The sustainable investing world has been on fire this week, after the Business Roundtable made a groundbreaking statement on the Purpose of the Corporation in modern society. For the first time, corporate leaders at the highest level are changing how they think, replacing the mantra of “maximize profits at all costs” (you’ll see the words ‘shareholder supremacy’ thrown around a lot) with ideals that acknowledge the impact businesses have on more of their stakeholders: customers, employees, suppliers, the communities they work in, and their shareholders. Read more
Common Interests is proud to be a part of the global investor network, including Amundi, California State Teachers’ Retirement System (CalSTRS), Legal & General Investment Management, Natixis Investment Managers, Mitsubishi UFJ Financial Group, and Sumitomo Trust Mitsui Asset Management, making up a record number of signatories to the Global Investor Statement to Governments on Climate Change.
Today, we are joining with investors from around the globe to urge world government leaders to step up their ambition on climate change and enact strong policies by 2020 to achieve the goals of the Paris Agreement, including phasing out thermal coal power and pricing carbon. 477 investors with $34 trillion (USD) in assets, a record number of signatories, are behind the urgent call-to-action to limit average global temperature rise to no more than 1.5-degrees Celsius.
“As institutional investors with millions of beneficiaries around the world, we reiterate our full support for the Paris Agreement and strongly urge all governments to implement the actions that are needed to achieve the goals of the Agreement, with the utmost urgency,” the investors wrote in a Global Investor Statement to Governments on Climate Change.
The statement comes as world government leaders gather at the Group of Twenty (G20) Summit in Osaka, Japan and as the United Nations Secretary-General António Guterres calls on “countries to build no new coal power plants after 2020.”
“Climate change affects all sectors of the economy and all countries,” said Christiana Figueres, Convener of Mission 2020 and former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC). “It is the biggest and most urgent challenge currently facing the world. As we face a true climate emergency, limiting temperature increase to 1.5-degrees Celsius is necessary for survival, and achievable!”
Figueres added, “Investors have a vital role to play in providing the trillions in capital required to support the transition to a low-carbon and climate-resilient future. It is therefore hugely encouraging to see so many investors unite around such a clear and powerful statement to governments. They are showing a sentiment shared across the global community: exponential scale-up and acceleration of climate action is not a choice but a requirement, and represents our best opportunities for financial stability and economic prosperity.”
“As an investor in global markets, we are exposed to the increasing risks and opportunities that climate change presents to our portfolios, especially in Asia where the physical impacts of extreme weather events will be the harshest and of the greatest cost,” said Seiji Kawazoe, Senior Stewardship Officer, Sumitomo Mitsui Trust Asset Management. “To enable us to effectively invest in the necessary transition to net-zero carbon economies around the world, we have signed this statement to urge governments to take the actions needed to set us on the course to limiting global warming to 1.5-degrees Celsius.”
In particular, investors are asking world government leaders to:
Achieve the Paris Agreement’s goals
- Update and strengthen nationally-determined contributions to meet the emissions reduction goal of the Paris Agreement, starting the process now and completing it no later than 2020, and focusing swiftly on implementation
- Formulate and communicate long-term emission reduction strategies
- Align all climate- related policy frameworks holistically with the goals of the Paris Agreement
- Support a just transition to a low carbon economy.
Accelerate private sector investment into the low carbon transition
- Incorporate Paris-aligned climate scenarios into all relevant policy frameworks and energy transition pathways
- Phase out thermal coal power worldwide by set deadlines.
- Put a meaningful price on carbon
- Phase out fossil fuel subsidies by set deadlines
Commit to improve climate-related financial reporting
- Publicly support the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) recommendations and the extension of its term
- Commit to implement the TCFD recommendations in their jurisdictions, no later than 2020
- Request the FSB incorporate the TCFD recommendations into its guidelines
- Request international standard-setting bodies incorporate the TCFD recommendations into their standards.
“As shareholders, we are engaging with companies about their emissions, and how their Boards and their business plans are preparing them for a carbon constrained future,” said the California State Teachers’ Retirement System (CalSTRS) CEO Jack Ehnes. “We need the governments of the world to implement the Paris Agreement and regulate emissions on a clear timeline so that businesses know what the interim targets are and the timeline for their action.”
“Renewables are the cheapest energy source across more than two-thirds of the world today. The direction of travel is clear: the economics of wind and solar will continue improving,” adds Carola van Lamoen, Head of Active Ownership, Robeco, a global asset manager with $203 billion in assets under management. “Renewables are expected to outcompete new coal-fired power plants by 2030 almost everywhere. As investors, in our view the development of new coal power plants after 2020 puts at risk both the return on investment and the world’s chance of limiting global warming in line with the goals of the Paris Agreement.”
