Graham Sinclair's blogshttp://www.justmeans.com/editorials/sustainable-finance-and-responsible-investment/241.htmlFri, 25 May 2012 00:17:32 GMThttp://www.justmeans.com en hourly 1http://www.justmeans.com/Good-News-in-Social-Investment/3497.htmlWed, 28 Oct 2009 07:04:26 GMTGraham Sinclair Directing capital toward meeting social goals above financial goals is, like hiking up Table Mountain, not a stroll in the park [no, the cableway was not open!]. You have a good 1.5-2 hours up a steep "stairclimber" of rocks and boulders to talk, think and admire the mighty cliffs as you wind your way up the Platteklip Gorge from Tafelberg Road. So it was this past Saturday on a perfect blue sky winter's day in the Cape of Storms that I was hiking behind a local entrepreneur talking about how to Read Full Article ]]> Directing capital toward meeting social goals above financial goals is, like hiking up Table Mountain, not a stroll in the park [no, the cableway was not open!]. You have a good 1.5-2 hours up a steep "stairclimber" of rocks and boulders to talk, think and admire the mighty cliffs as you wind your way up the Platteklip Gorge from Tafelberg Road. So it was this past Saturday on a perfect blue sky winter's day in the Cape of Storms that I was hiking behind a local entrepreneur talking about how to build economies one small, medium, micro enterprise [SMME] at a time. Especially where the needs of society may be great and not met by those with purely cash profit motives. A strong movement currently in directing capital to meet social needs is in tapping into the entrepreneur, in the form of the social entrepreneur, similar to the work of Ashoka and the Skoll Foundation prize winners, to name a few. Sustainable finance is able channeling capital to good work in building and rebuilding sustainable livelihoods.Some good news for social investment has come of late from the UK government. Earlier in July it released the start of a process to build a new bank where social benefits rank higher than cash profits; the "consultation" will take 12 weeks and had been announced back in April in the UK Chancellor's [finance minister] budget. Organizations like the UK Cooperatives, itself a respected generator of enterprise and funding, have welcomed the Whitehall announcement of the consultation on the Social investment Wholesale Bank. As the release stated:...[A]ccess to appropriate funding and finance is often the single biggest concern facing organisations driven by social or environmental purpose. A Social Investment Wholesale Bank could help enable third sector organisations to access the finance they need to grow and become more sustainable...More broadly, the Bank could help increase investment in society, the environment and the economy at the same time, delivering against a 'triple bottom line' of more effective interaction between greater economic growth, social cohesion and sustainable development.I am most interested to see what metrics are deployed to measure social return, and how the "triple bottom line" will be assessed, and audited. The ClearlySo team in the UK reported on the launch, and see some of Rodney Schwarz's comment at Will The Government Ever Listen? This is challenging stuff attempted in different ways by many financing and investing institutions, including the IFC with its standards for ESG as well as seed capital [see note in Central Asia for the controversial Baku-Tbilisi-Ceyhan (BTC) pipeline in 2003, note on first Paua New Guinea investment in 2006]. See the solid library of IFC materials on ESG integration in investment. Where capital is deployed with primarily a social return expected, less a financial return if at all, practitioners in Africa tend to describe it as social investment, and where it is funded by the private sector, often termed "corporate social investment". It is closely tied to CSR and to what in North America is described as "corporate philanthropy". See examples of companies framing their social investment such as BMW SA, Anglo American, Coca Cola and De Beers in Canada. As I may often offer as reference in framing the view from emerging and frontier markets to my MBA seminars on sustainability in investment strategy, any company doing business in such markets whether in Chile, Botswana or Indonesia is probably filling some public sector need because it may well not be provided by the local or national government. Social investment funds range from the global like Acumen Fund [see also the Acumen Fund blog] to the local, like the Heart Venture Fund or Tembeka Social Investment Fund in South Africa.In South Africa this month we marked a second roll-out of the SA Social Investment Exchange, SASIX. Local organization Greater Good leads the initiative. [Another partner back in 2006 was Fidentia, a financial services firm subsequently shutdown for fraud, ouch!]. Globally the ClearlySo.com online marketplace also seeks to match capital with social entrepreneurs. The SASIX social exchange was first mooted in 2006 with a back-end technology in partnership with the Johannesburg Stock Exchange, and following the model from similar southern hemisphere emerging markets major, Brazil, where BOVESPA [the Brazilian stock exchange based in mega-city Sao Paolo with over 15 million inhabitants] launched BVS&A - Environmental and Social Investment Exchange in May 2007. See http://www.bovespasocial.org.br/English. Similar concepts have been in development around the world for some time, including GEXSI in Germany and variations of the concept in the UK, with mixed success. A mate in Iberia tells me a Social Stock Exchange is now being setup with Euronext in Lisbon. Earlier this year in Bellagio, Italy some plotting for a global social investment exchange was mapped out at Maximizing Efficiencies In The Social Capital Market 3-6 February 2009 Rockerfeller Conference Centre, Bellagio, Italy funded by Rockefeller Foundation and discussed at Philanthropy 2173. See also Social Capital Index launched at the SoCap 2008 conference, and look forward to SoCap 2009 in SFO early September 2009 posted on our JustMeans events page at:http://www.justmeans.com/listeventnew. So today on SASIX you may find "investment opportunities" in a math and science centre, artisans, rehabilitating a community-based blueberry orchard and mother-tongue storybooks. A great way to understand the opportunity and impact in social investing is to read The Blue Sweater by Acumen Fund's Jacqueline Novogratz, see the Facebook page. Also check out video of her at the TED conference on investing to end poverty. Read, watch, and try not be inspired to do good work through sustainable finance; pretty much like the hike and talk up Table Mountain.]]>http://www.justmeans.com/More-development--Less-CO2--Missing-Answers/4137.htmlTue, 13 Oct 2009 10:51:49 GMTGraham Sinclair The Shell Dialogues debate in Cape Town was a useful touchpoint on the debate around sustainable finance and alternative energies. Following up on yesterday's post, the SHELL logo sat uncomfortably in the middle of the background, between the Mail & Guardian logo and the podium with Robben Island Museum logo. I wonder where the government minister was to have sat [government was missing due to transport issues?]. Shell's representative presented a structured pitch on policy options, Dr Wolfgang Read Full Article ]]> The Shell Dialogues debate in Cape Town was a useful touchpoint on the debate around sustainable finance and alternative energies. Following up on yesterday's post, the SHELL logo sat uncomfortably in the middle of the background, between the Mail & Guardian logo and the podium with Robben Island Museum logo. I wonder where the government minister was to have sat [government was missing due to transport issues?]. Shell's representative presented a structured pitch on policy options, Dr Wolfgang Heidung, who was in SA for a carbon capture & storage conference. With his German accent, he epitomized the scientific/industrial position, and he preferred to think of the UNFCCC in Copenhagen as an auction of the right to pollute globally [see post on the UN negotiations simulation]. Prof Kevin Bennett offered the view that the challenge comes from urbanization more than the people of many emerging and frontier markets suddenly generating negative through developed world power infrastructure. He referenced the wood economies, many societies are still in the wood stage, while developed countries have already moved to more sophisticated stages. Controversially Prof Bennett introduced the thoughts of skeptics [perhaps heretics] on carbon emissions. He argued perhaps forcefully for a distributed power system with smaller provision with distributed power and use of wind and solar technologies. Reality check is SASOL's Secunda plant is the world's single largest carbon dioxide emitter on the planet [and causing protests outside the SASOL Rosebank head office]. Emerging markets make up around 6% of global emissions, Africa around 2.5% and South Africa the largest part of it. The comments kept tripping over the definitions of developed, developing and other markets. The decisions around size of economies, and how countries have negotiating power around climate change. kept coming up as an issue needing clarity. News for carbon traders from the podium was that we have bets both ways on what will or will not happen in Copenhagen: a market in outcomes, sounds like the marketplace to me?! See Justmeans.com post on carbon scenrios http://www.justmeans.com/Sending-Money-Managers-with-Laptops-Copenhagen/3233.html.I enjoyed Mr Raubenheimer's approach to being "risk averse". Maybe that will be a more useful approach to the conversation on investment in new technologies, partly because most humans are mostly risk averse anyways - check out any defined contribution retirement fund investment choice distribution: most retirement fund members adopt a default or risk averse approach. As the debate unfolded, the merits of carbon trading came up. The proposition for carbon trading is about allegedly internalizing externalized costs. Marketplace.org recently covered the uneasiness about carbon trading [Is Europe's Carbon Trading Going Up in Smoke?], trading which the UNFCCC Copenhagen meeting may ramp up by simplifying and globalizing rules of trading carbon credits. As an investment guy and ESG architect, I was mostly interested in hearing the live audio clips of traders in action. The snippet also covered the negative reaction of environmentalists who see carbon trading as ultimate smoke and mirrors. And as all conversations about new investment in power generations inevitably do, the conversation came to nuclear power. SA has a small bet around pebble bed modular reactor [PBMR] which has burned around ZAR 12,5 billion with no deployable technology. A small debate-within-a-debate erupted about the real costs of coal, nuclear and solar - need someone to read their Platts. I posed the first question, on how to join the dots between those in the audience - they are investors in some way, whether through their pension funds or unit trust funds [collective investment vehicles] - drew a muted response. Mr Worthington marched a little down the road, but did not pull it through to some basics like investment say in the WWF International mutual fund, the Living Planet Fund. I will have to bring that up with the WWF LPF team when next in Switzerland. Mr Worthington did press on trying to answer the question of polluter-pays principle, by pointing to cost increases, including carbon taxes. The debate closed leaving me with some better sense of the dialogue around policy options, and hoping that the "media of distractions" in South Africa could maintain a serious thread to the discussion. I was reminded why Judge Dennis Davis is respected for his candour [see his reaction to the JSC hearings]. Together with the comments from the audience about the humanity in Khayelitsha, a poor shanty town near the airport, the evening at the M&G Critical Thinking Forum/Shell Dialogues pretty much summed up where we are with sustainable finance: talking out loud.]]