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"Integral Impact Investing", by Mariana Bozesan, Ph.D.; published in forum CSR international 2010-1; This article introduces Integral Impact Investing as an evolutionary model for sustainable capital management.
Integral Impact Investing (forum CSR international 2010-1)
Where the science of achievement meets
the art of fulﬁllment
by Mariana Bozesan, Ph.D.
This article introduces the concept Planet’, Columbia University profes- person will rise by 400 percent
of Integral Impact Investing as an sor, director of The Earth Institute, between 2005 and 2050. Ac-
evolutionary model for sustainable and special UN adviser, Jeff D. Sachs 1, cording to current predictions and
capital management. It argues that identiﬁed six major trends and chal- projections by the World Bank,
the major collective threats faced by lenges that humanity is facing in the by 2050 the average income per
humanity today are addressed only 21st century. person in developing countries will
partially by the current development be at $40,000 and in the United
strategies and investment schemes. These trends and challenges are the States, for example, it will be at
It emphasizes the important role of following: $90,000.
capital and business in alleviating
today’s challenges and questions the 1. The Age of Convergence: The 3. The Asian Century: According to
sustainability of current investment rapid economic growth especially Earth Institute studies, Asia’s share
practices in all investment fields in the so-called BRIC states (Brazil, of global income will grow by 49
such as Venture Capital, Public, and Russia, India, China) leads to a percent by 2025 and to 54 percent
Private Equity. Moreover, it provides much larger world economy of by 2050, thus taking the lead in
an integral investing framework that a global world product of $420 the world.
may ﬁll the current void while poten- trillion by 2050 – or 6.3 times
tially reducing the investment risk and higher than in 2005 – and a popu- 4. The Urban Century: For the ﬁrst
increasing the social, environmental, lation growth of 40 percent. That time in human history, more people
cultural, and happiness impact. causes an economic convergence on earth will live in urban rather
between the developed and de- than rural areas. To the beneﬁts,
What’s the problem? veloping countries. there are significant downsides
that include the “urbanization of
In his remarkable book ‘Common 2. More People at Higher Incomes: hunger,” health hazards, infectious
Wealth: Economics for a Crowded The world’s average income per diseases, violence, and insecurity.
Figure 1: Worldwide carbon dioxide emissions by region an per capita. (Schulz, 2009)
5. The Environmental Challenges What’s the proposed solution? dictates what is being traded.
caused by the current trends are That includes the availability of
enormous and include water, earth, In addressing the global concerns strawberries and other exotic fruits
and atmospheric pollution with sig- outlined by the Club of Rome in its on Western kitchen tables in the
niﬁcant increase of carbon dioxide “World Development Program,” 4 the middle of winter or ﬁsh on every
emissions per capita, raising ocean Copenhagen Consensus from 2008 5 day of the week. This is unsustain-
levels, further ecological destruc- and the Millennium Project (Figure 2), able and must change.
tion, reduction of biodiversity, and Sachs (2008) summarizes a successful
increased depletion of natural re- strategy of sustainable development 4. The Sustainable Population
sources. The human impact on the in the following way. Growth that includes the volun-
environment is already unsustain- tary reduction of fertility rates and
able 2. With the rise of China and According to the Earth Institute (Sachs, requires cultural transformation,
India, the current carbon dioxide 2008), a strategy of sustainable de- the empowerment of women, and
emissions per capita and year must velopment that creates global and increased education.
be reduced signiﬁcantly otherwise sustainable prosperity must address:
the survival of our planet as we 5. The Ending of the Poverty Trap by
know it is in danger. Thus, the rise 1. The Development and Adoption of 2025 by empowering the poor
of ocean levels, habitat destruction, Sustainable Technologies such as with (a) high-yield agriculture
increase disease transmission and clean-energy, drought-resistant seed such as improved seed varieties,
natural hazards, changes in agricul- variety, vaccines for tropical diseases, fertilizers, and irrigation tools;
tural productivity, water availability, as well as remote supervision and (b) educational technology such
and ocean chemistry may not be preservation of biodiversity. as classrooms, bathrooms for
the only consequence of climate girls, and Internet; (c) health care
change (Figure 1) 3. 2. The Sustainable Harvesting of Nat- technologies; and (d) modern in-
ural Systems such as the correction frastructure such as electricity, all-
6. Poorest Billion and The Pov- and reduction of the intensity with weather roads, and safe-drinking
erty Trap: Roughly one billion which society uses natural capital water.
