by Greg W. Spencer and J. Greg Spencer

Unrecognized Value 

Most social impacts, even when quantified, remain significantly undervalued by investors and, at times, are completely unrecognized by the market. While impact investments and the emphasis on Socially Responsible Investing have increased significantly since 2000, the value of such investments are often either evaluated using traditional financial metrics or insufficiently considered in non-financial performance. Therefore, non-financial performance, or “positive externalities” remain external to the transaction.

We have evidence that this market failure exists from our own experience. After launching and operating several for-profit social ventures in East Africa over the last decade, we routinely sold the environmental benefits produced by our clean burning cookstoves into reasonably sophisticated carbon offset markets. However, we consistently received only a modest – if any – premium from also enabling families to save (and implicitly reinvest) more than twenty-two million dollars of income, thirty-one million hours of time, two and a half million trees, and arguably even more significant (but unquantified) improvements in health. We have also observed the inefficacy of development work and outdated models of donors and corporates paying for inputs hoping to achieve unverified impacts.

These unrecognized externalities mimic the conditions surrounding the emergence of the carbon markets in North America in the late 1990s. Working with large emitters who anticipated upcoming climate change regulations, we developed diverse sources and types of emission reduction projects to deliver newly created environmental assets. Ultimately, many of these project methodologies evolved into standards adopted by both commercial and regulatory bodies and became part of what is now a thriving industry.

A New Marketplace for Good

We believe the solution to capturing unrecognized social value is the development of a “Common Good Marketplace” – a place to value and exchange independently verified social impacts categorized within the UN’s 17 Sustainable Development Goals (SDGs). This Common Good Marketplace might well emerge following a development process similar to that in the carbon markets.

There are strong, but early indicators that this marketplace is already evolving. A handful of carbon registries, nonprofits, foundations, social enterprises and project developers are already creating new SDG-specific impact standards and methodologies with the goal of measuring social impacts. What we have not yet seen are any attempts to independently certify and then exchange these assets for value once created.

A marketplace will likely only grow when there is reasonably consistent supply and demand for the products and services provided. Therefore, the first step toward creation of such a market must be a much broader awareness that SDG impacts can be quantified for the purpose of being converted into assets. Once this awareness is combined with verifiable quantification methodologies, it seems only a modest step to then economically value and transfer them for the benefit of corporate buyers, foundations and donors, who could then better assess the “social ROI” of their investments.

The Relevance of Resiliency 

The recent energy, airline and hospitality industry shocks, stock market volatility and higher long-term unemployment resulting from the COVID-19 pandemic demonstrates that corporate resiliency is more important than ever. “Resilience” can be difficult to monitor, quantify and develop, but through the lens of Environmental, Social and Governance (ESG) performance, it can more easily be identified and improved. According to Oxford University’s Robert Eccles, “Firms with a better ESG record than their peers produced higher three-year returns, were more likely to become high-quality stocks, were less likely to have large price declines, and were less likely to go bankrupt”. He was specifically citing the Bank of America Merrill Lynch ESG study completed in 2018.

We know that investing in environmental performance and the purchase of environmental assets increases performance of the environmental component of ESG. We believe a similar thesis exists for using social assets: companies will increasingly invest in internal, supply-chain, and external (third-party verified) social impacts to improve their ESG performance and long-term resiliency.

Limitless Opportunity?

In any market, suppliers, buyers, technical experts, capital, and infrastructure are needed. This Common Good Marketplace would serve non-profits, social enterprises, development organizations, foundations, and corporates. Impact measurement experts, auditors, economists and registries (certifiers of and repositories for impact) would make up the technical expertise required to quantify and qualify impact standards and methodologies; developers would create new business models that investors would finance; and, finally, foundations and corporates would create demand by purchasing quantified, verified outcomes, thereby demonstrably improving their ESG performance. The opportunities seem limitless. Could this new marketplace match the $215 billion in transaction value last year for the carbon markets, and attract  investments as significant as Jeff Bezo’s recent $10 billion commitment to climate change (SDG 13)?

