Investing and divesting
The global financial system relies in part on the money invested by individuals, pension funds and institutions. While the primary aim of big hedge funds and investment banks is to maximize profits and minimize taxes, the rest of us can take a more responsible and ethical tack: we can accept a lower monetary return in exchange for the social and environmental benefits of investing in smaller, more local and community-minded businesses.
Joining with others to provide capital for new or established local businesses is a great way to meet entrepreneurs in your community, strengthen relationships among friends, and bring more vitality to your local economy.
Take action
- How to Invest Local by Locavesting (US) offers extended guidance on a dozen models for local investment groups. Most of these are applicable worldwide.
- Join or start a Slow Money group. These groups provide interest-free loans to local food and farming enterprises. Most existing groups are in the US, but there are also chapters in Canada, Australia and France. Find a group near you, or start one of your own.
Get inspired
- Through their Local Investing Opportunities Network, residents of Port Townsend (Washington state, US) have provided more than $7 million to local businesses through a peer-to-peer lending program mediated by the town government.
- The US state of Vermont is home to at least two innovative investment clubs. The White River Investment Club provides financing to small businesses that contribute to a stronger local economy, while the Vermont Solidarity Investing Club invests only in cooperative businesses.
- The members of FarmWorks, in Nova Scotia, Canada, annually purchase shares in a diverse portfolio of local food and farming businesses, bringing almost CAD$3 million to 95 local enterprises.
- Slow Money chapters worldwide have shifted $79 million towards food and farming enterprises since 2010.
Many people who want to invest locally simply don’t have the time to research all of the options; and since most aren't "accredited investors," there are strict rules about where they are allowed to invest money. At the same time, small businesses can find it difficult or impossible to obtain loans – and when they do, they must often pay exorbitant interest rates to distant banks and financial institutions. Community investment funds aim to solve these problems. They are similar to mutual funds, but instead of investing in Fortune 500 companies, the funds invest in local businesses, affordable housing, small farms, entrepreneurs from disadvantaged groups, and so on. Although investors expect a return on their investment, their goal is to support small businesses, not to extract maximum profits from them.
Take action
- Learn how to create a community investment fund with Michael Shuman's guide Community Investment Funds: A How-To Guide for Building Local Wealth, Equity, and Justice.
- Dive in more deeply with the British Columbia Community Investment Co-operative's 320-page Start-Up and Operations Guide, with tools and templates for starting a local impact investing program (Canada).
Get inspired
- Seed Commons community wealth cooperative in the US is a "national network of locally rooted, non-extractive loan funds that brings the power of big finance under community control," and "provides infrastructure for cooperatives and communities organizing for economic self-determination."
- The Boston Ujima Project in the US has created a community investment fund as part of an economic alliance devoted to building a local economy by and for the people.
- The Vermont Community Loan Fund in the US offers interest-bearing savings and Certificate of Deposit (CD) accounts to individuals and organizations. Lenders can specify that their money go towards either the Food, Farms and Forest Fund (supporting local food businesses), or the Next Generation Fund (supporting childcare programs).
In the US alone, foundations hold hundreds of billions of dollars in assets. Standard asset portfolios often include fossil fuel companies, the private prison industry, land stolen by force, and other exploitative corporate activity. Those of us who have a relationship with a foundation – as a board member, staff member, or even a donor – have a voice in shifting these investments towards strengthening local economies and communities.
Get started
- Encourage a foundation to adopt mission-aligned investing principles and move its money towards local businesses with Common Future's Funder Learning program.
- Write a responsible investing policy that excludes exploitative corporations and favors local community development. The guide Writing a responsible investment policy: Guidance for asset owners from PRI takes you through the steps, and provides links to sample policies in dozens of countries, including South Africa, Brazil, New Zealand, the US, and many European countries.
Get inspired
- The Heron Foundation in the US has shifted 100% of its assets in line with its mission to reduce domestic poverty, through the Funder Learning program. Read details of their journey in the link above.
Around the world, institutions are chasing after the highest possible monetary return on trillions of investment dollars. This means that banks, pension funds, university endowments, and state and local government portfolios are heavily invested in fossil fuel, nuclear, and military industries, as well as deforestation, land grabs, predatory lending, and other destructive activities. Doing what we can to convince governments and institutions to stop funding the destruction of the planet is an important act of resistance.
Take action
- Join or start a fossil fuel divestment campaign. This interactive map by GoFossilFree.org shows where existing campaigns are underway, and describes the basic steps for starting up a campaign in your community.
- Work to divest government funds from fossil fuels with the Mayors Innovation Project's guide Divestment from Fossil Fuels: A Guide for City Officials and Activists.
- Join the Center for International Environmental Law's campaign to get pension funds to stop investing in fossil fuel companies.
- Investments in military industries not only fuel conflict and environmental destruction, they make survival even more precarious for local cultures, communities and economies. Divest from the War Machine can connect you with existing campaigns, provide you with model city divestment resolutions, and more.
- Learn which pension funds contribute to land grabs by visiting the websites of GRAIN, National Family Farm Coalition, and Farm Land Grab, and to deforestation by visiting Deforestation Free Funds. Ask your labor union or professional association to pass a resolution against land grabbing by pension funds.
- Hold your pension fund responsible for unethical investments. See the TIAA (US) petition against land grabbing as an example.
- Join The Next Egg (US), an online community working to shift retirement savings from global to local economies.
- Make My Money Matter makes it easy to send a message to your pension provider, asking them what they are doing to help cut emissions in half this decade.
Get inspired
- By the end of 2018, institutions ranging from universities and banks to sovereign wealth funds and major cities had made nearly USD 8 trillion in fossil-fuel divestment commitments.
- Fossil Free California maintains a list of California cities and counties that have divested pension funds from big banks and fossil fuel companies.
- In 2021, thanks to pressure from NGOs, the Norwegian Parliament adopted a new criterion to guide the investments of the Norwegian Government Pension Fund Global – the world's largest sovereign wealth fund. The Fund will now exclude companies that sell weapons to countries that violate international humanitarian law. Read more in this story from the German NGO Urgewald.
- Michael Shuman, author of Local Dollars, Local Sense, is a valued source of information about all aspects of local finance. His talks at Economics of Happiness conferences include A World Without Wall Street, Localising Finance, and Local Finance for Local Economies.
- The Pathways to a Peoples’ Economy Toolkit contains a number of policies and case studies on divesting banks from extractive industries and reinvesting in local communities. These are US-based but many are applicable elsewhere.
- Although written during the Occupy Wall Street movement in 2011, this essay by Michael Shuman, A non-partisan idea to help the economy: make it easier to invest in local businesses – describes policy prescriptions that are still relevant today.
- Top 24 Tools for Local Investing by Michael Shuman offers a great overview of many of the topics covered on this page, and more.
- How to Raise Local Capital from Locavesting offers more than a dozen methods for local businesses to access funding.
- Democratizing Finance, a recorded panel discussion by the New Economy Coalition, discusses a variety of models for shifting financial systems away from extraction and towards cooperation.
- Michael Shuman's book Put Your Money Where Your Life Is: How to Invest Locally Using Self-Directed IRAs and Solo 401(k)s describes how individuals can invest in their communities and themselves, rather than in Wall Street.