people on earth, however, are and resources. For instance, the
not touched by the convergent procurement of lithium that is However, within the context of the
economic growth mentioned used in electric car batteries must current challenges such as climate
earlier. In fact, they are trapped in not destroy the natural beauty of change, biodiversity conservation,
a downward spiral of poverty that Chile that has one of the world’s and eradication of poverty we must
presents great danger to political largest sources of lithium. look well beyond the social and envi-
stability, is prone to violence and ronmental lens. If we think that these
conﬂict, and contributes to mas- 3. The Overcoming of the Importance are the only things that challenge
sive local degradation. of the Market. Today the market humanity today, we’re mistaken. The
2 forum CSR international
current problems are not only sys- decades since World War II has led to part is that while most people in the
temic; they are integral. They are not greater democratization, more gender developed world are literally killing
only related to the exterior/conscious equality, increased social tolerance, themselves with excess more than one
dimensions of reality such as social and thus a higher happiness index billion people on this planet live on the
and environmental, their true source worldwide 9, material abundance10 brink of starvation with one child dy-
is related to the interior/unconscious ceased to be the ultimate goal in ing from hunger-related causes every
dimensions of reality such as cultural, developed countries. Further research ﬁve seconds 16.
moral, emotional, and spiritual. published in the Journal of Public Eco-
nomics into 2002 by Blanchﬂower & Every time we turn on the radio, TV,
What’s missing? Oswald 11 showed that the happiness read a newspaper, magazine, or at-
index in the U.S. and the UK has even tend a conference, we keep hearing
What is often left out within the decreased despite increased material the call for higher ethics and morals as
context of current challenges is the prosperity. well as innovation and creativity. Gan-
emotional devastation and spiritual dhi and Einstein seem to be the most
deprivation along with their impact. Moreover, according to a 2005 paper quoted people these days. Through
That often includes loss of self- by the American Heart Association 12 – their calls, “We must be the change
esteem, depression, violence, addic- and the numbers are similar in other we want to see in the world” (Gandhi)
tions, social isolation, and destroyed developed countries – one in three or “The signiﬁcant problems we face
relationships. To give one example, (actually 2.6) adults are currently cannot be solved by the level of think-
according to Jennifer Baker of the For- dying of cardiovascular (i.e., heart) ing that created them” (Einstein), we
est Institute of Professional Psychology disease. Furthermore, in keeping with are being encouraged to change our
in Springﬁeld, Missouri, 50 percent of a study performed in 2002 by the U.S. behaviors and come up with better
ﬁrst marriages, 67 percent of second Department of Health and Human solutions to the current problems.
and 74 percent of third marriages in Services, the Center for Disease Con- Yet, the calls for change are loaded
the United States of America end in trol, and the National Cancer Institute, with fear and desperation and those
divorce 6. The numbers are similar in one in four people is currently dying of us who have ever tried to change
Europe 7. of cancer 13. unwanted habits, know how difﬁcult
that is. Behavioral change occurs from
Moreover, despite our wealth and Like Europe 14, 30 percent of U.S. within and fear is a good slave that
abundance, Westerners are ironically American adults 15 are considered gets us quickly out of trouble but not
among the unhappiest people on obese according to the scientific a good master.
Earth with U.S. Americans being on deﬁnition of obesity and tragically the
average unhappier than the people of prevalence in overweight and obesity Despite all of it, humanity has proven
Bhutan, which is one of the poorest among children is rising signiﬁcantly numerous times in the past that it can
countries in the world 8. Although the with as many as one in four children collectively address some of the most
overall economic growth over the past that are being affected. The sad challenging tasks such as ratifying
Figure 2: The promise of the Millennium Goals (www.millennium-project.org)
cessful by adding interior metrics such
as culture, ethics, and emotional prop-
erty to the exterior ones such as ﬁnan-
cial, social, and environmental. They
are driven by a happiness index.
