that high-impact OZ strategies are feasible and profitable. Just like capitalism as a whole, there will always be some groups that look to maximize gain at all cost, while others act sustainably and responsibly — the same goes for Opportunity Funds. But for impact investors who are looking to benefit others, there are opportunities out there to use their wealth as a force for good.   Risk Disclosure: Investing in Qualified Opportunity Funds involves risks such as market loss, liquidity risk, and business risk, to name a few. Consult with a tax professional and attorney to determine if it aligns with your financial goals and risk tolerance before investing. Read the fund's documentation carefully and remember that tax benefits may not justify the potential risks.   ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member FINRA SIPC.

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Opportunity Zones Incentivize Impact Investing Through Tax Benefits

The Tax Cuts and Jobs Act of 2017 helped create a new type of impact investing.

Sultan White

20 Apr, 2023

3 min read

On April 5, 2012 President Barack Obama signed the <a href="https://www.sec.gov/spotlight/jobs-act">Jumpstart Our Business Startups (JOBS) Act</a> into law. Among loosening oversight and regulations on small businesses, the JOBS Act legalized equity crowdfunding to help drive technological innovation and high-growth enterprises in the United States. Equity crowdfunding provides both a new method for raising capital for privately-owned businesses, and a new asset class for investors. It involves business owners selling a number of company shares to a pool of investors through regulated online crowdfunding platforms. This type of crowdfunding is different from donation crowdfunding (like <a href="https://www.gofundme.com/">GoFundMe</a>) and loan crowdfunding (like<a href="https://www.kiva.org/"> Kiva</a>). With equity crowdfunding, startups looking to fundraise have new opportunities to tap into sources of capital, while non-accredited investors can finally break into a small-scale form of angel investing. Similar to the venture capital field, equity crowdfunding investors buy small shares of early-stage startups to hold for a long time horizon. This is generally due to the fact that crowdfunding investors only see returns in the event of an Initial Public Offering, acquisition by a larger company, reverse buyout, or some other qualifying event. However, this form of investing closely resembles venture capital investing, and chases the same goal of investing in the next high-growth tech company. Of course, there is always the risk of not seeing returns for many years, or investments losing value. It’s important to keep this in mind. Equity crowdfunding effectively democratized the venture capital and angel investing spaces, once reserved for high-net worth individuals based primarily in Silicon Valley, New York City, and other select cities. Paired with the widespread use of social media platforms such as Facebook, Instagram, LinkedIn, Reddit, and Twitter, equity crowdfunding <a href="https://www.grandviewresearch.com/industry-analysis/crowdfunding-market-report">has introduced a new generation</a> of digitally-literate Millennials and Zoomers to the world of startup investing. In 2018, <a href="https://www.forbes.com/sites/forbesagencycouncil/2021/12/20/the-meteoric-rise-of-equity-crowdfunding/?sh=60fa778c4d41">equity crowdfunding drove</a> $74M in startup capital to companies, with an additional $100M raised the very next year. Then, while a portion of the financial sector struggled through the pandemic, equity crowdfunding accelerated, channeling a staggering $211M in 2020. Now more people can participate in this new asset class for relatively small amounts (like $100 investment minimums) depending on the platform used. We have yet to see how much equity crowdfunding will influence inter-generational wealth creation in working and middle class families, nonetheless it is refreshing that access and opportunities in startup investing has increased for a wider array of investors from diverse socioeconomic backgrounds. If you’re looking to try investing through equity