Benjamin Bingham is the CEO/Founder of 3Sisters Sustainable Management, focused on 100% impact portfolios across private and public asset classes (Scarab Funds). Educated at Groton School, Yale and Emerson College (UK), his writing and work draws on broad experience as an artist, bio-dynamic farmer, and teacher. His pioneering book on Impact Investing: Making Money Matter is an important contribution to this expanding movement (www.makingmoneymatterbook.com)
- Tell us your life story, how did you go from Yale University to founding 3Sisters Sustainable Management, Inc.?
I was blown away by two books at the start of my Spring semester in 1970. One was The Sand County Almanac, which made me recognize my own detachment from nature, and The Immense Journey by Loren Eisley which shocked me into the realization that since we began pushing buttons to get things done humanity was likely to be devolving rather than continuing to evolve its consciousness. Students were picketing my classes, thousands came to protest a Black Panther trial and people I knew were considering blowing up the law school to make a statement about the corrupt legal system. It felt as crazy as now. I took a leave of absence to reconsider the purpose of my life and after some adventures ended up with a motorcycle in Sussex, studying bio-dynamic agriculture for two years at Emerson College, a beehive of alternative thinkers and seekers for meaning from around the globe.
There I met Fritz Schumacher (Small is Beautiful), Theodore Roszak (The Making of a Counter Culture), Owen Barfield (Saving the Appearances), and through many profound speakers, the work of Rudolf Steiner. All this content has stayed with me for the last 50 years, including the idea of building cultural communities based on agriculture and sustainability. I was particularly struck by the inherent Threefoldness of human beings with unlimited variations of expression and how healing organizational principles naturally derive from this awareness. This particularly can be applied to the handling of money.
Raising capital and building conscious communities in the ’70s and ’80s led to building conscious companies in the ’90s and after an apprenticeship within the dragons of Wall St, starting 3Sisters Sustainable Management, Inc (3SSM) to help investors overcome their detachment from the impact of their investments and engage in the transformation and healing of society. We have been building impact portfolios (Scarab Funds) that use all forms of financial instruments to achieve game-changing impact goals.
- Tell us more about 3SSM & the Scarab Funds. What is the thesis of the impact funds that they constitute?
We believe that impact considerations are a matter of good management and good management leads to positive outcomes from an environmental, social and financial perspective. Building a portfolio that is 100% aligned with positive environmental and social outcomes often means that in order to build an appropriate mix of investments you may need to expand the universe you are considering. After decades of exposure to the portfolios of sophisticated and unsophisticated investors alike, it is striking how similar they all are. We see this as risky. Now that ESG includes proxy voting against management, there is confusion about what constitutes “green” or sustainable. Here is our approach:
Though we invest in private debt, private equity, real assets and public instruments (including hedging options and environmental credits), we only consider products and services that we feel have an inherently beneficial impact on the planet. That said, we avoid extraction, pollution and exploitation as much as possible and practice the precautionary principle in regard to man-made substances that are unproven in long term studies. We are also guided to some degree by the beneficial ratings of companies on CSRHub.com ( I am a founding Board member), the largest aggregator of ESG data.
Our direct private investments are focused on clear goals ranging from land rights to doubling small farmer production in Africa, from affordable housing to high-tech solutions for social and health problems. What differentiates us is our strong positive focus on the best solutions we can find for the most relevant problems. We have far to go and look for investors who want to expand our universe of impact.
- Like you said, there are many books on money and investing, but very few provide a philosophical basis for transforming our view of money from an end unto itself to a means to change the world for the better. Tell us about your journey to authoring ‘Making Money Matter’; what inspired you to write it?
It seemed important to me to share the ups and downs of this journey I am on, starting as a naïve inheritor of wealth (the tail end of the Tiffany fortune) who gave it all away on purpose. My initial success at Legg Mason and Citi Group, seeing through the mortgage debacle and going private in 2007 (with less than a 5% loss in 2008) only to join a dysfunctional RIA deep in debt where I lost much of my business due to the owner’s illegal actions, and almost lost all my confidence along with a number of friends. This industry is not known for transparency, vulnerability and originality. Mine is a kind of survival story with much good still to come.
Much of the book describes the holistic thinking behind our investments which can be compared to the principles of bio-dynamic agriculture. Diversification, rebalancing and even hedging are very comparable to crop rotation practices and hedges which serve to reduce the winds of volatility. I also go into Steiner’s threefold conception of healthy organisms and how this relates to how money works or could work better.
- What was the most interesting or amusing story that occurred to you in your career so far? What was the lesson or take away you took out of that story?