>http://www.justmeans.com/More-Development--Less-CO2--Some-Sustainable-Investment/4131.htmlThu, 01 Oct 2009 01:41:38 GMTGraham Sinclair ...And we're back. After a hiatus we are back tonight with a headful of talking heads. Investment in adaptation and mitigation in emerging markets, especially Africa, is a huge ask in the current economic context. Hard to find sustainable investment in 2009, though not impossible. Your newspapers like ours have probably been covering the posture by India that they will make no emissions-related limits at the UNFCCC Copenhagen meeting. Recently South Africa adopted a similar position. Mail & Guar Read Full Article ]]> ...And we're back. After a hiatus we are back tonight with a headful of talking heads. Investment in adaptation and mitigation in emerging markets, especially Africa, is a huge ask in the current economic context. Hard to find sustainable investment in 2009, though not impossible. Your newspapers like ours have probably been covering the posture by India that they will make no emissions-related limits at the UNFCCC Copenhagen meeting. Recently South Africa adopted a similar position. Mail & Guardian, an independent and respected weekly paper in southern Africa, hosted a third of their Shell Global Energy Dialogues within the M&G Critical Thinking Forum. Tonight we had 4 covering carbon emissions management. The purpose pointed toward policy options for emerging markets. One of the most respected legal thinkers in South Africa, Judge Dennis Davis, moderated the event - he has a good balance of wit, intellect and good spirit. He is telegenic for nerds. Zapiro's G20 climate change cartoon [above] had me chuckling this week in M&G [see zapiro.com]. The title, More Energy, Less CO2, was immediately reasserted to "More Development, Less CO2" by the first speaker, Stefan Raubenheimer from SouthSouthNorth. Long term mitigation plans have 2050 as a magic timeline. For South Africa, this implies no coal in 2050. But like Australia, US, China, coal is the regional energy mainstay. One of my favourite statistics lately is the replacement cost of the energy sector in SA, the largest economy in Africa, around ZAR 1 trillion [USD 120bn]. Not a small number. Second speaker Richard Worthington of WWF presented how the UNFCCC 2007 fourth report understates the scenario and the reality in sub-Saharan Africa. Climate change is happening faster than scenarios predicted. Faster loss of sea ice. Increase of sea level rise. That is always going to have the audience sitting at a busy port feeling a little uncomfortable.Richard's colourful comments helped the debate steer away from boring! Mr Worthington spoke of ecologicial footprint. He touched on ESKOM's lack of coal power plant provision being linked more to water than anything else. He controversially quoted from some environmental impact assessment report by consultants to a new power plant in the Waterberg by quoting "the exploration of alternative energy is not realistic". Mr Worthington referenced the situation of investors in a board room thinking beyond a four year horizon and toward returns to their children's generation. Pity he did not take further the institutional investment thinking. Nor did he tie together what investment horizon should better be considered for weighing investment decisions that cover environmental, social and governance factors. But it was insightful that the local affiliate of an international environmental NGO referenced sustainable investment. Prof Davis sharpened the debate by suggesting that developing countries should not even embrace climate issues, with development and job creation being much more important. Stiglitz's arguments about GDP reared their heads [see Dawn's post] This reflects very much the survey of sustainable investment in 2007: job creation trumps saving penguins. In an upcoming project we at SinCo are working on, together with asset consulting and analytics firm, RisCura, and an international financing organization, we will be surveying attitudes and actions around sustainable investment in sub-Saharan African in Q4 2009 and Q1 2010. It will be interesting to see what the reality is on the ground in this unsettled time in history and in changing the conceptualization of sustainable investment. More on this debate soon.]]>http://www.justmeans.com/So-What-Do-We-Want-of-Banks/3242.htmlMon, 24 Aug 2009 14:38:06 GMTGraham Sinclair So what do we want of banks? A fair question and more sharply pointed in the post-2008 financial meltdown. The skeletons of some banks that fell over are still roaming halls and corridors in major cities, and probably still rumbling through your life too if you're in a major financial center like Singapore, New York or London. You may still find some Lehman Bros goodies on Ebay [Vineyard Vines silk ties going at USD 32.95 right now!] and the bankruptcy administrators did find USD 11 bn! The Lloy Read Full Article ]]> So what do we want of banks? A fair question and more sharply pointed in the post-2008 financial meltdown. The skeletons of some banks that fell over are still roaming halls and corridors in major cities, and probably still rumbling through your life too if you're in a major financial center like Singapore, New York or London. You may still find some Lehman Bros goodies on Ebay [Vineyard Vines silk ties going at USD 32.95 right now!] and the bankruptcy administrators did find USD 11 bn! The Lloyds/HBOS/Insight Investment/SWIP saga drags along in the City of London, while the boxing inside and outside the Bank of America/Merrill Lynch merger will be a great spectator sport for a while yet [can you believe they messed with THE iconic bull logo?] as WSJ [Old Merrill Quickly Disappears Inside BOA] and The Atlantic covered. Tuesday's profits announcement from Wall St did not help the mood either [Bloomberg: Goldman Sachs Posts Record Results, Beating Estimates]. Things are a little prickly now that Goldman Sachs is piling on the profits, profits which some argue are from the crisis it helped create [see Businesssweek, WashingtonPost, Marketplace, Telegraph, WSJ], although investment types at SeekingAlpha like the good news. And the bump in pay packages is going to attract whining louder than Lions supporters on the 2009 Springbok tour. The question was posed by moderator Tom Cummings facilitating one of the breakout conversations at the Tallberg Forum 2009 in Sweden 24-28 June 2009. My thinking heads to the large end [making their investment or lending decision in a way that directly integrates ESG factors in investment decisions] and the small end [offering ramps for the unbanked to enter the financial system].At the financial sector "reality check" seminar at the Tallberg Forum on Fri 26 June the question was debated - so what do we want of banks? - and I liked the first reply by the discussant (that role title always makes me smile). The discussant prefaced comments by admitting he had been a sell-side analyst covering the financial services sector in his past. Chatham House rules make me unable to attribute comments nor positions, but we had a fair crop of current and past financial services thinkers, workers and leaders, including fromTriodos, HSBC and ABN Amro. The frank comment from the discussant was not "more funding to eco-friendly ventures" nor "lower fees for unbanked communities' nor "low-income housing loans" or such. No, it was short and sharp, and indisputable: "I want my money back!" Can you argue with that from a bank? Pretty simple, but pretty fundamental. We want a bank to be solid - reflecting the huge architectural homes they had back in the 19th century with columns and vaults and steps - and to know the cash will be there when we need, give or take the odd Italian Job [did 1969 Michael Caine make polonecks cool again?].Tom managed to guide the conversation long enough to unlock other core aspirations for what we want from banks, namely "meet needs at reasonable price" and "values that match my values" [see video of Tom looking all Harrison Ford does Al Gore in Greenland]. But that first reason for what we want from banks does stick out: core to strategy. The comment is also a reminder about the context: the for-profit lender bank has a role to play, and fundamentally it is about keeping its client's money safe until called for. This is some 9 years after the paper in Fall 1998 in defence of the need for commercial banks from a University of Chicago academic, Prof. Rajan, at the National Bureau for Economic Research [NBER] in the US.Peter Blom, of legendary Dutch banking group Tridodos has reasons to smile, and not just for having a shop that won the 2009 FT Sustainable Banker award in LDN (see post Geldof Lectures Bankers) in a boost to the UK operation. [Sidenote: the FT failed to cover the story of the winners in any of their editions, or did I miss something? And the conference website is not really world class, no?]. After the recent meldown, Triodos was swarmed by depositor clients seeking safe haven for their money. Triodos describe how they deploy your capital. In a moment, in a disaster, the different and transparent and understandable business model over the history of Triodos had been building for years suddenly proved its worth. Apart from the Triodos sustainability pitch, depositors were delighted to just find a bank they could trust. At its peek, Triodos were collecting 300 clients per day. That is something to grow a business on, although still yet a niche in The Netherlands, UK, Belgium, Spain and Germany [not Sweden?] where it has operating licences.The Tallberg conversation spoke of banks heading back to core business, addressing responsibility, transparency and speculation issues up front. What shall we do with the banks [especially now we own some, right?]. Some delegates spoke of wanting to have banks being simpler, to make sure savings are really safe. Regulation to help make this happen is a given. The super-regulation across jurisdictions is still being hammered out, and no doubt too much regulation will be with us before things settle back. But do enjoy reading the paper "Why Do We Regulate Banks" from the right-wing American Enterprise Institute from 2005 [wonder what Peter is writing now?]. Or the 1991 Time article "Do We Really Need Banks Anymore?" which predates the 1990s rush to unpack the wise but outdated 1930s banking legislation in the US. What a wonderfully prescient push in the wrong direction. The impact of "fear and greed" was still apparent at Tallberg in the edgy comments about bankers (but some of my best friends...!). Not every bank is a Triodos. What do we want of banks? Bottom line for banks, whether at the windy end of downtown Manahattan at 85 Broad St or on your local neighbourhood block: we want our money back, on any given day. Better than that, get that money multiplying into investment and lending that understands the planet has boundaries, that directly integrates ESG factors in investment decisions.]]>http://www.justmeans.com/SABMiller-Plays-CSI--Investor/3728.htmlMon, 17 Aug 2009 16:02:35 GMTGraham Sinclair Activity by the investor relations (IR) team at SABMiller [LON: SAB, JNB: SAB] is causing a bit of a stir in the [small] world of institutional investment. It seems the SABMiller IR team are doing a bit of CSI - "crime scene investigation". Asset management is small in the same way that FB makes the world small, not quite the club that many people think it is, especially since the computer algorithms crashed the party from late 1990s. But there is a mix of rules, regulations and norms that shape Read Full Article ]]> Activity by the investor relations (IR) team at SABMiller [LON: SAB, JNB: SAB] is causing a bit of a stir in the [small] world of institutional investment. It seems the SABMiller IR team are doing a bit of CSI - "crime scene investigation". Asset management is small in the same way that FB makes the world small, not quite the club that many people think it is, especially since the computer algorithms crashed the party from late 1990s. But there is a mix of rules, regulations and norms that shape how the players play the game. Active shareholders are a feature of market capitalism and we encourage shareholders to be actively engaged in the companies they are part-owners of. Share votes usually happen in an anonymous fashion, or at least with some deference to leaving who does what a matter for mystery, not media, unless the shareholders choose to tout the way they will vote. So poking around to identify who voted for what is considered a little outside the norm. SA and UK papers on Thursday 13 August were reporting JPMorganCazenove, corporate advisers to SABMiller are trolling through records to identify the naysayers. I like the quote that it is not 'illegal" but a sign of "a very proactive investor relations team" [see today's Business Report [BR] for Ann Crotty SABMiller witch-hunt causes stir among investors]. In fairness, the inquiry even led to a nod to the Principles for Responsible Investment [PRI] and work by Element Investment Management [Fraters re-branded, I'm still ambivalent on the new name] in the Opinion pages of BR, reflecting on the fact that anonymity is not the better option, and shareowners should be know to companies. Outsize paypackets for executives is an overarching theme of corporate governance around the world, and something flagged by sustainable finance practitioners as unhinging the creative tension between people who invest money and people who manage the business that deploys that capital. In a recession, any big paypackets are going to raise flags. The 2008 global financial meltdown helped throw a floodlight on remuneration practices, from Wall St to Main St to your neighbour: who earns what and to what benefit of society? If risk/reward mechanisms are tilted wrongly, then employees will gamble and if they fail, just walk away. And if the firm is "too big to fail" then taxpayers end up bailing out the firm so it does not run the hole political economy toxic. Nice! The situation for the respected institution making and marketing Super Bowl commercials for Miller High Life was pretty obvious. Throw in the fact that SABMiller grew up "from the dust" of an African background where the salaries based on London scales may buy you a small Karoo town or three, and the salaries at the least were always going to bring on the army ants. The close-knit nature of the Boards tied to SABmiller execs had also got the media excited. SA papers as much as UK papers were triggered by remuneration issues. In another classic corporate tactic, where the company has the ability to set the terms of the AGM, companies will management the annual meeting to the benefit of the executive and Board, less to the minority or marginal investor. If SABMiller wanted to be engaging to its [large] SA shareholder base, and fair enough SABMiller choose to host the AGM in London, why not hook up a video or telcon link, something over the web? Heck, SABMiller spend millions of rands and dollars on televised sports events, they could have just tagged it onto one of their month's major sponsored TV-events, yes? Maybe too much to expect when the SABMiller FB profile only has 125 fans?Owning shares in a company is not like having votes in politics: the majority votes do not win. There is no democracy - all votes are indicative: management can completely disregard a 99% opposition vote. What prevents this behaviour is the signal such opposition sends. Management may reject the opposition vote and win the battle, but