crowdfunding, it’s important to know that each of the platforms have their own rules, investment minimums, and selection of startup companies. If you’re a startup founder looking to raise equity crowdfunding, be sure to review the deal terms. There are several equity crowdfunding platforms out there, including <a href="https://www.startengine.com/">StartEngine</a>, <a href="https://www.seedinvest.com/">SeedInvest</a>, <a href="https://microventures.com/">MicroVentures</a>, <a href="https://wefunder.com/">Wefunder</a> and <a href="https://republic.com/">Republic</a>. While the equity crowdfunding space is still in its infancy, its meteoric rise indicates that it’s worth keeping an eye on. On top of this, there are many startups that have benefited from the new model. For example, startup company <a href="https://techcrunch.com/sponsor/seedinvest/the-next-era-of-equity-crowdfunding-is-here-and-its-not-just-for-seed-stage-deals-anymore/">NowRx used an equity crowdfunding strategy</a> to raise capital for both its official launch and an aggressive scale-up during the height of the COVID-19 pandemic. It raised a $750K seed round in 2017, then a $7M series A, and then an impressive $20M series B — primarily on the StartEngine platform. Equity crowdfunding is expected to grow, with experts <a href="https://www.prnewswire.com/news-releases/crowdfunding-market-to-grow-by-usd-196-36-billion-during-2021-2025--13-86-year-over-year-growth-in-2021--technavio-301249041.html">predicting almost $200B growth</a> in market share from 2021 to 2025. Whether you’re a CEO looking to raise money or an investor trying to break into the private market, equity crowdfunding has proven itself as a viable alternative to traditional channels, some of which have been <a href="https://medium.com/democratizing-finance/equity-crowdfunding-is-creating-opportunity-for-minority-women-owned-startup-founders-3cfba591374c">marred by gatekeeping and institutionalized bias</a>. Similarly, equity crowdfunding may serve as a boon for diverse founders. Despite the rhetoric from the VC industry claiming to support minority groups, <a href="https://www.cnbc.com/2020/10/07/black-and-latinx-founders-have-received-just-2point6percent-of-vc-funding-in-2020-so-far.html">a measly 2.6% of VC funding</a> went to Black and latinx founders from 2015 to 2020. Meanwhile, <a href="https://www.bloomberg.com/news/articles/2022-01-11/women-founders-raised-just-2-of-venture-capital-money-last-year">only 2% of VC money</a> in 2021 went to female founders. And on the investor side, <a href="https://www.theinformation.com/articles/the-most-and-least-diverse-venture-capital-firms">white men represent 53% of all VC investors</a> and control a whopping 93% of all VC dollars. In comparison, <a href="https://www.startengine.com/blog/venture-capital-vs-equity-crowdfunding/">33% of startups on StartEngine</a> have a BIPOC founder and <a href="https://twitter.com/joinrepublic/status/971828497667842049">44% of all funds raised on Republic</a> went to female founders. The “old boys club” may have historically controlled access to VC money but along came equity crowdfunding — both a technological and legislative innovation that has started to disrupt the system. Equity crowdfunding has the potential to knock down barriers, and provide both access to capital and investment opportunities to a wider variety of people, connecting diverse founders with diverse investors.   Crowdfunding also has significant risks to consider such as liquidity risk, risk of loss, fees and expenses, limited information and more. Crowdfunding offers are speculative and investors should be able to afford and be prepared to lose their entire investment. For more information, view <a href="https://www.sec.gov/oiea/investor-alerts-bulletins/ib-crowdfunding">Investor Bulletin: Regulation Crowdfunding for Investors.</a> ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. This is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Employing ESG strategies may not result in favorable investment performance. Securities offered through Fennel Financials, LLC. Member <a href="http://finra.org/">FINRA</a>, <a href="https://www.sipc.org/">SIPC</a>.