My father used to tell a story that told of a peasant who commented at each turn of events “good luck, bad luck, who can tell?” For me, learning that my mentor was borrowing from my clients (friends and family) almost derailed my career, but instead, as I was forced to take over the portfolio and form my own company to manage it, I grew in ways I might otherwise not have dared. I learned that people with good intentions may allow themselves to take shortcuts and once the line is crossed it becomes addictive. I also learned that due diligence is not easy and it is important to have tough colleagues who leave no stone unturned. And even then life will always be full of surprises, both good and bad. Be prepared, keep your eyes open and never believe that you know everything about anything!
- We have heard that investing to make an impact does not necessarily mean lower returns. Is that right?
Like I said, good performance is a matter of good management. Some people want philanthropic investments that are a 100% give away. Some are happy to get their money back to make another impact investment, and some want 20X with impact so they can do it again 20 times over (or simply to put it in their pockets!). Whatever the goal, this may or may not be managed well. Even badly managed philanthropy can provide negative impact if it is invested unwisely.
So to me the question needs a context. There is no inherent reason that impact investing is any different from other impact blind investments. In fact, many studies are showing that companies with beneficial products and services and well managed processes from an ESG perspective tend to be more profitable, less risky and more highly valued by employees, consumers and investors. Why not?
One day we will all agree that the External Rate of Return (ERR) is as important to us all as the Internal Rate of Return (IRR), and management will be chosen for their ability to efficiently and profitably manage both internal and external costs and benefits equally well.
- Are you working on any exciting new project now? If so, how do you think that will help people?
We are thrilled to announce the partnership we have formed with MDC and the United Way of Greater Greensboro to build our first beta test for a new technology company we formed with our investors called workflow, which I chair. The contract is to build a tech-enabled platform to show that by integrating social and medical services through an online partnership we will empower individuals and families who are uninsured or under-insured to find their own pathway to success. There is a movement in this country that wants to prove conclusively that social determinants of health are more critical than medical interventions and that healthcare can be relieved of tremendous financial pressure through this collaborative approach to individualized pathways of success (education, jobs, housing, healing). Other cities around the country are lining up for us to build customized systems that meet their needs and their circle of partners. We are grateful for a lead investment from Knightsgate Fund II, an early-stage venture fund, which just closed on $25M from leading family offices.
- What should a novice family office/investor know about impact investing? What would you advise them?
The first thing any investor needs to do (and it is never too late to do this) is to deeply reflect on the assumptions they have about investing and the purpose of their money. Are these assumptions true? How do they know they are true? What would it feel like to let any of the assumptions go? Are they comfortable going into unknown territory for their family? Is everyone on board? If not, how can this be addressed respectfully? What matters to everyone? What can you agree on that is important to all?
Impact investing should always be part of such conversations, because otherwise families become divorced from their own impact, their meaning, their legacy as a family. It matters and it is an illusion to pretend it does not.
Finally, give up the assumption that impact investing will lead to poorer financial outcomes. That has no basis. Anecdotes to the contrary are examples of bad management in most cases or possibly philanthropic intentions that cared little for financial performance in the first place.
Make a good solid plan and stick to it.
- What are some of the common misconceptions about impact investing?
I hope none of the misconceptions are common anymore. Impact investing is not really a “thing.” We use the term to differentiate intentions from solely financial considerations. However, all investments have an impact whether good or bad. It is a matter of awareness and good management. I would say my main concern is that we make it too complicated and think this has to be so until we come to a common language for it. This is a dangerous misconception because it limits the considerations to a consensus perception that may be less than optimal. I say we underrate our ability to make judgments based on common sense. And the more we do this the more true this position becomes. If we have to measure everything we manage, we can lose the forest for the trees. It is a misconception that our true hearts lie or are less intelligent than our intellects. Humanity can improve in this realm of the heart and intuition. Some of us are losing faith in our ability to know our own special path.
- What trends are emerging in impact investing?
It keeps getting bigger and more institutional and sovereign wealth money is chasing it. The UN Sustainable Development Goals (SDG’s) are becoming a common language for justifying investments toward the 2030 goals. Europe is ahead of the US because it is mandated institutionally to some extent. Families would do well to pay attention to this trend. Some called it a green bubble last year. Everything in the future will depend on good management. Anecdotal experiences can kill a movement like this. I see it becoming more and more sophisticated, and possibly increasingly greedy and less philosophical. Women and people of color are showing up as leaders and are going to be in position to keep it real.
- How do you teach grit to your children and grandchildren?
By letting them get dirty in Nature and make mistakes. My five children are very independent and got little help from us.. We had no TV or internet in the house and they learned to read for pleasure. Our twin sons run one of the most popular skateboard shops in the country (Nocomplyatx.com). They donated $100k to the Central Texas Food Bank last year. My daughter runs a phenomenal non-profit to conserve the rainforest in the Congo (Gcearth.org). Two of our sons have lived off the grid since they left home. We sometimes worry we did not hold their hands enough, but parents can always worry. The thing is to consciously stop worrying and trusting them to become who they are… and to stand for the Truth when action is needed. Grandchildren are pure pleasure. Just enjoy.
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