Dear Reader
Cheryl Smith, Ph.D., CFA, President
For investors who seek out sustainability, cycles of birth, death, and rebirth are everywhere. The rapidly waning light as we approach the winter solstice calls to mind the Greek goddess Demeter and her daughter Persephone; Demeter’s sorrow at the loss of her daughter led to winter for the earth. However deep and dark and endless the winter seems, eventually Persephone’s return from Hades each year brings spring and renewal.
We are accustomed to economic and market cycles, but the October 2007 – March 2009 stock market decline was the most wrenching in decades. Many people began to anticipate a frightening future following in the wake of a total financial and economic collapse. And yet, we are finally seeing signs of recovery – housing sales very slowly starting to recover and consumers venturing out of their houses into markets. The stock market’s activity since March has preceded it, and we’re happy to see it.
At Trillium, we are seeing our own cycle of renewal and growth. In October, we were extremely pleased to welcome our new CEO, Matthew Patsky, CFA. While in one sense Matt is new to Trillium, in another sense his own career harvests the seeds that Joan Bavaria planted. Matt was an early subscriber to Investing for a Better World, in its previous incarnation as Franklin’s Insight. Joan co-created and co-founded the Social Investment Forum and Ceres, two organizations that harrowed the ground and fertilized the soil for social and environmental investors. I was an early employee of Trillium, and I remember our concern that Joan expended so much of her time and energy outside of the company – didn’t she know that we needed her at Trillium? Yet Joan continued to give her time and her effort to the world at large – encouraging investors, encouraging research analysts, gently – and not so gently – prodding companies to create a better, cleaner, greener, and more just world. Matt is one of the many people Joan encouraged along the way. He comes to Trillium eager to extend and grow Trillium’s expertise in research, advocacy, and community investment. He is a member of the Social Venture Network, and an active board member for Root Capital, which provides financing to sustainable businesses in the developing world.
So we at Trillium are now reaping Joan’s harvest. Her generosity to others has built the overall field, and we benefit from her efforts so many years ago. Matt brings a wealth of experience as an analyst, as a portfolio manager, and as a colleague. We’ve added to our research staff, and are busy developing our advocacy plans for the spring proxy season. At Trillium, we are all invigorated, enthusiastic, and very glad to have Matt leading us as we work together to build a better and more just world. We hope that you will join us in this next cycle of renewal!
Dear Reader
by Cheryl Smith, Ph.D., CFA, President
The first daffodils of spring just opened beside my house. The sight of these spring flowers always engenders a spirit of newness, of freshness, and of hope after the excessively long New England winter. This year more than ever, I need that sign of hope.
For at least 50 years, as transaction and trading costs have fallen, world financial markets have become increasingly focused on the short term, and the expectations for acceptable quarterly returns have moved ever higher. Profit’s share of national income has reached new heights. Over the past 15 years, the determined drive for ever higher returns, aided by increased leverage, produced Long Term Capital Management, ever more esoteric asset backed securities, and a credit default swap market with only a tenuous connection to the underlying bonds. With the hubris of unlimited faith in their elaborate mathematical models, and aided by increased financial market deregulation, Wall Street traders built up an unsustainable structure of interrelated claims and credits, and reaped gargantuan bonuses. Ever-increasing income and executive pay fueled competitive consumption, expressed in bigger houses, bigger boats, and bigger cars.
After 18 long months of stock declines, and the slow realization of the huge systematic risks in credit markets and the financial system as a whole, the U.S. public is battered and just plain weary. Layoffs and unemployment are increasing, consumers have retrenched, and financial and industrial businesses see little prospect for attractive investment. Fear has the upper hand over greed in the markets.
And yet these seismic shifts in economic life are shaking up attitudes of resignation and denial, causing citizens to rethink basic assumptions. In place of a headlong drive to grab ever more while the getting is good, we now have an enforced pause, a time to reflect. The public has begun to understand all that went wrong on Wall Street, and to reject the ideology that led to the crisis.
We now have an opportunity to create a more vibrant, just, ecologically beneficial society and economy. We have the opportunity to reframe our expectations and to redefine our measures of success.
We can choose to patch up and repair our existing economic system, and to continue to believe in the myth of the free market. Or we can recognize that sensible and appropriate regulation creates well-functioning markets. Markets, whether for goods, for services, or for assets have always been social constructions. We can institute norms of market behavior and greater transparency, shaping markets to serve human needs rather than shaping ourselves to fit them. It is time to reconsider the paradigm of unrestrained, unregulated growth and think about a more sustainable economy – sustainable levels of growth and development, supported by less inequality in the distribution of income. It is time to shake off resignation and to become engaged in civic and economic life.
We’ve been working for over 25 years on investing for a better world; one with more equity, a sustainable economy, and a sustainable environment, all leading to living more lightly on the planet. Let those daffodils bloom!