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Equity Crowdfunding: The Democratization of Startup Investing

Equity crowdfunding allows more people to participate in early stage startup investing.

Sultan White

27 Apr, 2023

3 min

At Fennel, we believe that individual investors should have access to as much data as the traders on Wall Street do. That’s why we’ve packed all that ESG, financial, and shareholder voting information into our app. But, we also acknowledge that a lot of data can be overwhelming at times, especially when it comes to financial data. This data can tell you about the health of a company’s business or the performance of its stock, but it also involves understanding a fair amount of terms and numbers. That’s why we’ve put together this glossary as a cheat sheet to help you remember what all the financial terms measure and mean. With this glossary, we hope you feel well-equipped to invest based on the metrics that matter to you. (For a rundown on Fennel’s ESG data, you can <a href="https://fennel.com/fennel101/4">read our explainer here</a>.)   Annual Revenue Annual revenue tells you how much money a company generates by selling its products or services over the course of a year. Fennel gets this information by looking at the net revenue or net sales that a company generated in its most recent fiscal year. Revenue differs from profit because it doesn’t include the expenses that a company had to pay in order to generate that revenue. If you subtract a company’s expenses from its revenue you’ll get its net income or net profit.   Beta Beta is a measurement that represents a stock or ETF’s volatility. To measure this, beta compares how much the price of that security changes relative to the broader market on average. The market, which is usually represented by a benchmark like the S&P 500 or Russell 1000, is given a beta value of 1.0. For example, if the security’s price tends to experience similar percentage changes as the broader market (on both up and down days), it’ll have a beta value close to 1.0. If the security’s price swings more wildly than the broader market, it’ll have a beta value greater than 1.0 — the higher the value, the greater the variance. But if the security moves less than the broader market on average, its beta value will be less than 1.0.   Change on Day This measures how much the price of a stock or ETF has changed between the close of the prior trading day and where the price is currently. This change can be represented by either a dollar amount ($) or by a percentage (%).   Dividend A dividend is a sum of money that a company pays out to its shareholders in regular intervals (often quarterly) as a way to share its profits. If an investor is interested in collecting dividends, they may also want to know about a company’s dividend rate and dividend yield. The dividend rate is the company’s annual dividend payment per share (as determined by the company). Sometimes, if you hear an investor talk about a company’s “dividend” in terms of dollars per share — as in, “this company pays a dividend of $1.22 per share” — they are actually talking about its dividend rate. The dividend yield, on the other hand, is a ratio that describes how much the dividend pays out relative to that company’s share price (as a percentage). So, if a company’s share price is $10, and its dividend rate is $1.22 per share per year, the dividend yield is 12.2%. Some ETFs pay out dividends too if the underlying assets in that ETF pay dividends.   Earnings Per Share (EPS) Earnings per share is a calculation used to help estimate a company’s value. EPS takes a company’s net profits (which, as mentioned above, is annual revenue minus expenses), then subtracts the company’s dividends (also mentioned above), and then divides that total by the number of outstanding shares. Thus, this calculation gives investors an estimate of how much the company is earning per share. The Fennel app includes both actual earnings per share, which uses company reported earnings from previous fiscal years to calculate EPS, as well as estimated earnings per share, which calculates EPS for the current and next fiscal year based on what analysts estimate earnings will be. (These analyst estimates are provided by FactSheet).   Enterprise Value Enterprise value is another calculation that can help investors figure out how much a company is worth. A company’s enterprise value is equal to its market capitalization (the number of shares times the share price), plus the company’s debt and minority interest, then minus the company’s cash. It can be seen as slightly more comprehensive than market cap because it takes a company’s debt and in hand cash into account.   Last Price This is a stock’s or ETF’s most recent share price, either from the current or most recent trading session at close.   Market Capitalization Market Capitalization (often shortened to “market cap”) aims to calculate a company’s total equity value. It does this by multiplying the company’s share price by the number of outstanding shares. Sometimes, investors classify companies by size using market cap. Companies are split into small cap (when market cap is less than $2 billion), mid cap (when market cap is between $2 billion and $10 billion), and large cap (when market cap is greater than $10 billion).   