If there’s one thing that’s growing as fast as sustainable investing, it’s the number of book pages devoted to the topic. I recently contributed to that trend, co-editing the 1,300-page Global Handbook of Impact Investing, which is longer than some editions of War and Peace. While assembling the volume, and while leading a company that rates investments for social impact, I’ve looked over many of the books about the field. Here are five of the best.
Making Money Moral: How a New Wave of Visionaries Is Linking Purpose and Profit
By Judith Rodin and Saadia Madsbjerg
After leaving her post as the first woman president of the University of Pennsylvania (and in the Ivy League, for that matter) in 2004, Judith Rodin took over as president of the Rockefeller Foundation. With a bird’s-eye view of the birth and rapid growth of impact investing, she sought to blend the best of traditional charity and finance into investments that can produce social impact and profit. Her book, co-written with former Rockefeller program leader Saadia Madsbjerg, documents a wide range of case studies, pilots, innovations, and new bonds—some of which the authors helped start, launch, or scale up.
Making Money Moral is rich in examples, from the first $15 million sustainable-oceans “blue bond” issued by the Seychelles, to new exchange-traded funds focused on gender equality and racial equity, to the nonprofit Low Income Investment Fund’s $100 million municipal bond issue.
The pair interviewed impact investors from families (Liesel Pritzker Simmons), private equity (Leapfrog’s Andrew Kuper), and institutional investing (Frédéric Samama, Amundi’s head of responsible investment). The profiles and strategy discussions could inspire the 91% of CEOs reporting a need for sustainability in their companies—only 48% of whom are actively implementing solutions. A chapter citing evidence that ESG is a stronger indicator of bond performance than credit ratings could prove eye-opening to many.
Grow the Pie: How Great Companies Deliver Both Purpose and Profit
By Alex Edmans
Many CEOs say that “people are our most important asset,” yet treat people as labor costs to be reduced. Investing in human capital with training and mentoring can lead to tremendous innovations that yield high-growth revenue and capture new markets. At the core of London Business School professor Alex Edmans’ book is a people-first philosophy, which grew out of his Wharton School research, that the best companies to work for typically outperform financially. The Securities and Exchange Commission in 2020 finally acknowledged the importance of this approach, requiring companies to disclose people-focused metrics on pay, safety, and satisfaction. The international standards group, or ISO, also launched a human-capital metrics initiative.
Edmans’ book provides data-driven evidence and real-world examples of how investing in people can grow the corporate pie. With enough “pie-conomics,” increased revenue, profits, and cash flow can lead to lower prices for customers, higher pay for employees (Edmans calls them “colleagues” to combat hierarchical culture), and fair prices for suppliers, with enough left for CEO pay, too—in Edmans’ words, “rewarding the leaders of the enterprise’s growth.”
After reading this book, you may be inclined to ask for a raise based on your value-add, to train and mentor more of your colleagues, or to envision new opportunities to enlarge your workplace’s pie. After all, as intellectual-property merchant bank Ocean Tomo notes, 84% of the S&P 500 index’s market value comes from “intangible capital,” primarily people-driven innovations.
Activate Your Money: Invest to Grow Your Wealth and Build a Better World
By Janine Firpo
Janine Firpo worked for Hewlett Packard, Apple, and the World Bank, and deployed technologies and projects for social good in Africa and Asia. She then wrote this book to help women get more comfortable with impact investing. After all, women allocate to—and contribute front-line knowledge about—real-world impact investing, though this book should be a desk reference for every impact investor, male or female.
Women control 50% of today’s wealth—a number expected to grow to 65% in a decade—and 45% of millionaires are female. Women also typically earn higher investment returns than men, by 0.4% a year, according to Fidelity. Yet only 2% of venture-fund managers and 2% of mutual fund asset managers are majority owned by women, according to the Knight Foundation. Firpo recommends embedding gender criteria in investment policies.
Firpo covers all asset classes. Portfolios, she notes, can have more impact with community-development financial institutions, including funds like CNote, a women-led impact investing platform; in green-bond ETFs; or in venture funds like female-led Zebras Unite. Her book also encourages giving via donor-advised funds and collaborative investment clubs, and discusses how to pick a financial advisor or even a robo-advisor specializing in ESG.
Firpo also has a website full of templates and worksheets, and links to social-media-friendly fireside chats on Zoom and Facebook.
Reading Firpo’s book will educate, engage, and empower, whether you’re putting a toe in the water (1% ESG), running a head-to-head portfolio (50% ESG), or diving into the deep end of a truly focused portfolio (100% ESG).
How to Avoid a Climate Disaster: The Solutions We Have and the Breakthroughs We Need
By Bill Gates
Can a compelling planet-saving book be written by a private-jet-flying billionaire? Bill Gates would say yes (and pays $7 million annually to offset his carbon emissions). So would I, since Gates adroitly converts problems and solutions into everyday language, and identifies actions to reduce the 51 billion tons of carbon the world emits yearly. The “big five” emitting activities each have an easy-to-understand chapter: “making stuff” (31% of greenhouse-gas emissions), “plugging in” (27%), “growing food” (19%), “getting around” (16%), and “keeping cool—or warm” (7%). Gates shares his back-of-the-envelope calculations of big-picture solutions and “green premiums,” noting that we have limited time and resources.
While late to climate-action investing, Gates describes his journey, complete with visceral portraits of people who benefited from the Gates Foundation’s billions in charitable grants for vaccinations and education. Since 2016, Gates and investors like Jeff Bezos, Michael Bloomberg, and Richard Branson have funded Breakthrough Energy Ventures, which is seeking new approaches to stopping climate change—from new nuclear approaches, to carbon capture in concrete, to modeling the energy grid.
Doughnut Economics: Seven Ways to Think Like a 21st Century Economist
By Kate Raworth
The goal of many financial and economic graphs is up and to the right. But can society absorb unlimited growth? In this book, Oxford economist Kate Raworth argues that economic frameworks need to shift from wasteful extraction to sustainable, regenerative, equitable systems. Raworth visualizes a doughnut, with concentric circles representing Earth, society, and the economy. The doughnut hole represents those in poverty, lacking income, energy, and healthcare, among other essentials. Finance must be organized to serve people and the planet, she argues.
This is the economics book you probably didn’t read while you were getting your M.B.A. Raworth includes a dozen metrics of shortfalls in the social foundation of our fellow seven billion citizens: 29% of us are living on less than $3.10 per day, 17% have no electricity, women earn 23% less than men, 57% lack internet access. At the same time, our use of land, water, air, and natural resources exceed the planet’s biological capacity. Carbon intensity is at an all-time high. Species destruction is 10 times more than nature can replenish.
In Raworth’s world, social and ecological factors can be measured systematically, and our Earth, society, and economy can operate more like nature, where the waste of one species equals food for another. A circular economy can achieve higher prosperity and citizen well-being, while preserving clean air, drinkable water, and a balance with all the species on Earth.
Sadly, the book doesn’t contain a comprehensive how-to case study. Still, all of the concepts are here to assemble a systemic view. Starting your summer reading with this book will steep you in systems design, including the purpose, products, and priorities of capital markets.
R. Paul Herman is the CEO of HIP Investor Ratings + Portfolios. He is co-editor of the Global Handbook of Impact Investing: Solving Global Problems via Smarter Capital Markets Towards a More Sustainable Society (Wiley, 2021).
Email: editors@barrons.com
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5 of the Best Books on ESG and Impact Investing - Barron's
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