We know this market will require diverse expertise, actors and capital to work. We also know that faith like a mustard seed can move a mountain. Many of the faith-driven investors we have spoken to believe it is time for the faith community to demonstrate greater leadership in identifying and developing mechanisms and opportunities to enhance human flourishing.While we wait to see what roles are adopted by the faith community in this emerging impact marketplace, you may wish to consider how the organization’s you manage or support might benefit from developing quantitative, verified “pay-for-performance” funding mechanisms for their social and environmental impacts.

by Sound Financial & WealthShield

Are you a 5 Talent guy/gal or will your Ox get stoned? Weird question, huh?

Consider that God is so serious about our investments that Jesus complimented those that doubled their money. And He is equally as serious about the quality of our assets, that if they hurt people those should be destroyed, i.e. the Ox gets stoned to death. Jesus once told His disciples to be street-wise as snakes and yet innocent as doves. He gives us no wiggle room in between. He expects wisdom, creativity, and growth. We should not hide our money in the name of safety. And He expects innocence, we cannot present Him profits earned from activities that harmed people or the environment. Therefore, we should invest shrewdly, reach for great returns, and do good work in the process.*

The issue at hand is: can we invest in stocks of good companies that do not harm people and still capture investment results competing with common indexes? Our friends at WealthShield built a stock index demonstrating the possibility of returns to answer this question.

Given the data, we believe the answer is yes.

In our research we compared this Biblically Responsible Strategy to the S&P 500 Total Return Index. This is a hypothetical scenario meant to demonstrate the possibilities of investments like these. We wanted to be as accurate as possible in our testing, therefore we included both wealth and asset management fees, attempting to demonstrate as complete of an investment picture as possible. In short these are the results; for every $100 invested in the Index upon its first historical data point (April 7th, 2000), a hypothetical investor would have $328.17 in total return on April 7, 2020, this is after advisory and asset management fees were paid. This is an annualized return of 6.12%. This compares to only $251.77 in the S&P 500 total return over that same timeframe which is an annualized return of 4.73%. We believe this answers the question, can we invest in Biblically responsible companies and earn a greater return? Yes, we believe the data demonstrates that this Index has the potential to compete with and even exceed the S&P 500 Total Return. And as Believers, we believe this helps us in our quest to invest in companies that do good work, while not harming people or the environment which is exactly what God’s word instructs us to do.

This is a link to the full article demonstrating this Index: FAITH-BASED INVESTING INDEX

—

(1)  The BRI Strategy Total Return Index is hypothetical in the back tested years (April 7, 2000- April 7, 2020). Hypothetical performance results are intended for informational purposes only to show historical performance had the model portfolios been used over the relevant period of time without any limitations or restrictions. There is no guarantee that the hypothetical results can be replicated. Hypothetical performance is presented net of Sound’s anticipated management fee of 1.44% per year from the inception date listed to present and includes the reinvestment of all income. Actual performance results will vary from this example.

(2)  Matthew 25: 19-23

(3)  Exodus 21: 28-29

(4)  Matthew 25: 24-28

(5)  Proverbs 16:8

(6) *The views and opinions of scripture are the views and opinions of the author based on his interpretation of the cited biblical passages.

(7) https://www.soundfsg.com/uploads/docs/BRI-Index-Paper_v3.pdf

This is one of the 2020 CEF Whitepapers. For more information on the Christian Economic Forum, please visit their website here.

by Paul Bolte

The Problem to Solve

As an organization, TrustBridge Global Foundation was founded to make global giving easy so that charities everywhere could have all they need to accomplish their mission. In 2016, TrustBridge was registered as a charity in Switzerland and bank accounts were opened. The first problem has already been solved. Is there a market to make Christian cross-border giving easy? The pilot program run in 2017 and 2018 has proven that there is a definite need.

So now comes the problem we are currently solving: how to systemize the platform so it can be scaled.

Step 1: Software Research

An extensive research of viable platforms was undertaken by TrustBridge member NCF (National Christian Foundation in the US). The following platforms were considered:

• Oracle

• SAP

• Oracle NetSuite

• Microsoft Dynamics

• plus 8 other packages

After final research, the best solution was Oracle NetSuite.

TrustBridge was able to utilize this research to also come to the same conclusion that our global platform would be built on Oracle NetSuite.

Our goal was to allow donors and charities access to a web portal where they could make contributions and grants, and see the balance of their funds and all historical activity. Also needed was a monthly statement emailed to all fundholders. Sounds simple enough, but to achieve this we had to work through a series of stages.