Open / High / Low These are three different price measurements for the current, or most recent trading session. Open refers to the share price at market open. High refers to the highest value that the share price reached during the trading session. And low refers to the lowest value that the share price reached.   Price This one may seem self-explanatory, but price refers to the current or most recent share price in US dollars. It’s often used to calculate other financial metrics, such as market capitalization or price-to-book.   Price-to-Book (P/B) A ratio that is used to compare a company’s market value (the price that its shares are trading at) to its book value (the value of the assets on its balance sheet minus liabilities). P/B is calculated by dividing the company’s current share price by the most recently reported book-value-per-share. P/B can also be calculated for ETFs by taking the weighted average of the P/B values for that ETF’s underlying holdings (i.e, stocks).   Price-to-Earnings (P/E) Another ratio, price-to-earning compares the company’s share price to its annual earnings per share (EPS). Another way to think about P/E is to view it as how much an investor pays to get a dollar’s worth of company earnings. It’s also sometimes referred to as the “earnings multiple.” P/E can be calculated as trailing P/E (which uses a company’s reported EPS from its most recent fiscal year), or as forward P/E (which uses EPS estimates calculated by analysts for the current fiscal year).   Sector A way of classifying companies by the industry they operate in (or where their revenue comes from). The Global Industry Classification Standard (GICS) is responsible for classifying companies by their sector. To learn more about the 11 different sectors, you can <a href="https://fennel.com/fennel101/5">read our blog post here</a>.   Theme Another way of classifying companies based on the area they operate in. While sector can be seen as the type of business a company is, the theme has more to do with industry trends and the company’s area of focus. Themes may be more specific than sectors. For example, Information Technology is one of the 11 sectors, but Cybersecurity is one of the themes listed in the Fennel app.   Total Debt to Equity Ratio As hinted in the name, this ratio is calculated by dividing the total debt a company has by the most recent value of the shareholders’ total equity, and then multiplying by 100. This measurement can also be used to tell investors more about how leveraged a company is (since it compares how much the company owes in relation to its equity value).   Volume Volume refers to the total number of shares that are being traded. Volume can be calculated for the current trading period (referred to as today’s volume), the most recent trading period, or can be averaged out over time. For example, Fennel calculates a security’s average daily volume by taking the mean of a security’s volume over the most recent 30 days. Some investors look at a security’s volume as an indicator of its activity or momentum. It stocks are being trading more frequently, that may tell you more about the popularity of that stock, or if large transactions are being placed.   52-Week Range The 52-week range tells you how much a security’s price has moved (roughly) over the past year. It’s calculated by comparing the highest price that security reached over the past 52 weeks (the 52-week high) to the lowest price (the 52-week low).   *ETF Terms* Fennel allows investors to buy and sell both stocks and ETFs. While stocks represent shares of a single publicly traded company, exchange-traded funds (ETFs) act as a pooled investment, which can represent several different underlying stocks or assets.   Since ETFs differ from stocks, we’ve included a few terms that are used in the Fennel app to provide data about ETFs. Investors should consider carefully information contained in an ETF’s prospectus or, if available, the summary prospectus, including information about investment objectives, risks, charges, and expenses. You can request a <a href="https://www.schwab.com/etfs/investor-information">prospectus</a> by contacting customer support. Please read the prospectus carefully before investing.   Assets Under Management Sometimes abbreviated as AUM, this refers to the total market value of all an ETF’s holdings.   Expense Ratio ETFs don’t just appear out of thin air, they are usually created and managed by some organization. The expense ratio refers to the operating costs that it takes to manage an ETF’s portfolio (for things like management fees, marketing, distribution, administration, distribution, and other expenses). These expenses are then expressed as a percentage of the fund’s average net assets.   Number of Holdings This refers to the number of underlying securities held in an ETF. Some ETFs consist of many different underlying stocks, others may have less, while some ETFs only have one (known as single-stock ETFs).     ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Employing ESG strategies may not result in favorable investment performance. Securities offered through Fennel Financials, LLC. Member<a href="http://finra.org/"> FINRA</a><a href="https://www.sipc.org/"> SIPC</a>.