Traditional investors are proﬁt driven
and have the challenge to earn con-
sistently superior ﬁnancial returns on
their investments. During the dot.
com boom of the 1990ies, return on
investments between 10 and even
50 percent have often been the case
especially within the high-risk venture
capital world. Yet, the traditional,
Figure 3: Evolution of investing proﬁt-only, and mostly rational driven
decision criteria impeded even the
the ozone layer protection act 17, the is expected to become mainstream in most astute investors to identify and
eradication of smallpox and polio 18, 2015 with AUM of 15 to 20 percent invest in newcomers such as eBay,
as well as ﬁghting AIDS, tuberculosis, of total global AUM (USD 26.5 trillion) Federal Express, or even Google. For
and malaria, some of which are still and total revenue of USD 53 Billion. instance, all these three companies
under way. The keys to success in- What determines investors to put are on the list of missed opportuni-
clude not only a clear objective, but more money into these markets in a ties of Bessemer Venture Partners 22,
also, an implementation strategy, an way that changes the entire invest- one of the oldest VC companies in
effective technology, ﬁnancing, and ing paradigm from niche to main- the United States. On their website
most of all trust, compassion, and the stream? one can read how David Cowan,
ability to “celebrate what’s right with one of their partners, missed the op-
the world” as the famous National Increased social and environmental portunity to invest in Google when
Geographic photographer, Dewitt awareness along with growing prices his “college friend rented her garage
Jones 19, would say it. for energy and natural resources, to Sergey and Larry for their first
legislation changes regarding reduc- year. In 1999 and 2000, she tried
Why investors put their money tion of CO2 emissions, and the avail- to introduce Cowan to “these two
where their heart is? ability of new technologies such as really smart Stanford students writ-
clean technology play the key roles. ing a search engine.”[He thought]
1985 is generally seen as the ofﬁcial However, various studies 21 including Students? A new search engine? In
birth year of Responsible Investing a recent phenomenological research the most important moment ever
(RI) also known as social responsible performed with top business leaders for Bessemer’s anti-portfolio, Cowan
investing, program related invest- and investors, revealed a signiﬁcant asked her, “How can I get out of this
ing, or impact investing. That year, shift in consciousness at the leader- house without going anywhere near
the Canadian Vancity Credit Union ship level in business and investing your garage?” This example shows
introduced the ﬁrst ethical mutual (Figure 3). These are called integral that the need for a new investment
fund that allowed investors to have impact investors because they make lens with new success metrics became
a social or environmental impact by their ﬁnancial bottom line more suc- obvious.
investing their money in companies
that cared about addressing some
of the challenges outlined above. By
the end of 2007, the global assets
under management (AUM) invested
in the Responsible Investing market
had reached USD 5 trillion 20 and
represented already 7 percent of the
total global AUM. While the total
AUM growth remained globally at 10
percent per annum, the Responsible
Investing AUM is growing since 2003
on average by 22 percent per annum.
According to a study performed in
2009 by Robeco and Booz & Compa-
ny, the Responsible Investing market Figure 4: Integral Businesses make more money than traditional ones.
4 forum CSR international
As we have seen, since 1985, a new ers it to be an Integral company, was exciting future if we are willing to
trend of responsible investing was even more successful than all other grow and reinvent ourselves anew
born through increased social and FoEs. Over a period of 10 years, Whole every single day. It is a future in
environmental awareness of investors Foods returned 1800 percent to their which new paradigms are emerging
along with new movements including investors and outperformed signiﬁ- while we collectively move to higher
Corporate Social Responsibility and cantly all of its competitors including levels of consciousness. There could
various new criteria of measuring Wal-Mart, Albertsons, and Safeway. be too much at stake if we do not.