pissing off your shareholders will lose you the war. Annual voting is one of the major methods for keeping shareholders of companies involved and included in the activities by the executive and the management. In SA we speak of annual general meetings [AGM] while in the US the preferred term is annual meetings. Strides in sustainable finance and responsible investment have been made partly be active capitalists, people and institutions owning a stake in companies and being vocal about directions they consider the ways companies should go, and which not to go in. It is one of the awkward trade-offs in capitalism: sure you can have people add their capital to your company, but then they're going to want to have a voice. Today the largest money manager in Africa, the Public Investment Corporation [PIC] managing around USD 90bn in assets for the GEPF in South Africa, took up the effort to build a shareholder code to go alongside the forthcoming guidelines for good corporate governance in terms of King III, see PIC vows it will not let code for institutions die. The proxy form is a powerful tool: whatever voting rights a share has may be given over to another shareholder to vote, so-called proxies. The proxy voting season is always eagerly anticipated, especially in it busiest "stadiums" being the annual meeting sof US corporations. The 2009 proxy season seemed to focus on issues of voting power around compensation and risk management. Voters may be anonymous, so why is SABMiller filtering through votes to find out who voted which way? Maybe the SABMiller team are feeling a little beaten up after having their webpage bounced about a bit in July, see critique of SABMiller's Investor Relations page. Surely easier to just call for opinions from shareholders in a structured way, get them talking to management? It is not hard, takes some skill and thick skin for some of the insults that (may) fly, but really just stakeholder engagement 101 - no doubt the IR team should be able to do this with their eyes closed, no? If SABMiller normally had 98%+ of votes in support of Board appointments, and now just 85% came through, well that's their free and frank focus group acting as dashboard, registering that all is not well with people who own a chunk of the firm. Good corporate governance says all shareholders have a right to vote, and more transparency makes it clear the firm, especially the large firm, is being run well and well run. Some words to this effect are probably on the SABMiller corporate governance webpage. A larger question for SABMiller is not whether these 15% of votes may be ignored and who voted them in 2009. The bigger question is what signal and multiplier effect will ignoring the issues flagged will have on ongoing capital raising efforts for future corporate activity. If the issues are not diplomatically and deftly handled by leadership, how big will the "no" vote be in a year's time? For the postscript, SABMiller posted a "For The Record" in BR the next day...leaves me thinking the IR team and the PR team need to hang out a bit, while the CG team heads for a session with the C-level suite to do some good work.]]>http://www.justmeans.com/SoCap09--RISE-and-Fossil-Fuel/3682.htmlThu, 13 Aug 2009 10:41:20 GMTGraham Sinclair How to choose where to put money: creating software applications, launching community small, medium, micro enterprise [SMME] hubs of barbers, gyms and internet cafes, and retailing food in lowest income communities? Conversations on social entrepreneurs have been keeping us busy these past weeks. New and existing small enterprises needing capital, and how to get it to them, in Bophelong Gauteng in South Africa or Sao Paolo, Brazil, is the challenge. SoCap09 is just weeks away and there is much g Read Full Article ]]> How to choose where to put money: creating software applications, launching community small, medium, micro enterprise [SMME] hubs of barbers, gyms and internet cafes, and retailing food in lowest income communities? Conversations on social entrepreneurs have been keeping us busy these past weeks. New and existing small enterprises needing capital, and how to get it to them, in Bophelong Gauteng in South Africa or Sao Paolo, Brazil, is the challenge. SoCap09 is just weeks away and there is much good ground to cover to justify the thousands of miles and 2 day journey to San Francisco. This will be our first trip to SoCap for its second iteration - tight schedules meant we had to deploy interns [from Kenan-Flagler B-school at UNC-Chapel Hill] to report back on the inaugural SoCap08 last year. Reports were good, and the content for SoCap09 good enough to seeing what Kevin and Amy have been conjuring up. From the chatter online it seems a bunch of the JustMeans community will be at SoCap and so we to hope to flip from virtual to physical relationships. While our Sinclair + Company advisory work has us stretched and probably not blogging live, impressions and material from the days will filter through the investment mind and onto the pages here in the Sustainable Finance editorial and SRI-Extra in future postings. What are you interested in understanding more from the investor's perspective that we should be mindful of? Skimming the SoCap09 schedule to flag sessions that fit to the challenges of making sustainable finance and responsible investment happen in emerging markets, especially Africa, offers a fair amount. Check out the SoCap09 blog too. With the agenda set, it looks more like the sessions should offer material on metrics, impact and philanthropy capital than the role of public or private capital. Generation Investment Management will be there, perhaps covering the HBS case that came out in May this year. In particular we hope to learn from the West coast experience on deploying capital to meet social and environmental needs, and trying to keep core by measuring the impact robustly. One person I have been waiting to spend time in conversation with is Sara Olsen of SVT. Back in 2006 we connected and she shared with me her short book covering Social Return on Investment (SROI). This was after I had spent some time with fellow Net Impacter from Boston and founder member with us at NetImpactBoston, Farron Levy. Farron developed a widget also used in metrics called True Impact, and has been featured in Boston Journal for the consulting and software solution it offers. Go you good thing, go! Exploring metrics and impact may help with tracking the positive impacts from projects like those at African Dream Trust, especially the economic development theme. Another piece of the puzzle that SoCap may help fill is where social exchanges are now, and what we may do to push them on [Social Stock Exchanges Around the World breakout session2 day 2 1:30-2:30pm Wed 2 Sept, see PDF], see JustMeans post Good News in Social Investment 27 July 2009. We head over the Atlantic after having spent time swapping notes with Greater Good and SASIX here in Africa about what is, and is not working. We should have some value to add to the conversations. At least the 20+7 hour flights offer some reading time, depending on the knee torture by old model Delta aeroplanes flying from S.Africa. The reading list includes catching up on what Cathy Clark has been up to since 2004 with her RISE (Research Initiative on Social Enterprise) program at Columbia University that launched in 2002. Her 2003 paper on the Double Bottom Line Private Equity Landscape 2002-2003 with Josie Taylor Gaillard seems like such a long time ago, but the work she did helped add some rigour to the emerging asset class and the integrated asset class thinking. For many of us, it helped open the intellectual and experiential door to this "other' category of money management where environmental and social factors were explicitly included. The newness of the work was shedding some light on early stage social and private equity investing in the US, administered via web in 2002 and 2003, surveying 1,254 venture capital (VC) funds and others and finding USD 2.6 bn in "double bottom line" PE market, a large number at the time for the small sample. With the mix of institutions and people in SFO for three days in 2009, that number will probably be in one lecture hall. Finally, in keeping with the life/work balance, entrepreneurship, biomimicry [see OnePlanet this week] and long-term investing, a mini-highlight of the SFO onsite will be seeking a taste of the million-years old beer, courtesy of a great WIRED story. Microbreweries are one of the beautiful fabrics of the US community life, like Harpoon in VT and MA which builds brand through a 110 mile cycle race Point-to-Point from Boston MA to Windsor VT every August. Fossil Fuel is brewed at a brewery is 70mi from SFO, Hackett's brewpub in Guerneville, California, so a cycle is do-able if we can secure some fine Cervelo rides or such and dream of the Tour of California. See the full Wired article of a scientist refugee from Cuba, biotechnology, business failure, and serendipitous ski slope conversations leading a bacterium from the age of dinosaurs 45 million years ago to crack out of amber and be cultured to brew some very, very funky beer. Reality is new ventures filled with good ideas grow and die; nine out of ten new small businesses fail. Making investment decisions for sustainable finance and responsible investment is even harder. Kudos to Fossil Fuel for trying, and bootstrapping with one's own cash to start a venture, that's the market economy in action. So the smallest consumption decision we make may help unlock the bigger investment capital down the line. For now, buying a few pints of local brew; that'll help a few social entrepreneurs in the region do more good work. ]]>http://www.justmeans.com/Investment-Policy-Statements-and-Sustainability/3513.htmlMon, 27 Jul 2009 15:46:36 GMTGraham Sinclair The investment policy statement [IPS] is a critical document that establishes how an investment firm, or pension fund, or organization goes about making decisions on if and how to invest capital. The rules of investment allow a degree of discretion for firms building investment products or pension fund trustees choosing between investment sfor their pension fund members. The IPS creates some rules of the game that covers the decision-makers, and offers guidance as decision-makers come and go or Read Full Article ]]> The investment policy statement [IPS] is a critical document that establishes how an investment firm, or pension fund, or organization goes about making decisions on if and how to invest capital. The rules of investment allow a degree of discretion for firms building investment products or pension fund trustees choosing between investment sfor their pension fund members. The IPS creates some rules of the game that covers the decision-makers, and offers guidance as decision-makers come and go or investment managers execute investment mandates. It is a framework. It has some legal standing and will be the basis for any checking back to see if things happen probably. Which means it is a critical place to look for where and how environmental, social and corporate governance factors are integrated, so-called ESG factors that cover environmental and social sustainability into the investment approach. If one is seeking to grow sustainable finance, then more and more IPS need to explicitly speak to the issues of sustainability. See worked examples of IPS from Investopaedia and Morningstar.com, for example:This statement provides the general investment goals and objectives of a client and describes the strategies that the manager should employ to meet these objectives. Specific information on matters such as asset allocation, risk tolerance, and liquidity requirements would also be included in an IPS.This being the 21st century, never be surprised when social media checks facts against internet-available counter-facts and/or draws negative inferences - see influential blog Daily Kos roughing up Generation Investment Management co-founder Al Gore on Sunday [Daily Kos Blood, Gore and Hypocrisy of Capitalist Pigs]. Some basics of creating the guidelines for socially responsible investment (SRI) include deciding if there are any companies that the investment firm will or will not invest in. Consilium cover some basics of making these decisions, A Social, Moral or Environmentally Responsible Agenda. But remember that asset management is a business. So no surprise for example that sustainability money manager, Australian Ethical this week announced the close of its fund, World Trust, Australian Ethical Closes World Trust. With just AusD 6m it was just not large enough to run efficiently. Importantly for our discussion, the firm covers its investment approach with an Ethical Charter which must be read together with its Investment Approach. At the other end of the spectrum, in the UK a respected sustainability manager has just launched a new fund [The Independent reported Sunday in Co-op launches a new fund to invest in global change]. In media coverage, Co-op explained:Zack Hocking, the head of investments at Co-operative Investments, says: "The world is changing and it is throwing up highly attractive opportunities for long-term investors. The need to tackle ageing populations, climate change and global power shortage will see significant investment in those areas in coming years." The new Sustainable Diversified Trust fund will be an actively managed multi-asset fund that aims to offer long-term capital growth. It will hold a mix of equities, bonds, cash and property, but will not invest in firms involved in armaments, tobacco, mining or animal testing for cosmetic purposes.The Co-operative Investments new unit trust [mutual fund] that will target opportunities emerging from a changing world and a shift in attitudes towards sustainable business practices. As always with marketing and sales, the marketing pitch at Co-op suggests "smart investors who want to grow their money while reducing risk"[!]