Article by Julianne Zimmerman
This article is the first in our three-part series, So You Say You Want Impact — next up: Choose Aligned Returns.
For decades, investment advisors have told impact-seeking clients that values-aligned investing just isn’t practical as a core strategy. They have advised, “You won’t love what’s in your public markets portfolio because the real impact actors aren’t there. The best you can do with a values-aligned public markets portfolio is get the broad public equities exposure that provides the liquidity and market returns needed for the core of the portfolio, in exchange for a basically unsatisfying, harm-reduction model.”
They have also advised, “Make as much money as you can in the market, so you can maximize your philanthropic giving.”
Harm-reduction investing approaches have often been based on a “light-exclusion” model that screens out the worst offenders and invests in less problematic companies, while using the investor voice to influence selected companies to do better, or alternatively cherry-picking a very small set of good actors.
Since real impact has generally been conceded as unattainable for the core of the portfolio, instead it has generally been pursued in private markets or in thematic, inclusion-based portfolios that held too few companies to be appropriate for core strategies.
In other words, this historical approach has artificially constrained impact strategies to small carveouts in the portfolio for specialty strategies at the fringes where they are largely ineffectual, when real change is possible with core portfolio strategies and at the scale of public markets.
Unfortunately this has meant that values-aligned investors have had most of their investments working against their values. Structurally, this arrangement has ensured that far too often, 95% of institutional clients’ assets have worked directly against the 5% allocated for values-aligned, programmatic, and philanthropic purposes. For individuals and the 401k and pension plans that serve them, it’s even worse: adherence to conventional strategies may work against the conditions for a healthy, safe, secure retirement. The same may be true for high-net-wealth and ultra-high-net-wealth individuals investing for the future well-being of their families, and to create a family legacy.
Moreover, public market investors control the vast majority of society’s collective capital resources, in the form of nearly $300 trillion global public market value. That order of magnitude corresponds both to the scale of resources required to fulfill impact-oriented investors’ aspirations, and also to the benefits we all stand to gain by solving our most pressing issues, like racial, gender, economic, and climate injustice. Given the financial and economic power of public markets to drive positive or negative outcomes, relegating impact investments to the fringes is shortsighted and self-defeating for everyone.
Why then should asset owners of any size accept what the market demands of us to perpetuate its objectives, instead of exercising the market to achieve our objectives? Yet this is exactly the bad bargain impact investors have been told to accept.
In recent years, more and more people have realized this way of investing for impact is upside-down and not fit for purpose. They are beginning to demand better.
Adasina answers the demand by raising the bar for impact investing at the core of public market portfolios.
With Adasina, investors can have a high-impact strategy at the core of their portfolio, as a result of two unique offerings that work together: impact-focused portfolios with community-accountable screening, and broad market impact outcomes via investor mobilization. The combination produces both high-conviction investment products and active engagement that produces meaningful, measurable impact at the scale of the market.
Portfolios with Community-Accountable Screening
Where other investment firms follow conventional finance models or develop their own in-house investment criteria, Adasina instead chooses to work with social justice movement leaders to act on what they say is urgent and critical. We translate the insights of our Social Justice Partners into material investment insights, including the 40+ Social Justice Investment Criteria which The New York Times called “the most rigorous” they had ever seen — and 80+ corresponding metrics we apply in our public equities investment products.
We have gone a step further and created the Adasina Social Justice Index, because until Adasina existed there was not a values-aligned benchmark for public market investors, and it is inappropriate to compare rigorously impact-driven strategies against unscreened conventional indexes. Adasina’s Social Justice Index aligns with our social justice values and remains accountable to our social justice community through rigorous application of our Social Justice Investment Criteria, while also providing broad diversification — the definition of a high-conviction portfolio.
We began with approximately 9,000 global, all-cap securities to create our investable universe. We then apply our own and our Social Justice Partners’ datasets in a two-stage screening process: we begin with our Social Justice Investment Criteria — our quantitative screening method – and then conduct community-accountable manual screening. We conclude with portfolio balancing. The result is a broad public equities portfolio of approximately 600 companies that represent the constituents within the Adasina Social Justice Index (Bloomberg: JUSTICE).