success. In addition to bottom line/ Along with the shifting worldview in
proﬁt metrics, impact investors began Summary all areas of life, we must all awaken
putting their money into investment the leader within whether we act as
portfolio companies that used new Having been an integral impact in- an investor, an entrepreneur, or a
metrics such as the Social Perform- vestor over the past ﬁfteen years, I ﬁsher. We all have the responsibil-
ance Indicators, Environmental Per- can safely conclude that as investors ity to deﬁne and implement a new
formance Index (EPI) 23, the ISO 14001 expand their investment metrics to worldview that is based on the es-
Environmental Management Systems, include cultural, social, and envi- sence of all existence, the interior as
or even Triple Bottom Line accounting, ronmental criteria in addition to the well as exterior reality. The time has
which adds People and Planet to the ﬁnancial ones, they will be able to come to move to higher levels of hu-
Proﬁt metrics. increase not only their return on ﬁ- man existence at which we must let
nancial investment, but also their deal our hearts speak much louder than
We are still at the beginning of respon- ﬂow, its quality, and their overall im- before. We must unify our brains
sible investing and even the introduc- pact in a signiﬁcant way. As investors with our hearts. This is where the
tion of the Dow Jones Sustainability expand their selection lens to become science of achievement meets the art
Index in 1999 has not stopped its crit- integral impact investors, they will of fulﬁlment. At this intersection we
ics from claiming that the introduction be able to identify and invest much realize that the true light shines not
of social, environmental, and govern- sooner in integral companies such as on us but from within us.
ance metrics is reducing the proﬁt Whole Foods, Aveda, and Patagonia.
bottom line. In fact, the opposite is These companies are not only led
true. Integral Impact Investors (Figure by what I call consciousness leaders,
3) and Integral Businesses (Figure 4) but are driven by integral teams with Proﬁle
are showing how the ﬁnancial bottom a high level of integrity, passion and
line can be signiﬁcantly increased by love for people and the planet. Inte-
adding cultural and developmental gral companies are driven by cultures
metrics to the social, environmental, of inter-dependency that connect and
and ﬁnancial ones. respectfully honor all stakeholders
equally from investors, to partners and
In a recent study 24 published in the suppliers, to customers, to employees,
book ‘Firms of Endearment: How to their communities 25.
World-class Companies Proﬁt from Because of that, integral companies
Passion and Purpose’, one can clearly are able to maximize their long-term
see what the key to success of these shareholder value by simultaneously
An impact investor, venture philanthropist,
companies is: namely, their biggest optimizing the value of all stakehold-
and serial entrepreneur, Dr. Bozesan, is an
competitive advantage, which can ers. Moreover, they create, support,
international authority on Integral Impact
be measured at the ﬁnancial bottom and integrate new industries such Investing. Together with a worldwide team
line, is their corporate culture. Firms as green buildings, organic and of impact investors, Dr. Bozesan is signiﬁ-
of Endearment (FoEs), as these com- sustainable agriculture, sustainable cantly reducing the investment risk and
panies are being called, outperformed fisheries, or local manufacturers. increasing the social, cultural, environ-
ﬁnancially S&P 500 companies by 8 to Last but not least, integral compa- mental, as well as the happiness impact
1 over a period of 10 years. Under the nies care about their communities through her evolutionary Integral Impact
premise that every exterior is driven and the environments and are on a Investment Model based on Ken Wilber’s
by an interior, these companies such philanthropic mission. Whole Foods Integral Framework. Educated at Stanford
as Timberland, Southwest Airlines, or for example, donates ﬁve percent of University and KIT (Karlsruhe Institute of
Technology) in Germany, Dr. Bozesan holds
Whole Foods are driven by a cultural their after-tax proﬁts to nonproﬁt
an M.S. degree (Dipl.-Inform.) in Artiﬁcial
shift toward subjectivity, trust, inter- organizations. Their ﬁnancial success
Intelligence and Computer Science from
dependency, integrity, transparency, shows that caring business practices KIT. She received her Ph.D. in Psychology
caring, passion and fun in addition and conscious capitalism pays off in from the Institute for Transpersonal Psy-
to proﬁt. the long term. chology in Palo Alto, California.