Step 2: Configuration

The first time we logged into NetSuite, it was an empty shell. The potential was unlimited but there was nothing in the system that related to our organization. All the basics of our organization need to be configured:

• Company details and branding

• Currencies

• Chart of accounts

• Features enabled

• Customer function used for donors

• Sub customer function used for donor advised funds (DAF)

• Vendor function used for charities

• Contacts function used for individuals connected to donor companies, DAF’s and charities

Step 3: Segmentation

We needed a way to do fund accounting in NetSuite. We needed to be able to produce a balance sheet and profit and loss statement for each fund. We needed a way to separate transactions that happened in the same account in the chart of accounts but was for a different fund. At this point we:

• Utilized custom segments for fund number and primary charity purpose

• Connected fund number to sub customer/DAF record or vendor/charity record

We wanted a way to track our financials by currency but without having to do fund accounting in each bank account as the ownership of any asset granted to TrustBridge is with TrustBridge. To solve this, we utilized the concept discussed in a CEF whitepaper in 2019 of virtual currencies. We created a virtualized currency that was pegged to each of the real (FIAT) currencies. When FIAT currency is deposited into our bank account, we credit the fund with virtual currency, and debit TrustBridge in virtual currency so that the net effect is a value is held with the fund while the FIAT currency stays with TrustBridge.

Step 4: Simple Customization

Once the system had the basics configured, we then needed to customize each feature to work for our needs. We made a strategic decision to have just one form for donors and DAF’s and one form for charities. Rather than have multiple entry forms for all the possible different types of clients, we chose to make the forms dynamic and to change based on information entered on the form. We decided to:

• Add custom fields to existing record types (customer and vendor records)

• Add custom sections in forms for each record type

• Move custom fields into the right section

• Build workflows to have fields hide or appear dependent on values in specific fields

Step 5: Define Accounting

We knew we wanted to have a series of transactions and transactions hit the general ledger, so we had to determine the basic building blocks:

• Donor contribution

• Fund to fund transfer

• Charity grant

• Charity assessment

We also wanted to track the balances that TrustBridge held in each of its network members and to do this we utilized the subsidiary feature within NetSuite. This allowed us to record transactions happening in funds in countries outside the parent country of Switzerland. We then had to create further accounting building blocks:

• Transfer to and from TrustBridge

• Transfer to and from a network member

• Subsidiary netting to ensure that only the fund portion of the transaction was recorded in the parent while not affecting the parent balance sheet and P&L.

The final accounting need was foreign exchange conversion. The accounting behind this requires multiple journal entries in two different currencies.

Step 6: Automate Accounting Entries (Custom Scripts)

Once we knew what our accounting entries should be, we then needed to automate the process so with a few simple pieces of data entered, multiple journal entries could be made. This is the stage in the project where the technological knowledge needed to achieve our outcomes was beyond the existing team. The story of finding a team of Christian NetSuite-only software developers in India is one of those miracles of God. Today we have access to a team of 40 people if needed in India who are NetSuite specialists.

We then created custom screens to reproduce all the transactions defined in Step 5.

Step 7: Fund Statements

The final stage of our initial goal was to produce a statement that could be emailed to fund holders to reflect all balances and activity happening in their fund each month. To do this we had to work through a series of building blocks again, so we:

• Built an on-screen statement by fund, by currency, and by date range

• Using NetSuite’s advanced PDF maker, produced a branded statement with all the fund activity included

• Built a workflow to create PDF statements and for them to pass through an approval process by utilizing a folder structure within NetSuite Documents

  • Pending Approval

  • Financed Approved

  • Approved Statements

  • Email Sent Statements

  • Revision Statements

  • Not Sent Statements

• Built an email sending system that would allow for all approved statements to be sent to relevant fund holders.

At this stage in the project we had achieved one of our original goals of being able to produce an accurate, beautiful looking statement that was emailed to fundholders.

Step 8: Web Portal

The other part of our goal was to produce a web portal that fund holders could log into and perform transactions and see balances and activity. Rather than waiting until our NetSuite development was fully complete, we ran our portal project in parallel so that both projects would be completed around the same time. The web portal was again a series of building blocks.