JUSTICE is the benchmark for all Adasina public equities products. Because our ultimate goal is to elevate financial sector standards to advance social justice at the scale of the market, we have also made JUSTICE available as a benchmark for all to reference.
Our strategy is purpose-built to provide exactly the social justice accountability, rigor, and performance impact investors have long sought after for the core of their portfolios. We believe all the elements are in place for investors to choose better products.
Impact via Investor Mobilization
Rigorously screening public companies to create a high-conviction portfolio and corresponding investment products does not mean we give up our seat at the table for influencing public company behavior. We practice both exclusion and highly influential engagement: in addition to voting proxies in alignment with the values embodied in our Social Justice Investment Criteria and otherwise engaging with portfolio companies to help them achieve even better performance, we develop, lead, and manage investor mobilization campaigns that amplify the impact we are making in our own portfolios.
In other words, where investors typically expect public market impact to come in the form of engaging one or a small number of companies, we employ investor mobilization to engage and influence the behavior of potentially thousands of companies at a time.
In keeping with our social justice principles, our approach to investor mobilization is also community-centric: Adasina does not exert control, but rather informs, equips, and invites other investors to take action in their own portfolios in accordance with their investment strategies and objectives. We encourage and welcome all kinds of investors to take the actions that they determine are appropriate for themselves, because we believe that the work of systemic transformation requires a multiplicity of approaches working in tandem, rather than a single homogenous push. The approach is far more akin to the open source software movement than it is to conventional finance power accumulation models — contrary to deeply established narratives around market dominance, we are anti-domination. We believe this is what makes our investor mobilization campaigns so influential and effective.
As a result, unlike traditional ESG practices that only reach out to portfolio-specific companies, Adasina’s investor mobilization strategy:
- Extends beyond our portfolio to reach ALL publicly traded companies on a specific topic
- Influences the broader financial ecosystem by:
- Educating other investors on material social justice issues, with webinars, white papers, issue briefs, keynotes, etc.
- Empowering other investors with actionable investor datasets
- Mobilizing other investors to take action in their own portfolios, with investor statements and supporting calls to action
- Collectively advocating for companies to change their practices and, where appropriate, for policymakers to act.
Examples of Adasina’s impact via investor mobilization include:
- Leading the $54+ billion investor coalition that ended forced arbitration for sexual harassment in the United States in 2022, directly addressing the root cause of the #MeToo movement;
- Leading the $1.25+ trillion investor coalition actively pushing to end the subminimum wage paid to tipped workers and others in the United States, addressing a legacy of slavery and a root cause of persistent poverty for over 6 million workers;
- Leading the investor coalition to end extractive agriculture, addressing one of the primary obstacles to arresting climate change, and a primary driver of global health crises, water contamination, and labor abuses.
You can learn more about the impact of our other economic and climate justice mobilization campaigns in Adasina’s 2024 Impact Report.
This is how Adasina puts investor power to work beyond the boundaries of Adasina’s own portfolios, to generate impact at the scale of the market. Our efforts are returning the kinds of systemic results we need to move the needle on racial, gender, economic, and climate justice.
“And” Not “Or”
With Adasina, the days of choosing between high-impact and broad public equities exposure are over.
By taking a community-centric approach to incorporating social justice in everything we do, Adasina practices transformational systemic change. We don’t dictate. We collaborate, share, and amplify our Social Justice Partners. By combining robust screening with investor mobilization campaigns, we build high-conviction core portfolio products and leverage our collective power to drive change both within and beyond our portfolio holdings.
Adasina products enable impact-seeking investors to transform unsatisfying, non-values-aligned public equities portfolios into portfolios with justice and sustainability at the core, and impact at the scale of the market.
We invite you to join us in achieving social justice at the scale of the markets by:
- Sharing and discussing this article with the people in your professional and personal networks (every investor counts!).
- Examining how your portfolio could better serve your objectives with impact at the core.
- Reading our inaugural Impact Report, which highlights our impact and achievements from our founding in 2020 through 2023.
- Joining our mailing list to stay updated on the latest news, events, and perspectives from the Adasina community.
- Reaching out to growth@adasina.com to learn more about aligning your investments with your social justice values.
Next up in the So You Say You Want Impact Series, “Choose Aligned Returns.”