As a matter of fact, Whole Foods, Despite enormous challenges, hu- email@example.com
whose founder John Mackey consid- manity can look into a bright and
1 Sachs, J. D. (2008) Common Wealth: Economics for a Crowded Planet, (New York: Penguin).
2 Gore, A. (2006). An inconvenient truth: The planetary emergency of global warming and what we can do about
it. New York: Rodale.
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CoR.GLOBE.Vienna.Statement.pdf viewed August 7th, 2009
5 The Copenhagen Consensus ofﬁcial website: http://www.copenhagenconsensus.com/The%2010%20chal-
lenges-1.aspx viewed July 24, 2009.
6 Divorce rate in the United States http://www.divorcerate.org/ viewed July 23, 2009.
7 World Health Organization (WHO) Regional Ofﬁce for Europe ofﬁcial website, http://www.euro.who.int/obesity
viewed July 24, 2009
8 Veenhoven, R., World Database of Happiness, Distributional Findings in Nations, ?Erasmus University Rotterdam.
Available at: http://worlddatabaseofhappiness.eur.nl
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11 Blanchﬂower, D. G., & Oswald, A. J. (2004). Well-being over time in Britain and the USA. Journal of Public Eco-
nomics, 88, 1359-1386.
12 “Heart Disease and Stroke Statistics – 2005 Update,” American Heart Association, www.americanheart.org/
downloadable/heart/1105390918119HDSStats2005Update.pdf downloaded July 24, 2009.
13 “United States Cancer Statistics – 2002 Incidence and Mortality,” http://www.cdc.gov/cancer/npcr/uscs/
pdf/2002_USCS.pdf downloaded July 24, 2009.
14 Obesity in Europe, A Case of Action, by the International Obesity Task Force and the European Association for
the Study of Obesity, http://www.easoobesity.org/docs/report72.pdf downloaded July 24, 2009
15 Finkelstein, E. A., Trogdon, J. G., Cohen, J. W., William Dietz, W., (2009). Annual Medical Spending Attributable
To Obesity: Payer- And Service-Speciﬁc Estimates, Health Affairs, The Policy Journal of the Health Sphere, viewed
July 29th, 2009 at http://content.healthaffairs.org/cgi/content/short/hlthaff.28.5.w822.
16 Black, R., & Morris, S., & Jennifer Bryce, J. (2003). “Where and Why Are 10 Million Children Dying Every Year?”
The Lancet 361:pp. 2226-2234.
17 The Montreal Protocol, http://ec.europa.eu/environment/ozone/international_action.htm
18 Smallpox: 30th Anniversary of Global Eradication. CDC Center for Disease Control and Prevention, http://www.
cdc.gov/Features/SmallpoxEradication/, viewed March 6th, 2010.
19 Jones. D. (2010), Celebrate What’s Right With the World, http://celebratetraining.com/, viewed March 6th,
20 Robeco, Booz&Co. (2009) Responsible Investing: A Paradigm Shift from Niche to Mainstream, http://www.robeco.
com/eng/images/Whitepaper_Booz&co%20SRI_ﬁnal_tcm143-113658.pdf, downloaded March 6th, 2010.
21 Bozesan, M. (2009). The Making of a Consciousness Leader: An Integral Approach, http://www.sageera.com/
22 Bessemer Venture Partners, Anti Portfolio, http://www.bvp.com/Portfolio/AntiPortfolio.aspx, downloaded March
23 The Yale Center for Environmental Law, and Policy, http://envirocenter.research.yale.edu/
24 Sisodia, R., Sheth, J., Wolfe, D. B., (2007). Firms of Endearment: How world-class companies proﬁt from passion
and purpose. Upper Saddle River, NJ: Wharton School.
25 Strong, M. (2009). Be the Solution: How entrepreneurs and conscious capitalists can solve all the world’s prob-
lems. Hoboken, NJ: Wiley & Sons.
6 forum CSR international