. Probably more interesting to readers of JustMeans is the Sustainable Leaders Trust which invests in "about 50 small, medium and large companies, mainly based in the UK, that contribute to the environment, human welfare and sustainability". Which brings us back to the policies of investment majors like the IFC (Investment Finance Corporation), a member of the World Bank group. The IFC's policy on Social and Environmental Sustainability defines "IFC's responsibility for supporting project performance in partnership with clients". The IFC policy guidelines are useful because they have been developed over some years, and tested against challenging situations in emerging and frontier markets. The IFC Sustainability Policy General EHS Guidelines contain information on cross-cutting environmental, health, and safety issues potentially applicable to all industry sectors, "(i)t is designed and should be used together with the relevant industry sector guideline(s)". Similar but different to other sustainability funds, the IFC has its own exclusions policy, which covers what it will not invest in.1. The IFC Exclusion List defines the types of projects that IFC does not finance.2. IFC does not finance the following projects:a. Production or trade in any product or activity deemed illegal under host country laws or regulations or international conventions and agreements, or subject to international bans, such as pharmaceuticals, pesticides/herbicides, ozone depleting substances, PCB's, wildlife or products regulated under CITES.b. Production or trade in weapons and munitions.1c. Production or trade in alcoholic beverages (excluding beer and wine).1d. Production or trade in tobacco.1e. Gambling, casinos and equivalent enterprises.1f. Production or trade in radioactive materials. This does not apply to the purchase of medical equipment, quality control (measurement) equipment and any equipment where IFC considers the radioactive source to be trivial and/or adequately shielded.g. Production or trade in unbonded asbestos fibers. This does not apply to purchase and use of bonded asbestos cement sheeting where the asbestos content is less than 20%.h. Drift net fishing in the marine environment using nets in excess of 2.5 km. in length.i. A reasonableness test will be applied when the activities of the project company would have a significant development impact but circumstances of the country require adjustment to the Exclusion List.All financial intermediaries (FIs), except those engaged in activities specified below*, must apply the following exclusions, in addition to IFC's Exclusion List:i. Production or activities involving harmful or exploitative forms of forced labor2/harmful child labor.3j. Commercial logging operations for use in primary tropical moist forest.k. Production or trade in wood or other forestry products other than from sustainably managed forests.l. When investing in microfinance activities, FIs will apply the following items in addition to the IFC Exclusion List:m. Production or activities involving harmful or exploitative forms of forced labor2/harmful child labor.3n. Production, trade, storage, or transport of significant volumes of hazardous chemicals, or commercial scale usage of hazardous chemicals. Hazardous chemicals include gasoline, kerosene, and other petroleum products.o. Production or activities that impinge on the lands owned, or claimed under adjudication, by Indigenous Peoples, without full documented consent of such peoples.p. Trade finance projects, given the nature of the transactions, FIs will apply the following items in addition to the IFC Exclusion List:q. Production or activities involving harmful or exploitative forms of forced labor2/harmful child labor.3Our best advice is to start small, then establish the right IPS for one's own objectives. Clealy the IFC were smart enough to realise I could only work with them if they did not discriminate aginst wine estates [!]. Yes, we did enjoy lunch at Bread & Wine in the Franschhoek Valley on Saturday at the Moreson Estate. As we see from the IFC examples there is a wide range of criteria, and existing thinking on stakeholder input, that the modern IPS may consider in integrating ESG factors. In emerging markets the IFC has surveyed for response to the 2008 Financial Meltdown. Sustainable finance is not always easy. But it is good work; and the IPS helps keeps things straight.]]>http://www.justmeans.com/Charles-Handy-and-the-Question-of-Trust-at-Tallberg-New-Leader-Program-2009/3208.htmlTue, 21 Jul 2009 03:17:01 GMTGraham Sinclair Thirtysomething. Yip, that still has a good ring to it. And while my wife keeps trying to round it up to forty, it works for a while longer. So I was relieved when invited to the Tllberg New Leader Program 22-25 June 2009 in Tallberg, Sweden and found that the foundation had switched out the name from "Young Leaders Program" to "New Leaders Program" last year. So I could still sit comfortably with my titanium flecks showing around the temples and in the stubble. Worthwhile traveling from the bot Read Full Article ]]> Thirtysomething. Yip, that still has a good ring to it. And while my wife keeps trying to round it up to forty, it works for a while longer. So I was relieved when invited to the Tllberg New Leader Program 22-25 June 2009 in Tallberg, Sweden and found that the foundation had switched out the name from "Young Leaders Program" to "New Leaders Program" last year. So I could still sit comfortably with my titanium flecks showing around the temples and in the stubble. Worthwhile traveling from the bottom of Africa to the top of Sweden to hear from management gurus like Charles Handy and think bigger thoughts on trust and sustainable finance.Young and older, from around the world, the Tallberg NLP 2009 programme has some heavyweight conceptual and personal ground to cover in a short space of time. The diversity of candidates was good, and I added some country members from Middle East, Asia and Latin America I had not met before. A global conversation. I enjoyed the conversations most of all, that is the Tallberg tradition - not speeches nor soliloquies, but conversations. Hosting by Tallberg Foundation team [Bo, Rebecca and team] and the tutors [Tom, Rita et al] was solid and offered variety and flow, in a dynamic situation. The group made a superb study in contrasts to the demands of living on one planet, and how capital makes or unmakes that to happen...A highlight for me was spending time with legendary business guru Charles Handy from Britain. A bonus meeting his lovely wife, Elizabeth Handy, herself an accomplished portrait photographer [she took the portrait for the bookcover above]. See The Economist piece from 12 June just before the forum, Wiki, some classic articles, incuding HBR articles "What's a Business For?" [2002] and "Tocqueville Revisited: The Meaning of American Prosperity" [2001], interview by Booz Allen "The Paradox of Charles Handy" [2003], and video at Forbes.com on Life Lessons. Charles's 1998 book also has one of the better titles, "The Age of Unreason", and the "The Elephant and the Flea" [2003] spoke of the working pattern for the "creative class" years before the phrase became famous. At Tallberg when we had the opportunity to interview key leaders, I stepped up to ask Mr Handy two questions, the first was about trust. His answer: so very, very hard to rebuild once it's broken. See more of his thinking on trust and reflections from Harvard's HBR Editors' blog in Q1 this year and his seminal article so relevant for our global online workstyles "Trust and the Virtual Organization" [1997]. In our JustMeans thinking, this issue of trust we will revisit many, many times in this year. Above all, in an age that chases youth, I found Charles Handy offered something which Richard Branson has sought through The Elders: using the accumulated and tested wisdom of those who have followed thoughtful and meaningful paths, and lived to tell the tale. Using the "still Life" project in developing the leadership program, which used five random objects arranged in a still life which Elizabeth then photographed to reflect a personal journey, illustrated how the Handy's experience complemented each other [see video and book of still lives, The New Philanthropists [2006]]. Reflecting for the assignment had me pondering the Van Morrison's lyrics to "Let the Slave" with extracts from William Blake's The Price of Experience". The windows into NLP 2009 colleagues was meaningful.The Tallberg NLP 2009 syllabus covered systems thinking developed out of MIT by Peter Senge and the monograph from the Tallberg Forum's "Grasping the Climate Crisis". In the larger Forum in the sauna that was the closed-flap circus tent on the village common from Thursday - Sunday, the Forum covered much ground courtesy of contributors; see video review of "What Have We Learned". Any paper that is tagged "a provocaction" works for my critical thinking processes, Charles Handy would be proud of the unreason! The Tallberg Network reflects more of the learnings, and while some of the content was philosophical and lyrical, the Forum Program itself on Thursday - Sunday had tracks covering sustainable finance and ecological ecnomics. The question of trust kept coming up, and Mr Madoff featured, along with beating up a few banks. As one delegate described, it is quite intense: most of us were wiped out by Sunday, and spacey the following week. More about that later.]]>http://www.justmeans.com/Investing-in-Water/3359.htmlTue, 21 Jul 2009 02:36:06 GMTGraham Sinclair Investing in water has been touted for a few years as the next great investable theme in sustainable finance. But "blue Gold" is not as catchy as "black gold", yes? No doubt as the population grows "up and to the right" it is obvious more people need water, which means an increase in the demand for potable water. 7 billion humans must drink. Investment website SeekingAlpha.com ["alpha" being investment-speak for outperformance, or returns] pitched the investment opportunities in "Renewable Gray Read Full Article ]]> Investing in water has been touted for a few years as the next great investable theme in sustainable finance. But "blue Gold" is not as catchy as "black gold", yes? No doubt as the population grows "up and to the right" it is obvious more people need water, which means an increase in the demand for potable water. 7 billion humans must drink. Investment website SeekingAlpha.com ["alpha" being investment-speak for outperformance, or returns] pitched the investment opportunities in "Renewable Gray Water - Sustainable Investments", also covered in California's Aquafornia. More accurately, much of the investment opportunities lies not in selling fresh drinkable water drop-for-drop, but in the pipes and pumping stations that moves water from catchment areas and man-made dams to urban or peri-urban areas where citizens or industry [light industry or agriculture] demand regular amounts of clean water for production and growing. What is "gray water"? That's the industry term for water from showers, baths, basins - not the human, animal or production waste that should be processed through sewage plants - rather water that is no longer drinkable but is not too heavily polluted that it cannot be re-deployed. See howstuffworks. It asks questions of "green building" and sustainability in built environment. Catching up in February with an architecture professor friend at the University of Cape Town and talking through what students get taught, or what developers want to fund, around more sustainable buildings begs the question: why in 2009 a full 40 years after humans land on the moon [and NASA erases the tapes!], especially in water-stressed regions like say southern Africa or Western Australia or Cyprus or south-western US, is gray water use not a mandatory requirement? Surely the drainage and plumbing systems are not that hard to adapt? Seekingalpha reports in the US just 10% of gray water is reused. Just think how much good work it took to get the clean water to a household, and that 90% is used once and then wasted. Not really a smart grid. But an opportunity for sustainable finance, and a gap for investors seeking to integrate ESG factors into investment architecture to invest in solutions.The water as investable theme has been floated in various ways, and some major shops and some small shops have sold investment strategies on it for years. Today FT reported from India that "India's Thirst Drives Water to Crisis Level". See Credit Suisse "New Technologies Keep Water Flowing" with their retail structured product in water. Sarasin Sustainable Water Fund, their paper grandly named "Elixir of Life and Investment Theme"; Sarasin is partly owned by Dutch bank Rabobank, itself a serious sustainability player. Investment ejournals have been touting the pros and cons for some time, see Dailymarkets.com Case for Investing in Water ETFs, MSN Water Fund Thirves on Thirsty World pitching the Palisades Water Index, Water-stocks.com and Moneyweek. In another sign of the investment markets' sophistication in the views on water, the index shop Powershares in Washington DC has strategies indexed on the water theme as ETFs, exchange-traded funds [such as PowerShares Global Water Portfolio (NYSE:PIO)], pooled like an index but structured differently. In ETFs investors buy a range of stocks, not just one, thereby spreading some risk while getting the exposure to the underlying theme, in this case, water. It is hard to invest in a water "pure-play" though unless you're project financing a whole dam, pipeline or reservoir. If you look at the top 10 stocks in some of these water