• Determine language to match NetSuite (Java, Java Script)

• Build user interface

• Develop back-end database and data structure

• Build NetSuite APIs (application programming interface)

• Connect APIs and backend of portal to user interface

We still have more to do to finish building our solution. In 12 months, however, we have taken an issue that needed a solution and built a viable working solution that we believe will ultimately impact the world by making global giving easier. We believe this because a user can now log in to a web portal and access their giving fund and grant to charities all over the world with the click of a mouse. By releasing donors into a world where global giving is easy, our prayer is that generosity will flow and the charities of the world will have all they need to accomplish their missions.

by Chad Hamilton

Good financial planners know that effective financial planning is comprehensive in scope and the components are interdependent. Like pieces of a puzzle that fit together in a particular way to form a complete picture, financial decisions are interrelated and contingent on one another. For example, the way investments are allocated impacts the amount of income taxes that are due; taxes due affect cash flow needs from the portfolio, which will, in turn, affect how much one needs to save for retirement, and so on.

Many readers will, no doubt, be familiar with the puzzle analogy. But all too often something is missing from it. In order to best put together the puzzle, you need to see the picture on the top of the box. It’s tempting to jump right in and begin fitting the pieces together. But you’ll have greater success if you understand what it is you are trying to build and confirm it’s something you want to build. Likewise, you cannot make the best financial decisions for your life until you have really articulated and envisioned your ideal future — the “picture on the top of the box.”

The “Picture on the Top” from a Christian Perspective

But there is another reason why the “picture” is so important. Your desired future not only informs decision-making today, but it also provides the incentive to make it a reality. Internal motivation drives external behavior. In other words, it is not primarily head knowledge that dictates the choices we make. It is our dreams and desires. A compelling vision of your desired future will provide the proper motivation for making the right financial decisions today.

For Christians, the need to begin with the end in mind is even more important because our “end” is eternal in nature. That’s why, in the New Testament, many of the references to money are framed in terms of ultimate consequences – from rewards in heaven (Matthew 6:2-4) to being cut off from God forever (Matthew 6:19-24). Therefore, what we believe about our ultimate future profoundly affects how we approach personal financial matters. If we do not fully contemplate or understand the eternal, we become experts in the trivial and novices in the significant.

The Picture Informs Daily Actions

So the central question is: what do we believe about our ultimate future and the future of this world? What is the scope of God’s redemption? Is it purely about saving souls or is it about restoring all things? What we believe about heaven and the Kingdom of God is not merely a speculative exercise or obscure theological debate. It informs our daily actions and decision-making.

If I believe that this earth is ultimately going to burn up and be destroyed and my vision of heaven is an ethereal, purely spiritual existence, what I do here doesn’t matter much. It matters in terms of saving souls, but none of the work I do or monetary investments I make have a lasting impact. In this view, what matters most is not being “left behind.” This results in Christians becoming “too heavenly minded for any earthly good.”

But what we see in Genesis 2:5-15 is that God created us to work. The Garden of Eden is God’s vision for humanity and it will ultimately come about. According to the Apostle Paul in 1 Corinthians 15:58, this means that what we do on earth is not in vain. When we know what our eternal future will look like, it will infuse our activities here with a whole new level of meaning and significance.

A Meaningful Difference

So how does this all play out on a daily basis in our money relationships? On a practical level, how do these beliefs shape our perspectives and decision-making?

An underdeveloped view of the end of time will lead to a compartmentalized view of personal finances, one that happens to look an awful lot like that of non-believers. In this view:

• I will negotiate the best deal possible, even if it means taking advantage of someone in a tough spot or another person’s naivety.

• I will buy the cheapest products and services without considering the supply chain or labor practices that helped produce it.

• I will invest money solely in pursuit of maximized financial returns, regardless of how the companies I am investing in make their profits.

• I will maximize financial wealth without much thought of the potential dangers money may pose to my own soul.

If, on the other hand, we believe God is in the business of restoring every inch of his Creation, as servants in His Kingdom our bottom line is no longer purely financial but rather about serving the greater good with our time, talent, and money. It means we spend money, invest money, and earn money all in ways that are intended to increase human flourishing. We will aspire to use our resources in ways that are beautiful and transformational.