“As one of Australia’s largest industry superannuation funds, and a major institutional investor, we believe we have an important role to play in bringing about positive action on climate change to protect the retirement savings of our members,” said Deanne Stewart, Chief Executive Officer, First State Super. “This aligns with the view of regulators in Australia, and internationally, who have identified climate change as a significant material and foreseeable risk and have called for immediate action. While we are responding on behalf of our members, this issue will require a coordinated, collective and collaborate response from governments, business and investors to ensure that critical changes are made now for the long-term interests of our members and the community.”
The Investor Agenda Founding Partners strongly welcomed the Intergovernmental Panel on Climate Change’s (IPCC) Special Report on 1.5-degrees Celsius which emphasised the urgency for average annual sustainable energy investments of up to USD $830 billion to transition to a zero-carbon and climate resilient global economy. The report also said that in order to achieve a 1.5-degree Celsius pathway, global net emissions need to decline by 45 percent by 2030 and reach net zero emissions around 2050.
The statement was drafted through a collaboration among seven partner organisations – AIGCC, CDP, Ceres, IGCC, IIGCC, PRI and UNEP-FI – that are the Founding Partners of The Investor Agenda. Launched in 2018, The Investor Agenda calls on investors to step up action on climate change in four key focus areas: Investment, Corporate Engagement, Investor Disclosure and Policy Advocacy. Signing the statement is one of the actions investors can take in line with the policy focus areas of the agenda. The statement is published at www.theinvestoragenda.org.
About The Investor Agenda
The Investor Agenda has been developed for investors to accelerate and scale up the actions that are critical to tackling climate change and achieving the goals of the Paris Agreement with the aim of keeping average global temperature rise to no more than 1.5-degrees Celsius. It provides investors with a set of actions that they can take in four key focus areas: Investment, Corporate Engagement, Investor Disclosure and Policy Advocacy. It has been developed by seven Founding Partners: Asia Investor Group on Climate Change,CDP, Ceres, Investor Group on Climate Change, Institutional Investors Group on Climate Change, Principles for Responsible Investment and UNEP Finance Initiative. Visit www.TheInvestorAgenda.org for more information.
For as long as anyone can remember, oceans have provided a source of sustenance and wonder to humanity. Whether by supporting coastal populations or perhaps even playing a role in human evolutionary development, our reliance on marine resources has been profound. In many cultures and societies, this reliance has not gone unappreciated. Ancient tribes and civilizations often looked at the oceans as a gift from the gods, and in return, had tremendous respect for their sanctity. Fast-forward to a pollution-ridden 2019, and the oceans are now in the worst state of our existence.
By their very nature, being that all streams flow to rivers and all rivers lead to the sea, the oceans are the end point for much of the pollution we produce on land, however far from the coasts we may be. And from dangerous carbon emissions, to choking plastic, to leaking oil and constant noise, the types of ocean pollution humans generate are vast.
The majority of the garbage that enters the ocean each year is plastic, and here to stay. That’s because unlike other trash, grocery bags, water bottles, drinking straws, and yogurt containers, among eight million metric tons of the plastic items we dispose of (instead of recycle), do not biodegrade. Instead, they will persist in the environment for a millennium, polluting our beaches, entangling marine life, and getting ingested by fish and seabirds. Plastic, while incredibly detrimental to marine life on its own, is not the only source of pollution flooding our seas.
Today’s seas absorb as much as a quarter of all man-made carbon emissions, changing the pH of surface waters, and rapidly leading to acidification, or “osteoporosis of the seas”. It’s estimated that by the end of this century, if we keep pace with our current emissions practices, the surface waters of the ocean could be nearly 150 percent more acidic than they are now, bringing down marine ecosystems and the coastal economies that depend on them with them.
While this whole blog post could easily be written solely about the destructive impact of pollution on marine life, I want to shift the attention to the tremendous opportunities these challenges present us. Yes, in order to unlock this opportunity we are going to have to open our wallets, and not just a small portion of governments and NGOs across the globe, but your average person and investor. A small price to pay to restore and preserve marine resources that will keep us and future generations alive for years to come.
Research suggests that impact-focused investors alone have approximately $5.6 billion in capital to deploy over the next five years and have the means to dramatically reshape the world’s “Blue Economy.” The ‘Blue Economy’ refers to an emerging concept which encourages better stewardship of our ocean or ‘blue’ resources. It supports all of the United Nations’ Sustainable Development Goals, especially SDG 14 ‘Life Below Water’, and recognizes that this will require ambitious, coordinated actions to sustainably manage, protect, and preserve our oceans.