indexes or ETFs, just a small portion of their revenues come from water-related businesses. The problem of buying more than you choose to in the conglomerate play is not unusual in large industry players, like buying GE [NYSE:GE] for its wind assets and ecomagination, but they constitute less than 10% of annual revenue. See Marc Gunther's post on "Greener-and More Open-GE" and Bloomberg on Q2 2009 results.An old mate I met in 2005, Gary White from Water Partners (named a Skoll Prize-winner in March, 2009 [nice work, Gary and team]) achieved something of a coup when Water Partners joined with Matt Damon's H2O Africa to relaunch a new global NGO focused on water issues at Water.org. Which puts in stark relief the challenge of investing in water. Water is seen as a basic human right: would you want to hear you made an extra dollar/yen/pound return while some "customers" died of thirst? That is too dramatic I know, but illustrates how some are making the point. See The Water Barons from 2003. Socially responsible investors (SRI) have always found this a double-edged sword, as Socialfunds.com reflected in 2008. In Soweto, South Africa civic activists headlined with "Johannesburg Water Declares War on the Poor" in June 2007. Rainforest Action Network, the activist organization based on the US West Coast and past experts at "naming and shaming" those investing in alleged nefarious activities, created some excitement in Canada at the "Investing in Water" conference. RAN's motto is "environmentalism with teeth". But no company ever stands in the way of a thirsty, poverty-stricken citizen, although the video Blue Gold points to a commodification of water. As one wise French investor active with a broad portfolio of projects and investments in Francophone Africa said, the water is a basic right, but someone has to pay for the pipe to get it to the people. French firm Veolia Environnement [EPA:VIA] works in infrastructure including water around the world, but only where it feels welcomed. And like the survivors of Hurricane Katrina in New Orleans found out in 2005, sometimes you have a much better chance of getting bottles of water faster from Wal-Mart (which stepped up with its impressive logistics) versus waiting for a slow and/or inefficient state or federal government to react. [Sidenote: last Thurs 16 July WMT hosted a major sustainability stakeholder milestone meeting].Just last week hardcore investment markets types on US channel CNBC were looking at the money being dedicated by the US government to infrastructure and trying to figure out where in the water supply chain to investment their money into: 10 foot concrete pipes, water pumping stations, residential piping, or water gauges? See CNBC video 10 July 2009. Water utilities should be earning higher rates of return because the infrastructure is years old. In London, water pipes were laid when Queen Victoria was still around. Replacing them saves millions of gallons a year. A large part of water piping is the cost of the labour to lay the pipes, so it is an interesting option to create jobs. meeting the social need of creating jobs must tip the theme as an opportunity for sustainable finance, and a gap for investors seeking to integrate ESG factors into investment architecture. The major issue is getting more clean water to more places. As the FT covered in June, it is about scarcity, and markets understand supply and demand Age of scarcity: Resource shortages yield investment opportunities 2 June 2009. Investing in water is a solid opportunity worth checking out, but factor in all the ESG factors for the complete perspective. Clean water is a human right. But sustainable finance is needed to put pipes in the ground, orprovide clean energy to pump it. How the clean water droplet gets to people who need it, whether the government pays all or part of the costs of getting it there, requires some good work and is currently leading to investment decisions from Washinton to Beijing. In an age of scarcity, perhaps even on a planet that is hot, flat and crowded, may make a lot of sense to the average person's portfolio.]]>http://www.justmeans.com/Sending-Money-Managers-with-Laptops-to-Copenhagen/3233.htmlTue, 14 Jul 2009 19:33:56 GMTGraham Sinclair The UN meeting in Copenhagen in December to try and set new rules of the game on emitting green house gases, namely carbon dioxide, was in or around most conversations in Europe when I was there a few weeks back. Officially it is called the UN Framework Convention on Climate Change, and now in its 15th iteration. In simple terms, money managers are interested to know how the Kyoto Protocol gets updated, and impacts the price for pollution per country and sector based on government reactions. Tha Read Full Article ]]> The UN meeting in Copenhagen in December to try and set new rules of the game on emitting green house gases, namely carbon dioxide, was in or around most conversations in Europe when I was there a few weeks back. Officially it is called the UN Framework Convention on Climate Change, and now in its 15th iteration. In simple terms, money managers are interested to know how the Kyoto Protocol gets updated, and impacts the price for pollution per country and sector based on government reactions. That is a lot of paper, bums on seats, and carbon-intensive travel, yes? Investors care because any change in regulation, anything that changes the costs structure of valuing a business, will impact the valuation of a firm, and so the investment in that firm. Leading ESG thinkers continue to try and improve the metrics, and why FTfm covers stories most Mondays. Money managers have been pushing companies to understand climate change impacts for years, through initiatives like CERES in the US and IIGCC in Oceana and Europe.Pretty much any NGO or international organization (IO) in the sustainable finance or green investment space is putting out a position paper or shaping to be near the action, for example WWF Copenhagen Expectations. The UN is giving it a full-court press, see UN Climate Change, and Denmark is using it like China used the Beijing Olympics as a window on their world. Perhaps Greenpeace will find some more coal ships to clamber up and use as billboards - did you see the photos | video from the Italian G8 summit. Pretty good approach to non-violent protest (do you also wonder how the crew did not slip loose the abseiling rope above the dude hanging above the water?). The Greenpeace focus on G8 was pretty punchy. It made news in Africa on account of it being South African coal loaded at Richards Bay Coal Terminal on the KwaZulu-Natal north coast not far from Mozambique, nor the pristine iSimangaliso World Heritage Site of the St Lucia Estuary and Sodwana with its whale sharks.The mechanics of negotiating new climate change rules was rudely made apparent in a simulation exercise we did at the Tallberg Forum, hosted by Drew Jones, Sustainability Institute, USA for a consortium of NGOs, universities and think tanks like MIT, foundations and companies like Nike, Fidelity Investments, Schlumberger and Citi. Check http://climateinteractive.wordpress.com/. The C-ROADS simulation aims to do what the Prius dashboard or prepaid cellphones do: kep score. Keeping score by illustrating where the negotiations get us. Actually, maybe not that different from Greenpeace, just a lot more acceptable to the suits. An XLS-based algorithm drives graphs of the numbers describing the net effect ot the planet of all the positions and commitments. The graph captures the respective negotiating positions of parties to an agreement and in coloured lines describes how those commitments to investment capital in mitigating or adapting to climate change will affect the "score", illustrated by the parts per million (PPM) and average expected temperature. Scientists have us pointed toward 350-450ppm and not more than +2C if we aim to keep enjoying the planet as we have. The designers of the simple software want negotiating parties to use it live in Copenhagen, as a kind of reality check, past the plain communiqus and statements (vague ones such as those that came from the G8 meeting in Italy). I recommend getting some mates to play out the scenarios, check Climate Change Exercise here, and watch how badly some people handle the pressure of negotiating!The simulated negotiation exercise was powerful too for putting the group into three groupings (developed countries, developing countries, and small countries and island states) with the way we played it out with subtle details like having the islands grouping I was in have no chairs, and sitting on the floor [see similar photo, above], while the developed countries had chair, flowers and fruit in their corner. Excellent role-play. Having been the undercover activist from time-to-time, my first offer to our group - basically nations like Maldives and Micronesia that will sink beneath rising oceans - to exit the chamber, or rather to barricade the doors until the other nations reached agreement. The simulated negotiation played out, and we laughed as our Tanzanian colleague pretend to be the US, and a Zimbabwean colleague spoke for China and Brazil. We, the threatened tiny nations, promised to send climate change refugees, one million men, women and children per annum, to join our favourite developed country and lean on their social security net: that got a reaction! The knotted stomach though came as we realized this was how it may play out for real in December. For keeps.One of the leading pension fund and money manager groupings active against climate change since 2003 has been the Institutional Investors Group on Climate Change, IIGCC. The IIGCC published its second annual report yesterday, Second Annual Report - Investor Statment on Climate Change [see publications dating back to 2003] and represents assets of USD 5,575 bn [EU 4,000bn; GBP 3,440]. The report reflects the work by money managers in asking questions covering climate change from their underlying company investments, and fully 90% are engaging the companies to do more. But most interesting finding for me, was that the push to engage, a notoriously vague term with mixed or unmeasurable results, has played out. One of the leading ESG thinkers and head of responsible investment at Insight Investment, Rory Sullivan, was reported in FTfm as saying "We've got to the limit of engagement without stronger incentives". Check II's responsible investment page. Now money managers are feeling that the push to companies on business case or ethical case bases has reached its maximum, this is where regulation will make the next big breakthrough. FTfm's Sophia Grene reported [Call for Government Action on Climate, 13 July 2009] Stephanie Pfeiffer, programme director at IIGCC for the four workstreams as saying "We're going to be trying to influence the policy-making in the run up to Copenhagen". Knowing how adept money managers are with their spreadsheets, and the fountainhead of information that crosses their terminals and screens daily, I think a few money managers and analysts should accompany negotiators to Copenhagen, armed with XLS to immediately [it is 2009, after all] demonstrate what the numbers will mean. The money managers may even improve the simulation graphics. I wonder if they could get the Climate Change Exercise software to simulate a boatload of one million poor climate change refugees floating across the floor halfway through some waffling negotiation impasse]]>http://www.justmeans.com/150-Years-Is-Too-Short/2982.htmlTue, 30 Jun 2009 13:22:27 GMTGraham Sinclair Nice work by the judge in US vs Madoff. The slimy Mr Madoff was sentenced to 150 years with cheers from the courtroom. Do you also think he reminds you of Gollum from JRR Tolkien's The Lord of The Rings and The Hobbitt? The swindler and low-life deserves more time in a cell, 150 years is too short. Or perhaps the end of his days doing an honest day's work at McDonalds [McDonald's Corporation (NYSE:MCD)] or mowing a lawn like the things his clueless investors may be doing to rebuild their retirem Read Full Article ]]> Nice work by the judge in US vs Madoff. The slimy Mr Madoff was sentenced to 150 years with cheers from the courtroom. Do you also think he reminds you of Gollum from JRR Tolkien's The Lord of The Rings and The Hobbitt? The swindler and low-life deserves more time in a cell, 150 years is too short. Or perhaps the end of his days doing an honest day's work at McDonalds [McDonald's Corporation (NYSE:MCD)] or mowing a lawn like the things his clueless investors may be doing to rebuild their retirement monies. Madoff deserves more punishment for the crimes, but also for obstructing justice by not cooperating with authorities to round up al the "enablers", those people that knew enough to know something did not add up, but turned a blind eye. Where did all the money go? Here's hoping the prosecutors get all of them; starting with the first 10 targeted. If my surname was "Madoff" I would put in a civil claim too, for making "Madoff" synonymous with "Ponzi" as the name for slimy tricksters schemes. Do we really think that Ms Madoff was clueless? Perhaps Ms Madoff should wash dishes for those retirees wiped out or make soup for the beneficiaries of not-for-profits forced to cut programs."Madoff's wife, Ruth Madoff, said in a statement Monday that she was "devastated" by the fraud, as well as "embarrassed and ashamed." She will be left with $2.5 million under a settlement with federal prosecutors". Madoff's prison term cheered BLOOMBERG NEWS June 30, 2009Thinking on the very basis of our virtual community, JustMeans, these kinds of fraudsters are a total blight on the market system, right up there what Hitler or Amin did for politics. They are a scourge and the fact that they schmoozed and mingled for so many years should make us as nauseous as knowing a paedophile was living next door. It's a pity Madoff did not throw up such a pointed comparison when he was given time (he took 10 minutes) to respond in court On Monday. From WSJ Speakeasy's description, maybe he earns an ant-size point of credit for turning to face the crowd he bilked...When the judge asked if he had anything to say, Madoff rose, leaned on the defense table and spoke slowly for 10 minutes. In the course of his speech, delivered without emotion, Madoff referred to his scheme as a "problem" and an "error of judgment." Then, at the end, he turned to his victims, from whom he bilked more than $13 billion. "I will turn and face you," he said. "I'm sorry. I know that doesn't help you."The other side of the story [see NYT timeline], of course, is all those who threw money at the man who marketed access as exclusivity, thereby creating momentum for the cash sucked into his scheme by exploiting the underlying vanity and greed of the average man and woman. NYT opinionist Joe Nocera spreads the blame in "Get Over It". Our pause for thought is: would we too have thrown our money in, assuming we mingled in Hollywood or Florida with spare cash? The basis for our JustMeans community is that we make fair business decisions and lifestyle choices that are a net positive to our people and planet. While business is not always a gentle place, there must be an underpin for ethics and principles. I hope our Just Means community may be the kind that is never sucked into a Madoff spiral, nor is home to some of that behaviour. Here's hoping Bernie sleeps uncomfortably for a while. Forgive? Of course we will. But sins have consequences. Sleep uncomfortably, Mr Madoff, one night at a time.]]