Investing

Fennel’s Glossary of Financial Terms

Beta, enterprise value, expense ratio ... what does it all mean? Here are definitions for the terms you'll see in the Fennel app.

Fennel

30 May, 2023

5 min

MBA programs are a breeding ground for future business leaders, so analyzing the trends that pop up in business schools across the country can give us a window into the direction the corporate world is heading. So what’s one growing trend we see? Sustainability. As the demand for sustainable business practices continues to grow, business schools are increasingly incorporating sustainability into their curricula. Teaching sustainable business in higher education equips students with the skills to address environmental and social challenges in their future careers and drive the transition to a more sustainable economy. It is difficult to determine which business school was the first to offer courses in sustainability as many schools have been incorporating sustainability into their curricula for several decades. One of the earliest programs to offer courses in sustainability was the <a href="https://erb.umich.edu/about/">Erb Institute for Global Sustainable Enterprise at the University of Michigan</a>. The Erb Institute was founded in 1996 through a partnership between the School of Natural Resources and Environment and the Ross School of Business. The program offers a dual-degree MBA/MS in Natural Resources and Environment, with a focus on sustainable business practices. Another early program was the <a href="https://aces.kenaninstitute.unc.edu/about-us/">Center for Sustainable Enterprise at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill</a>. The center was established in 1999 and offers courses and programs that focus on sustainability, corporate social responsibility, and environmental management. <a href="https://www.presidio.edu/about/">Presidio Graduate School in San Francisco</a>  was also an early pioneer in sustainability education and today is recognized as one of the most prestigious institutions cultivating the next generation of changemakers. Presidio Graduate School was founded in the early 2000s and offers MBA programs with a focus on sustainability and social entrepreneurship. Since then, many other business schools have followed suit and incorporated sustainability into their curricula. And in recent years, business schools have seen <a href="https://www.nytimes.com/2021/11/13/business/dealbook/business-schools-esg.html">a growing interest in ESG</a> from students.   <h4 class="p1">Why teach sustainability in business schools?</h4> Today's consumers are increasingly aware of the environmental and social impacts of the products and services they buy, and they are demanding more sustainable options. So a business school degree that emphasizes sustainability can help companies appeal to these consumers. The <a href="https://www2.deloitte.com/content/dam/Deloitte/mk/Documents/about-deloitte/2021-deloitte-global-millennial-survey-report.pdf">2021 Deloitte Global Millennial and Gen Z Survey</a> found that over a quarter of respondents consider a company's environmental and social impact when making purchasing decisions and <a href="https://www.firstinsight.com/white-papers-posts/gen-z-shoppers-demand-sustainability">First Insight’s annual surveys</a> uncovered a rising trend that consumers across all generations—from Baby Boomers to Gen Z—are willing to pay more for sustainable products. Investors are also increasingly looking for companies that have strong environmental and social performance, as some believe that this can be an indicator of long-term financial success. The <a href="https://thegiin.org/research/publication/impinv-survey-2020/">Global Impact Investing Network's Annual Impact Investor Survey</a> found that assets under management in the impact investing industry grew to $715 billion in 2020. On top of that, regulators are tightening environmental and social regulations, which can create new opportunities and challenges for businesses. The <a href="https://www.greenbiz.com/report/2021-state-green-business-report">2021 State of Green Business report by GreenBiz</a> found that 58% of companies surveyed believed that regulation was a driver of their sustainability initiatives. By incorporating sustainability into the curriculum, business schools can prepare students to meet these regulatory demands and help businesses navigate this rapidly evolving landscape. Teaching sustainable business practices can also help business schools differentiate themselves from their peers and <a href="https://www.uab.edu/reporter/campus/sustainability/item/9853-faculty-student-interest-drives-expansion-of-sustainability-curriculum">attract students who are passionate about sustainability as well as faculty who are passionate about teaching it</a>. Additionally, employers are increasingly looking for candidates who have sustainability knowledge and skills, as this can be a competitive advantage in today's job market. In fact, green job postings have increased by <a href="https://www.fastcompany.com/90831379/green-jobs-are-up-237-in-the-last-5-years-here-are-4-ways-to-boost-your-skills-and-get-hired">237% in the last 5 years</a>. To effectively teach sustainable business practices, business schools must take a comprehensive approach that includes both core courses and electives. Core courses should cover the fundamental concepts and principles of sustainability, including environmental science, social and ethical issues, and sustainability frameworks. Electives should provide students with opportunities to explore sustainability in greater depth and develop skills in specific areas, such as sustainable operations, social entrepreneurship, or sustainability reporting. Often, business schools engage with external stakeholders, such as industry partners and community organizations, to build partnerships and collaborative initiatives such as internships and capstone projects. And sometimes those initiatives help partners develop sustainability goals. An example of a group that does this is the Global Engagement Committee of the <a href="https://bacademics.org/">Global B Corp Academic Community</a> (B Academics). This organization works to advance the state of academic study into business as a force for good. The committee recently released a <a href="https://bacademics.org/wp-content/uploads/2023/03/White-paper-B-Academics-2-1.pdf">white paper</a> which presents academic initiatives aimed at accelerating the transition to a new economy, specifically through promoting teaching and research on B Corporations and sustainable business. The aim of the white paper is to share how these efforts have emerged and evolved and their different models, challenges and learning processes. Global initiatives such as B Academics and the <a href="https://www.unprme.org/">United Nations’ Principles for Responsible Management Education</a> are standardizing and legitimizing the way we teach sustainable business in higher education across the world, indicating that business schools will continue to be catalysts for a new class of professionals.     ∙ ∙ ∙ The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. 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Business Schools Are Ushering In a New Era of Sustainability

A growing number of future business leaders are learning about sustainability in their MBA programs.

Sultan White

08 Jun, 2023

5 min

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