When Christ says, “Where your treasure is your heart is also,” he wants to set us free (Matthew 6:21). Free from the widespread cultural idolatry of money. In this view:

• I will voluntarily pay more than necessary for some products in order to promote generous labor practices or sustainable agriculture.

• I will integrate my values with my investment decisions, avoiding investments in companies that promote the diminishment or destruction of human life.

• I will lavishly give my money in ways that are shocking and overflowing with grace.

• I will take seriously Jesus’s warning that we cannot serve two masters (God and “mammon”) by being concerned not only with what I am doing with money but also with what money is doing to me.

The Ultimate Hope

Everyone should have a goals-based approach to managing money.  It is the right framework for making good financial decisions.  The difference for followers of Jesus is that our greatest goals and dreams are aligned with God’s plan for eternity.  What we need is a hope-based approach to money.  Not a hope in money that rescues us from uncertainty about the future, but a hope that rests assured in the promises of the one who conquered death.

—

Chad Hamilton is a CFP® and Director of Practice Management with Brown and Company, Inc. in Denver, Colorado. Chad has more than 20 years of experience in the wealth management industry. This article is an excerpt from Chad’s book, Redefining Financial Freedom.

REDEFINING FINANCIAL FREEDOM: A GOSPEL-BASED APPROACH TO MONEY

by Chad S. Hamilton

There is no shortage of books providing financial advice and quite a few of those incorporate a Christian perspective. They all tend to start with existing financial practices and apply Biblical principles to what you are already doing. What makes this book different is that it starts with the gospel and then considers the financial implications. The underlying assumption here is that the gospel is Good News rather than Good Advice. That means it is not primarily about finding the right Bible verses to inform you, but rather about connecting with the Good News of Jesus to transform you. What Chad Hamilton provides in this provocative book is an antidote to the false cultural narratives about money. He shows how so many financial problems are due to a misguided search for freedom and helps paint a picture of “what could be” by weaving in stories of imaginative people helping to redeem a broken world. Redefining Financial Freedom provides an inspiring Biblical framework for understanding money. It will change the way you think about work, investing, and generosity.

by Allen McClinton

In the 1970s, Milton Friedman articulated a myopic mission for corporations to concentrate solely on serving the interest of the investing class. He said that if their interests are served well, all will benefit. Society now bears the results.

American corporation’s strict adherence to this hypothesis has driven a divide in our society where two different cities cohabitate in one nation. The citizens of one of those cities find themselves in tremendous hurt and desperation as they fight to survive. While the other city’s inhabitants economically insulate themselves with an unbreachable moat made from the ownership of assets.

This is America. This is the non-empathetic capitalistic machine we’ve created for ourselves. Adam Smith’s “invisible hand” is more discriminatory than many care to admit—directing the flow of power and capital to determine how people are valued and viewed. The resulting fragile societal structures are direct fruits of the behaviors incentivized by America’s capitalism.

While the structure of American society makes it easy for Corporations to create perpetual growth and make meaningful impacts in the lives of Americans, we’re also reaping the negative social side effects of what we’ve sown. Now, we find ourselves pondering, when our economy is built on broken societal foundations, should we be surprised when storms threaten to knock it all down?

Slavery is the result of a society that prioritizes financial gain over human dignity. We can say that slavery is “in the past,” but it was this free labor that allowed American capitalism to unlock the wealth of this nation. The racial injustices we see every day are the direct result of an economy that grew from the free labor of the very people it refused to value. Slavery is no longer legal, but if the racism that seems so core to our societal structures tell us anything it’s that laws alone don’t change the ethos of a nation.

Racial injustice is not a problem for government and social programs alone. It’s an economic issue. It’s one that requires the focused efforts of entrepreneurs and investors alike. It’s a problem that requires us to unwind the discriminatory policies that concentrate economic capital  in specific areas and stop allocating capital, calculated and applied at scale, to benefit one group of people to the exclusion of another.

It’s hard to believe that racial injustice can be reduced to economic and financial decisions, but that is exactly what occurs when economic decisions do not consider human equality. Discriminatory asymmetries were exploited in order to concentrate our nation’s resources and wealth in certain locations. Business leaders are just doing their job to maximize their own profits.

