2018 Lane Reports

How the Headlines Drive Investors’ Decisions

The Lane Report, April 2018
Monday, April 2, 2018 10:00 am
by Marc J. Lane

Our nation is at an inflection point and, perhaps now more than ever, cultural phenomena are informing the decisions individual and institutional investors make.

  • The Parkland students have turned their mourning into a movement. Along with their teachers, their parents and hundreds of thousands of other supporters, they “marched for our lives”on March 24, rallying for gun control and school safety measures in the wake of the deadly shooting at Marjory Stoneman Douglas High School. While the political debate over guns unfolds, more Americans are searching for ways to get guns out of their investment portfolios. Not only do they not want to profit from a product that, when functioning as intended, kills people. They also see firearms companies as under increased risk of regulation and political pressure, making them an investment whose profit potential may be constrained. So the marketplace is moving away from the gun culture for moral, public safety and financial reasons. No wonder Dick’s Sporting Goods and others have ended the sale of assault-style weapons and high-capacity magazines at its stores.

  • Facebook is under fire. The company's role in the Cambridge Analytica data breach, where some 50 million Americans' personal data was compromised, continues to present unprecedented challenges for Facebook's management. Investors and customers alike are viewing the breach as the digital equivalent of a toxic waste spill, one that has called for greater government oversight of social-media companies. Within two weeks of the still-growing scandal, the company's market value has plummeted $72 billion. Facebook's customers feel that their trust has been betrayed, and their loyalty is far from assured. Big Data is Big Money and a big part of the revenues and earnings streams of the best performing stocks in a generation. If the stunning backlash over privacy concerns forces a material change in the Facebook business model, big cap tech is likely to be affected for years to come.

  • At this year’s Oscar awards ceremony, the #MeToo and #TimesUp movements – and Frances McDormand’s fiery acceptance speech – drew the attention of the nation to the pervasive power of sexual harassment and sex discrimination. At the same time, broader conversations are underway about the systematic undervaluing of women in the workplace, a decades-old inequity hitting women of color the hardest.

Against this game-changing backdrop, Larry Fink, the Chairman of BlackRock, the world's largest asset manager with over $6 trillion in assets under management, wrote in his annual letter to CEOs: “Companies must ask themselves: What role do we play in the community? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world?”

Mr. Fink’s questions are not rhetorical. The reality is that shareholder engagement has ratcheted up to a new level. Hundreds of shareholder resolutions have already been filed this proxy season. They seek to promote good corporate governance, human rights, board diversity, decent work environments, inclusive hiring and promotion practices, and respect for customers' privacy rights.

Shareholders are voting their values and we’re privileged to help them. Marc J. Lane Investment Management, Inc.’s proprietary Advocacy Investing® strategy empowers investors to drive positive change by investing only in those companies whose social justice and environmental policies reflect their own core values.

We would be honored to help you, too.


Marc Lane is an attorney, financial adviser and the author of Profitable Socially Responsible Investing? An Institutional Investor’s Guide, published by Euromoney Institutional Investor PLC, and Representing Corporate Officers, Directors, Managers, and Trustees, published by Aspen Publishers. We invite you to reach out to Marc in confidence and learn how Marc J. Lane Investment Management, Inc. can add value to your investment portfolio. He can be reached at mlane@MarcJLane.com or 312-372-5000.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems.

A SIB isn't a traditional bond where investors are guaranteed a fixed return but a contract among a government agency that agrees to pay for improved social outcomes, a private financing intermediary and private investors. SIBs shift the risk of experimenting with promising but untested intervention strategies from government to private capital markets, with public funds expended only after targeted social benefits have been achieved.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system.

The government decided which goals would be supported, but exactly how those goals would be achieved was left to the private sector. It was the investors, through a bond-issuing organization, who ultimately endorsed the allocation of investment proceeds — how much would be invested in job training, drug rehabilitation and other interventions.

If the Peterborough plan eventually shrinks recidivism rates by 7.5 percent or more, the government will repay the investors' capital and share the taxpayers' savings with them, delivering up to a 13 percent return. If the target isn't hit, the investment will have failed and the government will owe the investors nothing.

Illinois' SIB effort was spearheaded by the state's Task Force on Social Innovation, Entrepreneurship and Enterprise — the governor's think tank on social issues, which I am privileged to chair — with support from Harvard University's John F. Kennedy School of Government, the Rockefeller Foundation and the Aurora-based Dunham Fund. A request for information issued by the Office of Management and Budget on May 13 yielded responses from service providers eager not only to reduce recidivism here but also to create jobs, revitalize communities, improve public health outcomes, curb youth violence, cut high school dropout rates and alleviate poverty.

Now the governor has issued a request for proposals intended to spur better outcomes for Illinois' most at-risk youth — by increasing placement stability and reducing re-arrests for youth in the state's Department of Children and Family Services, and by improving educational achievement and living-wage employment opportunities justice-involved youth most likely to re-offend upon returning to their communities.

Kudos to Mr. Quinn for bringing SIBs to Illinois. May they soon start delivering on their promise.

- See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf
The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpu

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