Investing in the New “B” Corporations: How to Make Money AND Make a Difference

 

 

JRW-WW.jpgMany people today find themselves seeking a deeper level of fulfillment in their lives. As an investor, one way is to consider allocating your capital to maximize not just your financial returns, but your impact on the world. Such investing is becoming easier thanks to a new kind of corporation.

 

Nineteen states (and counting) have enacted legislation creating benefit or “B” corporations. Despite a bill stalling in the Texas legislature this past spring, it looks to be a wave of the future. B corporations already include famous brand names such as Patagonia (clothing) and Ben and Jerry’s (ice cream).

 

What makes a B corporation different?

 

Although laws vary by state, in general a B corporation has some particular non-financial goal(s) as part of its charter. It might be improving the environment, or raising the wages of workers in poor countries. Management must consider such goals in addition to the goal of maximizing shareholder value. The company must also regularly report on progress in achieving its goals. In addition, B corporations are usually required to make decisions by considering the best interests of a variety of “stakeholders” (employees, the surrounding community, etc.), rather than just shareholders.

 

Before deciding that investments structured as B corporations are right for your portfolio, you should know that they bring some unique risks and challenges:

 

  • B corporation laws are relatively new, not entirely standardized across states and have not been rigorously tested and refined in court cases.

 

  • Unlike financial profit, a B corporation’s goal(s) may not be easy to quantify or measure progress on.

 

  • The goals of a B corporation may sometimes conflict. For example, a goal of raising employee wages might conflict with protecting shareholder wealth.

 

Despite such challenges, B corporations are on the rise. At its heart, the B corporation designation is a way of providing more information to investors. Think of it as a tool that can put you in control, ensuring that companies you supply with capital are guided by values you share. As with any type of investment, we recommend diversification. B corporations can make great additions to your portfolio, but don’t make it a requirement to gain entry.

 

To learn more about B corporations, you might want to take a look at the sites we’ve linked to below. As always, PARTNERSINWEALTH is ready to be your unbiased sounding board on this topic, or on any other financial matters you wish to discuss. For additional information, helpful guidance or professional assistance, please contact Jim Waters, CFP®, at PARTNERSINWEALTH , 713.964.4028 or jrw@partnersinwealth.com.

 

For more on benefit (B) corporations, visit:

http://benefitcorp.net/ (an information clearinghouse)

http://www.bcorporation.net/ (the Internet home of B Lab)