>http://www.justmeans.com/Connecting-Investor-Relations-officers-and-CSR-officers---IR-CSR/2873.htmlMon, 29 Jun 2009 08:11:25 GMTGraham Sinclair How many ways may we successfully present the ESG factors in the sustainability investment case? Finding numbers for the cost/benefit of sustainability is perhaps less fashionable than in 2007, but presenting the investment case - the sum of all business cases at a point in time - remains an unpracticed role of sustainability practitioners and CSR departments. It is something that several organizations have tried to raise and move the agenda forward on. While at UNPEFI for the PRI we helped enga Read Full Article ]]> How many ways may we successfully present the ESG factors in the sustainability investment case? Finding numbers for the cost/benefit of sustainability is perhaps less fashionable than in 2007, but presenting the investment case - the sum of all business cases at a point in time - remains an unpracticed role of sustainability practitioners and CSR departments. It is something that several organizations have tried to raise and move the agenda forward on. While at UNPEFI for the PRI we helped engage stakeholders in a pilot session at the Lloyds Building in LDN back in January 2008 (see reference PDF), pulling in mainstream money managers, SRI managers, company C-level types and regular CSR professionals. Partly on the basis of that work WBCSD Business Role team then conducted several more interactions, including the investor stakeholder session In Kuala Lumpur I was able to facilitate around the first ever CSR/SRI conference in Malaysia co-hosted by Geoff Williams and his OWW from Singapore, again in 2009.Later in the project as advisor we had the final in the run of sessions in Johannesburg at the WBCSD annual event just 200m down Gwen Lane from the Johannesburg Stock Exchange, the largest in Africa and 17th largest in the world (see the Background paper we co-wrote wth Cheryl Hicks). What struck then as now is the varied approaches to sustainability and CSR strategy, and so the differences in relationships between the CSR/ESG line function and how the firm's investors - whether listed or unlisted securities - ever came to know about it. It is fair to say that major investment presentations seldom cover ESG factors, unless the Black Swan happens (low probability, high impact negative event), and management scrambles to correct a problem. When colleagues in the JustMeans community like Dave Stangis at Campbells [Campbell Soup Company (NYSE:CPB)] in Camden NJ started chatting about how they may write their 2008/9 sustainability reports, the first question is "to whom"? While investor readership may be small, writing for the investor is an important discipline, and necessarily improves the rigour of the report: investors want the hard facts (both good and bad) and visibility on future earnings, as well as comparability with what stories have been told before.While enjoying a run along the Atlantic seafront in Cape Town on a warm, blue sky Saturday. before making the long journey by plane and train to Tllberg in northern Sweden on Sunday/Monday, I discussed this apparent gap between CSR practitioners and the Investor Relations function, and the trickle effect on ESG factors into investment coverage. It is an area that deserves more organizational behaviour inquiry, especially in 2009 when the sustainability business case is stress-tested against the cost-cutting context. CSR Europe did putout a solid reporting covering issues in 2008. In one positive example in emerging markets where firms have a strong implicit sense of social responsibility and are sensitive to (foreign) investor perceptions of good governance, I was pleased to learn that the sustainability head reports directly to the IR person at premium retail firm in South Africa, Woolworths [Woolworths Holdings Limited JNB:WHL], has the lead of Woolworths Good Journey, the Woolworths sustainability strategy embedded into their value proposition . Keeping whatever CSR is happening within a firm close to what the customer wants is the better approach when writing this year's sustainability report, or thinking about the Corporate Sustainability Officer role (read more in Forbes; SRI-Extra). And that helps investors understand what is good for the firm's future.]]>http://www.justmeans.com/Sir-Bob-Geldof-Lectures-the-Bankers/2516.htmlWed, 17 Jun 2009 02:22:24 GMTGraham Sinclair When I heard Sir Bob Geldof was to be keynote speaker at the 2009 FT Sustainable Banker awards this past Thursday I was a little cynical. But after about the first 2 minutes of his speech of close to 25 minutes, I was impressed. He mixed humour and pathos, tied to the audience and to FT's editor Lionel Barber on stage, and gently challenged the audience. I wonder when last bankers in the room had pondered millions in Eastern Ethiopia not eating as they eased through the three course meal..? Sir Read Full Article ]]> When I heard Sir Bob Geldof was to be keynote speaker at the 2009 FT Sustainable Banker awards this past Thursday I was a little cynical. But after about the first 2 minutes of his speech of close to 25 minutes, I was impressed. He mixed humour and pathos, tied to the audience and to FT's editor Lionel Barber on stage, and gently challenged the audience. I wonder when last bankers in the room had pondered millions in Eastern Ethiopia not eating as they eased through the three course meal..? Sir Bob is an entertainer (remember "I Don't Like Mondays"?); he can work a crowd.He probably enjoyed himself. The Irish sparkle lurked in the smiles and dramatic pauses. The silver hair falling over his eyes gave him a professorial visage. Some of the same talking points Bob had covered in the FT editorial earlier around the G20, The Poor Must Be Included in the Global Economy, and a flavour is given in this Live8 intro. The 300-odd banker types in the room were transfixed. At one point when he referenced the stupidity of famine in the world, referenced Africa being just 8 miles away from Europe, and spoke of a lifeboat that sustainability needs to be rowing the planet away from disaster. You could have heard a pin drop. The one-day conference and awards ceremony in a posh hotel in London is presented by the IFC with the FT adding media and conference organization. The IFC VP Rache Kyte has been instrumental, driven by the IFC Environment and Social Development Department. FT Sustainable Banker aims to showcase best practice in sustainable banking, and hopefully to pull banks toward better action. Sinclair & Company was there to plan ahead for 2010 with a client. The conference can do better matching the reality of making sustainability happen with the event: for example getting to a hotel with better sustainability credentials, sorting organic foods, and empowering local communities with jobs to host it. There is a gap between presenting the show, and how the event can lead by example. As one speaker commented, it is about solid banking firstly, but also being more than just a few nice good examples. It must help lift the bar. Now in its fourth year, the awards have increased, covering a range of areas, including some more broadly financial services than simply banks as lending institutions. This year for example acknowledgements were to mobile phone banking firm WIZZIT from South Africa and small-and-growing segment financial advisory firm Root Capital out of Cambridge Massachusetts USA. The conference had mixed panels, some content better than others. It would be more useful than talking shop if the audience input was captured in a structured and live way, using new technologies for audience input.The awards ceremony was worth staying for. Our table - table 9 in 2009 - turns out had almost as many rockstars as the keynote has on his rolodex. At our table the winning Asian bank, Industrial Bank of China, the leading Latin American bank, Itau Unibanco of Brazil, and later the overall emerging markets bank of the year, I am sure Penny, Bouwe and I helped our Table 9 convince the good judges somehow, yes?! The right firms won. In a reminder that these showcases may have larger impacts, and the importance of running a tournament strategically well-thought out and executed, my network was buzzing from late afternoon that NGOs such as Bankwatch had already come back hard on the IFC FT shortlisting Deutsche Bank for the overall prize. Awards may be serious business, and choosing shortlists requires good judges. Knowing what a grim year it has been for colleagues trying to make sustainability happen in financial services, it was good to celebrate Triodos winning, with Standard Chartered runners up. And of course, the award was the main item on Triodos UK's website shortly afterward. Rightly so.]]>http://www.justmeans.com/HSBC-Lions-in-South-Africa/2623.htmlWed, 17 Jun 2009 02:20:31 GMTGraham Sinclair Late Thursday at LHR Terminal 5 British Airways we boarded the stately 747 next to "Air Force Scrum" with the throng of red-shirted Lions fans, and a few stragglers like me. I spotted Wales legend Ieuan Evans and Irish legend Keith Wood in business class. The boarding tunnel was buzzing with conversation when it ordinarily is filled with the strange silence of strangers stuck together in an alien metallic place. Estimates for the economic model of hosting the Lions rugby team have pegged around Read Full Article ]]> Late Thursday at LHR Terminal 5 British Airways we boarded the stately 747 next to "Air Force Scrum" with the throng of red-shirted Lions fans, and a few stragglers like me. I spotted Wales legend Ieuan Evans and Irish legend Keith Wood in business class. The boarding tunnel was buzzing with conversation when it ordinarily is filled with the strange silence of strangers stuck together in an alien metallic place. Estimates for the economic model of hosting the Lions rugby team have pegged around ZAR1 billion [GBP75m; USD124m] to the tour, not bad given the economic realities. The British & Irish Lions team consists of players from the four rugby unions of England, Wales, Scotland and Ireland (a political masterstroke considering the fraught Anglo-Irish history) with colourful stories on tour. The economic estimates are as notorious as weather forecasts, especially those by sunnyside-of-the-street tourism authorities and government agencies. Estimates were in 2005 the Lions tour pumped USD120 million [GBP 72m; ZAR 964m] into New Zealand's economy. South Africa is using it as dry-run to the FIFA World Cup 2010. What is the appropriate investment profile for the rugby tour?HSBC is the proud Lion's sponsor via a GBP4 million [USD 6.6m; ZAR 52m] deal by FastTrack in 2007. The Lions brand is huge in the UK with blanket media coverage, even bumping football from the front-page news. Perhaps the emerging markets hook to South Africa works for them. HSBC South Africa entered the market by purchasing a small securities brokerage in 1990s at office nicknamed the "Mustard Mansion" in leafy Saxonwold, then a banking licence in 2004. We do know that HSBC can pay, not always a done deal post 2008 financial meltdown. HSBC is one of the first banks to wobble back in July 2007 as Forbes reported courtesy of their poor decision to buy in 2004 an American bank to gain exposure to the US property market, Household Financial. In May 2009, Chairman Stephen Green tried to assuage shareholders by admitting HSBC wishes they had never tried to conquer the US, in an investment analysts meeting on 24 November 2008 admitted it as "an essentially disastrous acquisition" Refreshing frankness. HSBC's first direct cost came when shutting Decision One in 2007 and later Household in May this year, the experience getting them tagged as "legalized loan sharks" in the US. Yikes! WSJ reported last week that more pain is to come from sub-prime.The better news about HSBC is their authentic efforts over some years to take on social responsibility and especially climate change, firstly in Europe. The US operation not so much. HSBC South Africa is about community action; check out the solid HSBC Sustainability reports. Curiously, a quick JustMeans search has no HSBC coverage or community members? The HSBC USD100m climate initiative [GBP 60m; ZAR 804m] was launched in May 2007, when HSBC Corporate, Investment Banking and Markets (CIBM) launched the HSBC Global Climate Change Benchmark Index. Having launched in 2004, HSBC claimed to be carbon neutral from 2005 by investing in offsets (a disputed strategy, but noteworthy). As investors, the HSBC private and investment banks are active selling advice and building widgets for customers to invest in; they lifted Nick Robins from Henderson's SRI team in London back in 2007; see the example of investing in climate change from HSBC Private Bank France 2008 conference. Climate change is a major effort by the UK government, and what the UK government is pitching climate change in southern Africa. The climate footprint of the Lions tour, with the majority of fans from the UK all making the 12-hour flight, is not inconsiderable. My own thinking is to buy a small farm along Route 62 about 3 hours from Cape Town. But if HSBC could get the thousands of fans with the cash to follow the rugby tour thinking about investing in climate change in their HSBC savings and pensions, that would be a good return-on-investment. And of course, to drown their sorrows in good (organic) South African wines after the 2007 Rugby World Cup champion Springboks will win!]]