This common power struggle surfaced during the creation of America. The Founding Fathers wrestled as they formed the Constitution, knowing that to recognize every man as equal and with unalienated rights was in direct conflict with the a slavery-driven economy. Thus, you find a “compromise” where a black man is considered 3/5ths of a man.

In the 1930s, racial discrimination became a formalized policy called redlining where essential government capital resources and services that seed wealth capacity in a locality were denied to largely black urban areas. Again, a “compromise” was made to concentrate capital in largely white neighborhoods at the cost and decay of black urban areas.

As we see very clearly in our society today, what starts as an objective and non-empathetic financial decision begins to hurt and deteriorate society in personal and intimate ways. Business leaders, entrepreneurs, and investors cannot ignore and be indifferent to the societal problems we face in our society. For how healthy can America’s Corporations be if America’s Society is not healthy?

Our economy claims to support the ideals of equal human dignity and to reward those that work hard to realize the American dream. However, the reality of the experiments we have run so far, fall tremendously short of these ideals. American’s economy is not compassionate and empathetic to human dignity. The decisive decisions that have been made throughout history show that specific human races are sacrificed to benefit and reward the economic gain of other specific human races.

As Christian marketplace leaders, we can’t stay indifferent to this injustice. Even more, we can’t settle, rest, and operate within economic structures that reward greed arbitraged from the intentional subjugation of fellow image-bearers of God. All men and women are equal because they bear the image of our Heavenly Father. We are called to follow the example of Jesus, who stewarded His privilege as a ransom that He might serve humanity.

We must then ask ourselves—how much am I willing to sacrifice to enable and empower those that have experienced forced and discriminatory setbacks? What does this look like for an early-stage investor? Have I taken a hard look at not just the diversity programs, but the actual structures and rewards of the economic systems I am operating in? Are there groups of people who are being intentionally left out of the room?

I am a passionate capitalist who finds great joy in making a profit. I am also a black man who has experienced institutional racism. I am a Christian for whom Jesus Christ died and rose again that I might have life, and I belong to His family. I am His child. And as His child, who is being crafted in His likeness, I can’t suffer being satisfied in blindly operating within an unjust system. I must take action to do justice in the businesses I operate in. I must join hands with my brothers and sisters to find new and redemptive ways to be a compassionate, empathetic and just capitalist.

One of the most amazing things about living in Silicon Valley is to have seen and experienced how capital unlocks and galvanizes productive human potential to create amazing and valuable companies. Like a heat-seeking missile, Sand Hill road capital seeks to fund great teams of people with the outcome of outsized economic returns. However, when their black and brown demographics are cooled by the cold-hearted institutional systems of racism, capital, as a heat-seeking missile, never finds and unlocks this group’s productive potential.

Everyone in America suffers when capital is boxed in to fund only great ideas and teams that look a certain way. When there are demographics in our country whose unlocked productive potential have never been fully capitalized, we all lose. The real and more compelling vision is to end economic racism and unlock the productive potential of Americans that have never been given a chance before.

At the heights of the Civil Rights movement in 1968, the Apollo project put the first human on the moon. 42 years later, as protests over racial injustice broke out yet again across the streets of America, SpaceX executed a successful mission becoming the first private company to launch people into orbit.

Lifting off to space will always capture the world’s imagination. And in very practical terms, the work to build a successful space endeavour unlocks tremendous amounts of innovations that touch and improve people’s everyday lives. From the Apollo project came GPS technology, breakthroughs in material science, and new ways to organize. The external benefits that society reaped were in the trillions of dollars.

Going to space requires men and women to stretch and stress every single building block of science, physics and engineering to complete a launch. As Chamath Palihapitiya shared in an interview about his company Virgin Atlantic, “[space travel] requires you to reimagine all the basic things we have today in a new light.”

These current protests have captured the hearts of Americans to the reality of racial injustice. Similar to the reimagining thought processes and work to launch into space, men and women who hope to launch society beyond the inertia of racial injustice must reimagine and reconsider very basic fundamental structures of our economy.

I am hopeful that we can change the landscape of America to a more just and profitable capitalism. With certain demographics forced to stay put at the starting blocks, we have only experienced a limited version of the might and productivity of American’s Capitalism. But once everyone is running the race, we can finally push the whole competition to new records.