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The nature of investing

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The time has come for us to refocus on investing in its essential, connected form, writes Katherine Collins – to reintegrate investing with the real world, rather than the world on the screen.

In green money circles, we spend a lot of time considering ways to invest in nature, or sometimes with nature. These are big and important questions: more complete understanding of the value of nature is certainly a vital component of any sustainable investing approach.

What if we also consider investing as nature? In addition to the material bounty provided by our natural world, we also have access to great stores of wisdom that are embedded in natural organisms and natural systems.

Looking to nature as our ultimate model of a resilient, regenerative system holds tremendous potential. As Janine Benyus, biomimicry pioneer, notes, “We are searching high and low, but we already have a perfectly sustainable world: the natural world.” What if our investment processes were rooted in the same principles that guide the effective, optimised function seen in nature?

Biomimicry begins with the idea of embracing nature’s wisdom, not harvesting nature’s stuff. At its heart is a deceptively simple question: WWND – what would nature do? How would nature perform the function I’m trying to perform?

This centre point is remarkable in several ways: first, it starts with a question, with open inquiry. Biomimicry does not begin with a predetermined endpoint, even when the challenge before us has clear requirements or constraints. Second, the question is rooted in context: what would nature do here, in these circumstances? And finally, it forces us to be precise about purpose and function: what are we really trying to do, and why?

I came to biomimicry along a winding path, beginning at a low point in my career. I was struggling through a tough performance patch, as all investors eventually do, when luckily I was introduced to the work of Dr Tom Seeley of Cornell University through a meeting at the Santa Fe Institute.

Seeley’s work investigates how bees make collective decisions that are consistently terrific. For example, when bees are looking to take significant action, like swarming to a new hive location, the first thing they do is to go out and explore the environment around them.

This simple observation struck me like a lightening bolt. Here I was, staying later and later at my desk every night, building more and more convoluted models and spreadsheets, hoping that the answer would come to me through my computer screen. What I needed, instead, was to be out in the world, assessing my investment decisions in context.

That path of inquiry first led (thankfully) to recovery in my investment performance, then to studies in moral philosophy at Harvard Divinity School, inspiration and mentorship from Janine Benyus and Hazel Henderson, formal training with the Biomimicry 3.8 organisation and Dayna Baumeister, and the founding of Honeybee Capital, where our mission is to reconnect investing with the real world. And now it has led to writing my first book, The Nature of Investing, which explores the principles of biomimicry and their application to finance in depth.

Locally attuned investing

For instance, one key set of life’s principles is to be locally attuned and adaptive. This is not a simple notion of physical proximity (though that’s part of it); these ideas encompass a more complete concept of life in context

The principles talk about fitting in to our local environments, connecting and integrating with those local systems. To thrive in any context we need to do more than just be there. We need local inputs, local relationships and local feedback loops.

Consider the amazing Namib beetle, which thrives in the desert. The beetle takes advantage of the fog that sweeps over the sand dunes at dawn. When the fog comes, the beetle raises its shell up so that the water condenses on the upturned surface. The shell has bumps that attract water at the tips and channels that then guide the droplets right into the beetle’s mouth.

This insect has found a way not just to survive in its challenging environment, but to thrive by integrating those same tough conditions into the most crucial parts of its life.

When I looked at my own investments with this idea of being locally attuned, I saw two different gaps between my intentions and my reality. The first gap was geographic: like many investors these days, I had a lot of faraway multinational holdings in my portfolio. There’s a place for global holdings, but there’s also a place for investing close to home.

Though I was investing my time, my energy – my life! – in my own community, my investment dollars were mostly elsewhere. So, over the last few years I’ve been working with our local Slow Money group, Boston-area entrepreneurs and other community-based organisations to ‘buy local’ more often for my investments as well as my groceries.

The second disconnect related to a more metaphorical kind of ‘local’, the kind that is defined by connection and mutuality, regardless of distance. My investments in some cases were not only far away geographically, but also far away in terms of their composition.

I owned some bundled-up funds of funds and some complicated securities that were supposed to protect me from market volatility. These ingredients might well belong in some of our portfolios, but I want my portfolio to be full of organisations where I have connection, whether it be to mission, people, or product. So I’ve gradually been de-layering my holdings in recent years, and reconnecting them to my own ideas and values in a less-processed way – a sort of ‘organic investing’.  Simpler structures and processes, more connected to me and my life.

Vision

If we apply all of the principles of biomimicry, what might real local attunement look like? I have an idea, though it’s not drawn from a traditional investing context.

Over the past two decades, I’ve had the joy of travelling to more than 20 countries with Habitat for Humanity, offering manual labour to assist local homeowners as they constructed their houses.

On one of my early trips to Africa, the leader of the local Habitat group showed us the storeroom, which was just a small shed with tools and a few bags of cement. I was confused — where were all the other building materials? Having been an analyst covering the home-building industry in the US, I was used to seeing big stockpiles of materials near any building site.

Soon enough, I realised where the materials were: they were all around us. In the coming days, we took an oxcart down to the riverbank to shovel sand, which we then sifted by hand before mixing into mortar. We walked to the pump down the road to gather water in big, 10-gallon containers, many times each day. We dug clay from the very spot where the house was going to be located, shaping it into bricks for the walls. We went out to the forest to cut lumber for the roof framing. Aside from those bags of cement, a handful of nails, and galvanised metal sheets for the roof, the materials were all hyperlocal.