>http://www.justmeans.com/Real-Life--Sudden-Death-for-SRI-Shops---Just-Like-the-Rest/2687.htmlTue, 16 Jun 2009 15:53:37 GMTGraham Sinclair Millions have lost jobs, and some of those have directly impacted SRI. In the numbers are real lives of real people. Including investment people. SRI shops are no different. The 2008 financial meltdown began with a whimper in July 2007 with HSBC shutting sub-prime broker in the US and ended with a bang when the G20 came together holding onto their briefcases by their fingernails the week of March 31 in London. SIFs around the world (like UKSIF) pitched the G20 for some sustainable finance answer Read Full Article ]]> Millions have lost jobs, and some of those have directly impacted SRI. In the numbers are real lives of real people. Including investment people. SRI shops are no different. The 2008 financial meltdown began with a whimper in July 2007 with HSBC shutting sub-prime broker in the US and ended with a bang when the G20 came together holding onto their briefcases by their fingernails the week of March 31 in London. SIFs around the world (like UKSIF) pitched the G20 for some sustainable finance answers in a statement. Along the way many businesses took evasive action and cut the obvious "variable cost" of people.The story is not new; Responsible Investor.com and SRI Extra covered it amongst others in Q4 2008. But WSJ Europe Banks Cut Back Analysis on Social Responsibility 11 June did see fit to cover it again last Thursday, reflecting a slow news day, the interest of Thomson Reuters in SRI, or the fact that the story remains news in the City and on the continent. From comments at events in LDN, GVA, STO and AMS the past weeks, it may well be the latter. This in a time when we need even better understanding of what makes investment, and business, sustainable.Responsible-Investor.com's editor Hugh Wheelan covered the end of the JPMorganChase [NYSE:JPM] team in LDN in December 2008 (nice cold capitalist move, hey? Just in time for Christmas at home with the family...) with a re-org to put SRI into the general research coverage JP Morgan ends dedicated ESG research coverage. Deutsche Bank followed shortly thereafter Deutsche Bank joins ESG cuts by ending corporate governance research trimming the team, although the NYC-based climate team remained including Bruce Kahn whom they had poached from a financial consultant role with Smith Barney about a year earlier. DB has spun off on the whole climate change gig, DBCCA.As always there is a silver lining. The analysts that were cut from large shops have the option to freelance, create new ventures like Mike Tyrell ex-Citi now with Sustainable Investor.org, or hired in by the ESG research specialist shops like Sustainalytics, or buy-side investors like Dutch mega-pension fund asset manager APG hiring new ESG staff this May (nice offices right above Schiphol airport). For those left standing, good times: Credit Agricole Cheuvreux's Stephane Voisin, Head of Sustainable & Responsible Investment and SocGen Co-Head of SRI Research Sarj Nahal both have stronger teams in my opinion (see Sarj's excellent 2008 Africa Factor report. Good for new horizons too: Goldman Sachs GS Sustain team has now mushroomed from humble beginnings in London, Sarah Forrest is now in Asia-Pacific and Marc Fox in the US. The upcoming Responsible Investor.com Integrating ESG Into Portfolios session in NYC should give us a good sense of where things are at on 25 June in Manhattan. It's probably also not a great time to have an i-bank hire you coming out of your MBA-program. Which explains why MBAs are re-thinking their futures. How is the market looking for you as an experienced professional or newbie into the world of ESG in investment management?]]>http://www.justmeans.com/Exploring-Next-Stage-of-ESG-Integration-in-Stockholm/2654.htmlMon, 15 Jun 2009 04:55:09 GMTGraham Sinclair Last Monday 8 June in Stockholm, Sweden at the IMN 8th European Summit on Corporate Governance and Responsible Investment I was invited to opine on the future of ESG integration into investment policy. The conference keynote was from Richard Grttheim, Executive Vice President of AP7, one of seven pension fund investor groupings created by the Swedish government in 2000 to professionalize and diversify the Swedish pensions system. I was intrigued by Mr Grttheim's description of the pure alpha str Read Full Article ]]> Last Monday 8 June in Stockholm, Sweden at the IMN 8th European Summit on Corporate Governance and Responsible Investment I was invited to opine on the future of ESG integration into investment policy. The conference keynote was from Richard Grttheim, Executive Vice President of AP7, one of seven pension fund investor groupings created by the Swedish government in 2000 to professionalize and diversify the Swedish pensions system. I was intrigued by Mr Grttheim's description of the pure alpha strategy, a kind of "hands-off" multi-strategy approach to seeking returns, and preventing the outsourced money manager from "hiding" returns tied to beta or market-linked risk/return profiles. After a succinct and insightful presentation of the AP7 approach to investment that included how "ethical and SRI" factors are considered and the corporate governance policy, I was able to ask him how the AP7 approach helps them handle the ongoing Chevron Corporation (NYSE:CVX) Texaco saga in Ecuador, where the national environmental legislation was not rigorous enough, the government itself is implicated, and the litigation looks to span both Ecuadorian and US court systems. See The Economist article "Justice or extortion?", May 23rd , comments and letters. In brief, his response pointed to the limits of the policy, and the importance of having the 2 outsourced ESG research providers, Ethix and GES-Investment Services, to provide engagement approaches.The panel "The Next Stage Of ESG Development: Integrating The Movement Into Mainstream Investment Policy" was a short 45 minute flip through the ideas and experiences of four panelists, guided by Anders Thorendahl, CIO of the Church of Sweden. ESG is the abbreviation for environmental, social and governance. The Church of Sweden is an iconic Scandinavian institution with a long history of using socially responsible criteria in its investment philosophy and executing its mandate. The Christian ethics influence the investment approach as covered by IPE in Q3 2009, A Christian Institutional Investor, along with a quaint water colour (I wonder if Anders saw it?!). The four-person panel included 2 research shops based in Europe, Sustainalytics of Amsterdam, The Netherlands and Asset4 of Zug, Switzerland, and consultant OnValues in Zurich Switzerland. Sinclair & Company was there to offer the US and Emerging Markets exposure. Cheryl Johnson Watts SVP at IMN produced a solid event, as she did last year in Copenhagen, another beautiful Scandinavian port city.Anders kicked off by exploring the regulatory future, in the reality of 2009 and the swing to greater government and regulator roles. Anders probed for our thoughts on the proposition that the future for ESG in investment is simply a matter of a case by case instilling of ESG accountability while others believe government intervention and regulation may be necessary to further the cause. What should the next stage of ESG development entail? The panel covered some thoughts on how more investors are asking questions about how to integrate ESG, looking at ESG in the context of strategic asset allocation, and my own experience of integrating ESG into investment strategies as a sustainability meta-theme. Henrik Steffensen of Asset4 explored the risk of not looking at ESG using data over time using a sample of financial institutions pre- and post-2008 meltdown: turns out only 2/5 institutions are still listed public entities in 2009. In the post-2008 meltdown asset management landscape, institutional investors are seeking new answers. Regulations provide the catalysts. Scandinavian countries have increased reporting requirements for companies and the various investment entities are scrutinized for adherence to international treaties to which countries have subscribed; although the response to the UK (since July 2000) and South African (2008) regulations for pensions reporting has been weak. South Africa is again exploring the prospect of prescribed assets whereby pension funds and money managers may have to invest in securities tagged as "socially responsible".Ivo and Dierderik agreed that we have many questions we seek to answer in 2009, some as practitioners, others as a financial discipline. While many institutional investors want greater of accountability on the part of management of failing corporations and asset managers that are entrenched in scandal: many institutional investors wonder if the current movement towards responsible investment is capable of thorough integration into mainstream investment policy. There certainly are cultural differences in the way different countries or regions try to integrate ESG, from Nordic countries vs. Western Europe, or the US, or emerging markets. Of course our comments were abbreviated in the short space of time, but nevertheless the panel covered a quick overview of future thinking. Feedback from conference delegates to my two provocative comments was positive: we are all emerging markets now, and there is a bubble in microfinance and soon one of the microfinance funds will blow up. Look out for the first major BRIC (Brazil, Russia, India, CHina) summit this week in Russia.]]>http://www.justmeans.com/Asset-Management-and-Trust-after-Madoff/2630.htmlSat, 13 Jun 2009 09:33:28 GMTGraham Sinclair Whom do you trust? The Economist in 2008 reported estimates for professionally managed assets was around USD 64 trillion [EUR 45 trn] at the end of 206, while the whole global system was approximated at around USD 150 trillion [EUR 107 trn]. Professionals manage other people's money in the realms of finance and investment. That is a lot of responsibility, and that responsibility can be misused to devastating effect. Making others your agents depends upon trust. Some hard lessons have been learne Read Full Article ]]> Whom do you trust? The Economist in 2008 reported estimates for professionally managed assets was around USD 64 trillion [EUR 45 trn] at the end of 206, while the whole global system was approximated at around USD 150 trillion [EUR 107 trn]. Professionals manage other people's money in the realms of finance and investment. That is a lot of responsibility, and that responsibility can be misused to devastating effect. Making others your agents depends upon trust. Some hard lessons have been learned about risk, leverage and regulation. And re-learned about trust. Banking, and the value of money, will forever be viewed differently because of the events of the past 24 months. We are a generation with a scar. Some of us will be smarter. In these uncertain times, new lessons in business, banking and regulations are being learned by policymakers and investors. Just this week the role of the SEC was affirmed, while the US government stepped back from ruling maxima for executive pay with a factsheet issued by the US Treasury entitled Providing Compensation Committees with New Independence. The more market-based approach announced by Geithner this week of empowering investors to ask questions and vet pay at the annual shareholder meeting (although non-binding) is a victory for years of ESG shareholder initiatives via proxy votes on say-on-pay the past few years by firms such as Tm Smith at Walden Asset Management. Many people still recall the 2003 GSK shareholder revolt on executive pay for JP Garnier as the watershed event for the issue in Europe, dating back to 2001. Current GSK chief Andrew Witty is communicating on executive pay. It is smart regulation. Legislation would authorize the SEC to require annual shareowner votes on executive compensation, and would require standards of independence for corporate compensation committees."Companies will have the opportunity to include additional resolutions on specific compensation decisions: Companies will have the opportunity to ask shareholders' views on specific compensation decisions, including decisions related to various aspects or categories of pay. Each company, however, will be required to permit shareholders to vote on a resolution addressing all of the compensation disclosed in the annual proxy"In 2008, approximately USD 4 trillion [EUR 2.85 trn] in assets under management (AUM) was managed explicitly integrating environmental, social and governance (ESG) factors according to the Social Investment Forum. Furthermore, the Carbon Disclosure Project 2008 (CDP6) counted 475 international institutional investors with $55 trillion [EUR 39 trn] in AUM, including major international investors, pension funds and investment banks. So we know that our work in making capital integrate the sustainability meta-theme is having some small impact. But at a very fundamental level, Madoff on the front page of the third-last edition of Portfolio magazine kind of sums this all up. His betrayal of family, friends and celebrities is "biblical". The poster child for excess is the front page story for a journal that launched as asset management reached glossy magazine status, and whose failure as the financial meltdown exposed the scheme, also brought down the magazine. I liked the journal, and the graphics. Like many existing hardcopy papers, even legendary brands like Boston Globe and The New York Times which are wobbling. R.I.P Portfolio. The man has a family name which will replace "Ponzi" as THE name for a fraudulent scheme, such as creating a pyramid scheme where a second person's money was flipped to a first person's money to give false "performance". The SEC has been beaten up about its role and must be gritting its teeth knowing the SEC website will have to update with the definition of a "Madoff", which happnened on their watch, and with warnings...The CNBC's coverage in 2008 was classic "60 Minutes" type material, with the usual breathless title: "Scam of the Century: Bernie Madoff and the $50 billion Heist". Apparently it was CNBC's highest rated documentary premiere telecast EVER in both adults 25-54 and total viewers. It is never too early for the guys at CNBC to be claiming a century brand, yes?! Probing questions from good investigative journalists keep picking through the wreckage that one man's greed, and accomplice's assistance, has brought to the state of trust (see Madoff's secretary's comments). Just like the damage to the brands of "MBA", "investment banker" and even "Wall Street". It is a tough time to be an investment advisor, with popular media offering up plenty of "can you trust your financial advisor" material.Trust has been shattered, and this generation has changed their opinions on whom to trust and with what. NYT's pointed question is How Do I Know You're Not Bernie Madoff?. Our asset management industry has questions to answer. Hollywood was burned by the Madoff scandal, and so I assume a new version of the iconic 1980s financial excess movie Wall Street will soon be filming, but here's hoping it is way better than The International. While I like Clive Owen, I drifted off to my own dream creativity somewhere over the Atlantic in seat 37A during the Guggenheim shootout]]>http://www.justmeans.com/Access-to-Medicine-Index/2481.htmlFri, 12 Jun 2009 05:58:34 GMTGraham Sinclair One of the more interesting examples in recent years is the Access to Medicine Index (ATMI). While in The Netherlands, I took the train to Haarlem to meet the founder, Wim Leereveld, in a renovated office with a fine table from old wood and large windows by the canal. The Access to Medicine Index points the world's largest pharmaceutical companies to help solve this global crisis. Hundreds of millions are afflicted with neglected diseases for which no affordable remedies have been developed or f Read Full Article ]]> One of the more interesting examples in recent years is the Access to Medicine Index (ATMI). While in The Netherlands, I took the train to Haarlem to meet the founder, Wim Leereveld, in a renovated office with a fine table from old wood and large windows by the canal. The Access to Medicine Index points the world's largest pharmaceutical companies to help solve this global crisis. Hundreds of millions are afflicted with neglected diseases for which no affordable remedies have been developed or for which treatments fail to reach patients. One classic CSR argument is that, in the private sector, larger market share infers substantial market impact. Therefore companies with large market footprints have a responsibility to the broader socio-economic context. An index ranking companies that compete in a marketplace is a powerful tool to leverage the underlying competitive nature of companies and to simplify a complex subject. Firms operate by competing for a share of the consumer expenditure. The competitive dynamic in the private sector - eat your competitor's breakfast or competitor eats yours - entails building, and then maintaining, a larger market share. A global ranking also offers the gap to play up the old trans-Atlantic rivalry: European companies ranked better in 2008.An investigation of ATMI reflects some interesting lessons. An obvious challenge is defining a sector; should research pharma companies be in the same category as generic pharma companies which are really just large factories? ATMI is still trying to find the balance. In defining what the rules of the game are, for example what criteria to rank the companies on, one must connect the need for simplicity with being comprehensive to offer a "smart" answer. Who judges? While a third party may be outsourced to for the actual research operations, deciding the criteria may need some (heated) discussions behind closed doors, or using stakeholder groups of private sector, public sector, NGOs, civic associations, pharma investors, consumer groups and others. Input from institutional investors was important, including UKSIF director My-Linh Ngo of Henderson in London (see Henderson SRI blog). If the companies dislike the rules for judging, and/or the companies feel they are more influential than the index, ignoring or undermining the index is a negotiating strategy, like Pfizer. Of course this is counter-weighted by companies enthusiastic about the index because they rate highly on the criteria, like GSK. It is a balancing job. The ATMI website explains the 8 critera approach. By creating a benchmark against which company behaviours and activities are measured an argument we make is that an index may help drive positive action by the private sector in existing and new areas of products and services.The good-looking ATMI website offers a fair amount of information, including the upcoming workshop in Nairobi, a good strategy to interpret locally the index criteria, and perhaps the impact. And being public, the ATMI has a fair degree of support (Bill Gates in Time July 2008) as well as detractors (to-and-fro debate with Health Action International in the pages of The Lancet). Indexes thrive on publicity and awareness, and The Lancet articles on the ATMI have helped. Awareness is one of the core success factors, although I am unsure if the old PR adage applies: whether good or ugly, all publicity is good publicity. Wim comes from the pharma sector, and is at least 6ft. 2in., proof of the Dutch height sterotype. I am still researching what makes the Dutch so tall: is it the cheese?! Which had me thinking about metrics, and the harder part of idnexes. Measuring outcomes against the mission. Through the index model as change agent logic model, how many people in Ecuador, Sri Lanka or The Gambia now have access to TB, malaria and HV drugs because of the ATMI?]]>http://www.justmeans.com/Windmills--wind-turbines-and-the-Dutch-Disease/1921.htmlMon, 01 Jun 2009 00:34:24 GMTGraham Sinclair On a clear day, the white wind turbines turn slowly above the Amsterdam skyline. Looking West from near the Passenger Terminal Amsterdam where the huge cruise ships berth, you may count maybe a dozen wind turbines in the land of windmills. Which had me quizzing a local Dutch colleague in sustainability at KPMG: why isn't the Netherlands the Saudi Arabia of wind turbine technology?The Netherlands had a few centuries as a major global power, berthed some of the earliest multi-national companies in Read Full Article ]]> On a clear day, the white wind turbines turn slowly above the Amsterdam skyline. Looking West from near the Passenger Terminal Amsterdam where the huge cruise ships berth, you may count maybe a dozen wind turbines in the land of windmills. Which had me quizzing a local Dutch colleague in sustainability at KPMG: why isn't the Netherlands the Saudi Arabia of wind turbine technology?The Netherlands had a few centuries as a major global power, berthed some of the earliest multi-national companies in the 1500s and added a name to an investment speculation surge (Tulip Bubble) in the 1600s. The Netherlands has histories connected to commerce, the ocean, and of course the dykes that make large parts of the country habitable. After Hurricane Katrina's storm surge flooded New Orleans in 2005, Dutch engineering companies answered the call. But nearly a decade ago the absence of major Dutch wind industry was already being targeted by the Dutch Friends of the Earth (FOE).The reality of the environment in daily life may be one reason why The Netherlands ranks with the UK and Sweden as leading countries in sustainability. With a strong pensions sector, the leading role of APG and PGGM - two Dutch pension fund money managers - at the forefront of sustainable finance and responsible investment makes sense. The biggest pension fund (and third largest globally in 2008) is the ABP civil service workers fund with a capital of over 200 billion euros (USD 282bn), while PGGM caters for pensions in the health and welfare sector; it is managing over 90 billion euros (USD 127bn).Perhaps the problem was the "]]>http://www.justmeans.com/The-State-We-re-In/1886.htmlSat, 30 May 2009 06:34:29 GMTGraham Sinclair Welcome! This new JustMeans blog on Sustainable Finance and Responsible Investment will offer up some snippets and snapshots on the real world of putting other people's money to work. In covering sustainable finance and responsible investment, we'll cover the demand and supply sides, good and bad news, on how sustainable finance is evolving and what the future is in a post-financial meltdown world. And we'll cover it from developed countries and frontier markets perspectives.Best current analysi Read Full Article ]]> Welcome! This new JustMeans blog on Sustainable Finance and Responsible Investment will offer up some snippets and snapshots on the real world of putting other people's money to work. In covering sustainable finance and responsible investment, we'll cover the demand and supply sides, good and bad news, on how sustainable finance is evolving and what the future is in a post-financial meltdown world. And we'll cover it from developed countries and frontier markets perspectives.Best current analysis reflects USD 6.9 trillion in 2007 was invested integrating environmental, social or corporate governance (ESG) factors. After decades and much increased publicity on sustainable finance or SRI (socially responsible investment), the industry I work in still makes up only a fraction of global investments, estimated at around USD 64 trillion at the end of 2006.The niche is a small, yes, but we in Sustainable Finance intend to change that despite the grim times (I don't buy the "greenshoots" stories being floated on CNBC). Maybe that's what had me watching a classic film that seems about right for the state we're in.Glengary Glen Ross is grim but compelling viewing with its rainy scenes, the blue and black colours, the mood music of saxophone and bass. In about 100 minutes of tight dialogue and superb acting by at least six legendary actors it reflects some of the underlying tensions of money, persuasion and ethics.It's not pretty. Some of the same tensions that have been on ugly display as we pick through the financial markets wreckage since Lehman Brother's collapse last October. Ugly, kind of like listening to Alex Baldwin's brutal "ABC always be closing" speech (a speech which some firms and and MBA programs still use for training).Sustainability in investment in strategies ("sustainable finance") has clearly grown as a global trend. Yes, like any good investment chart, the trend line is up and to the right. There are even ESG indexes in Brazil, South Africa, India and forthcoming in Egypt in 2009. But the asset management industry over the past months has been a bleak place to be. Like the setting for Glengarry Glen Ross, an arbitrary New York low-rise office block on a rainy night. The past 9 months when sending emails to colleagues in Melbourne, Sao Paolo, Stockholm, Johannesburg, Boston or London, we have adopted a pragmatic check-back method: for every email sent out, maybe 1-in-4 would bounce back indicating a colleague was fired, downsized and/or the business unit was cut off by panicked bank executives.Investment banks have cut ESG sell-side analysts in London and Zurich. Fund managers have closed in Boston. Marketers in Sydney and Paris are staring at bleak fund-raising targets. Even USD 50m seems too much to raise in 2009, as a leading French sustainability money manager explained this week in Amsterdam.As film director James Foley suggests, a classic film seems to come together at the right time, it has a sense of place that resonates. Little did Foley know that the film he made 5 years after the Black Monday stock exchange collapse in October 1987 would still be haunting us 17 years later. Watching the 1992 movie in 2009 long months into the financial meltdown and knock-on recession reflects the state we're in. I can even hear Baldwin's character leaning over the desk and rasping, "you laughing now?"We look forward to your comments and counterpoints. Keep coming back. Remember your ABC - Always Be Coming (back)! So you tell me - is it Baldwin, Pacino or Spacey who nails the most memorable speech?]]>