Even more importantly, the entire community was involved in the building process. Extended family, friends, and neighbors all helped on the jobsite. Some provided food and shelter for visitors. Others provided moral support, stopping by to cheer on the work and to comment on progress. The new house was not just situated within the community; its very construction was a community activity—completely locally attuned. A community investment.

The time has come for us to refocus on investing in its essential, connected form – to reintegrate investing with the real world, rather than the world on the screen.

Biomimicry provides us with a framework that embodies connection and integration, a model of our natural systems that have proven to be effective, adaptive, and sustainable. The principles of biomimicry, life’s principles, are not the newest theories: they are the oldest facts. These concepts describe how the natural world has actually functioned for 3.8 billion years.

Life’s principles give a clear and compelling guide for transforming the investment process from the roots up. The result is an investment approach that goes ‘beyond sustainability’ to form a system that is inherently resilient and regenerative. Most importantly, they are the basis of an approach that re-aligns investing with the world it was originally meant to serve.

Instead of efficient, effective. Instead of rigid, resilient. Instead of transactional, relational. Instead of maximised, optimised. This is the true nature of investing.

Katherine Collins is founder and CEO of Honeybee Capital, a financial firm dedicated to reconnecting investing with the real world. She is author of the book, The Nature of Investing, and her newest neighbours in Massachusetts are several thousand honeybees. This article was originally published by GreenMoney Journal at GreenMoney.com

Photo: James Knight via freeimages

Further reading:

Sustainable investment is about optimisation, not maximisation

From ethics to sustainability: shifting the investment debate for 2014

Do you know what your money is doing while you sleep?

There is a disconnect between investment and the real world

The Guide to Sustainable Investment 2014

Economy

Will Self-Driving Cars Be Better for the Environment?

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self-driving cars for green environment
Shutterstock Licensed Photo - By Zapp2Photo | https://www.shutterstock.com/g/zapp2photo

Technologists, engineers, lawmakers, and the general public have been excitedly debating about the merits of self-driving cars for the past several years, as companies like Waymo and Uber race to get the first fully autonomous vehicles on the market. Largely, the concerns have been about safety and ethics; is a self-driving car really capable of eliminating the human errors responsible for the majority of vehicular accidents? And if so, who’s responsible for programming life-or-death decisions, and who’s held liable in the event of an accident?

But while these questions continue being debated, protecting people on an individual level, it’s worth posing a different question: how will self-driving cars impact the environment?

The Big Picture

The Department of Energy attempted to answer this question in clear terms, using scientific research and existing data sets to project the short-term and long-term environmental impact that self-driving vehicles could have. Its findings? The emergence of self-driving vehicles could essentially go either way; it could reduce energy consumption in transportation by as much as 90 percent, or increase it by more than 200 percent.

That’s a margin of error so wide it might as well be a total guess, but there are too many unknown variables to form a solid conclusion. There are many ways autonomous vehicles could influence our energy consumption and environmental impact, and they could go well or poorly, depending on how they’re adopted.

Driver Reduction?

One of the big selling points of autonomous vehicles is their capacity to reduce the total number of vehicles—and human drivers—on the road. If you’re able to carpool to work in a self-driving vehicle, or rely on autonomous public transportation, you’ll spend far less time, money, and energy on your own car. The convenience and efficiency of autonomous vehicles would therefore reduce the total miles driven, and significantly reduce carbon emissions.

There’s a flip side to this argument, however. If autonomous vehicles are far more convenient and less expensive than previous means of travel, it could be an incentive for people to travel more frequently, or drive to more destinations they’d otherwise avoid. In this case, the total miles driven could actually increase with the rise of self-driving cars.

As an added consideration, the increase or decrease in drivers on the road could result in more or fewer vehicle collisions, respectively—especially in the early days of autonomous vehicle adoption, when so many human drivers are still on the road. Car accident injury cases, therefore, would become far more complicated, and the roads could be temporarily less safe.

Deadheading

Deadheading is a term used in trucking and ridesharing to refer to miles driven with an empty load. Assume for a moment that there’s a fleet of self-driving vehicles available to pick people up and carry them to their destinations. It’s a convenient service, but by necessity, these vehicles will spend at least some of their time driving without passengers, whether it’s spent waiting to pick someone up or en route to their location. The increase in miles from deadheading could nullify the potential benefits of people driving fewer total miles, or add to the damage done by their increased mileage.

Make and Model of Car

Much will also depend on the types of cars equipped to be self-driving. For example, Waymo recently launched a wave of self-driving hybrid minivans, capable of getting far better mileage than a gas-only vehicle. If the majority of self-driving cars are electric or hybrids, the environmental impact will be much lower than if they’re converted from existing vehicles. Good emissions ratings are also important here.

On the other hand, the increased demand for autonomous vehicles could put more pressure on factory production, and make older cars obsolete. In that case, the gas mileage savings could be counteracted by the increased environmental impact of factory production.

The Bottom Line

Right now, there are too many unanswered questions to make a confident determination whether self-driving vehicles will help or harm the environment. Will we start driving more, or less? How will they handle dead time? What kind of models are going to be on the road?

Engineers and the general public are in complete control of how this develops in the near future. Hopefully, we’ll be able to see all the safety benefits of having autonomous vehicles on the road, but without any of the extra environmental impact to deal with.

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Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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renewable energy policy
Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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