The problem then becomes: how can we open the faucet on this sitting capital, and once funds begin to trickle in at higher rates, how can we effectively channel these funds to the places where they will make the highest impact?
First, we are going against a generational notion that investing in the planet, and more specifically the oceans, is charity, rather than an opportunity to achieve substantial economic gains. While there are plenty of impact and Pro-Bono investors willing to invest money without seeing an immediate chance of return, the only way we are going to get the adequate funding that our oceans so desperately need, is to tap in to the group of investors solely motivated by the chance to realize gains. Luckily for us, we have the research to prove that these gains are possible.
Extensive research done by sustainably-driven groups and organizations like the Bloomberg Philanthropies Vibrant Ocean Initiative, Rockefeller Foundation, and Encourage Capital prove that impact investors in the fisheries sector have a real opportunity to realize potentially attractive financial returns, while at the same time creating lasting social and environmental impacts. The Investment Blueprints provided by Encourage Capital, (a new kind of investment firm that seeks to make profitable investments that solve critical social and environmental issues) show that impact-oriented business models benefiting from stock stabilization or restoration have the potential to generate equity returns between 5% and 35%, using conservative growth and exit assumptions. These returns are driven primarily by increased volumes linked to stock recoveries, improvements in supply chain efficiency, access to higher-value markets, and reductions in raw material supply volatility.
Furthermore, overall economic value creation associated with ocean reform is quite compelling. A recent study conducted by the University of California Santa Barbara’s Sustainable Fisheries Group concluded that the restoration of distressed fisheries globally could increase global fish stocks by 36%, boost seafood production by an additional 12 million metric tons, or 14% of current wild capture production, and in turn, generate an additional $51 billion in aggregate profits within 10 years.The global restoration potential offers an ample seascape (pardon the pun) of investment opportunities for impact investors, especially if management and governance improvements are linked with business models that profit from stable or improving stock health.
The opportunities are abundant, and with rapidly advancing marine technology, paired alongside a mind-boggling $68 trillion being passed to sustainably-conscious children through the largest wealth transfer ever, there is no excuse not to make the oceans and the ‘Blue Economy’ a priority for years to come. The ocean is the largest ecosystem on Earth, it is the planet’s life support system. Oceans generate half of the oxygen we breathe and, at any given moment, they contain more than 97% of the world’s water. Put simply, without them, we would not exist. The ball is in our court, what will we do with it?
CDP (formerly the Climate Disclosure Project) came out with a new report this week, their Global Climate Change Analysis for 2018. The summary of the report is well worth a read (it has some really great interactive charts if you’re a data nerd like I am), but there were a few takeaways that were so spectacular that we felt compelled to write a short post highlighting their findings. I’ll go through a few of the top quotes from the report and provide a little commentary of my own.
215 of the biggest global companies report almost $1 trillion at risk from climate impacts, with many likely to hit within the next 5 years
5 years is not a long time, especially for clients nearing retirement. We believe we have a duty to manage these risks in our investment portfolios.
Companies report potential $250 billion in losses due to the write-offs of assets
These are assets on the books, that contribute to the current valuations (and therefore stock prices) of many of these companies. In addition to “stranded asset risk” from fossil fuel reserves that cannot be extracted or burned, this number includes the damaging impacts from severe weather and other impacts from climate change.
Climate business opportunities calculated at $2.1 trillion, nearly all of which are highly likely or virtually certain
THIS is the opportunity for sustainable investing. By investing through the lens of sustainability as we do, we hope to capture these opportunities in our portfolios while mitigating the risks from climate change.
Potential value of sustainable business opportunities almost 7x the cost of realizing them ($311 billion in costs, $2.1 trillion in opportunities)
There are more takeaways, which you can read a summery of at CDP’s Press Release on the report, (where these quotes were pulled from). They highlight the challenges that disclosure still faces, but as investment advisors, the message to us is clear:
- Climate risk must be managed in investment portfolios.
- These risks are not something that future generations alone will bear – we are feeling the impacts today, and business leaders expect these impacts to accelerate to the point where there are material effects on their bottom line within the next 5 years.
- We have to act. Our firm is doing our part as much as we can – from building sustainable portfolios, to offering no-minumum fossil fuel free portfolios so anyone can join our movement.
I hope you’ll be motivated to join us. Click the link in the bottom right corner of this page to schedule an appointment with us to learn how you can join our community and use your investments to create change.
We all need to face the fact that with modern medicine plus the desire of many people to stay active and fit that the length of our retirement, once we start it, is probably going to be a lot longer than it was for previous generations!
Let’s take a look at the current mortality tables and see what we learn. A male 65 has a life expectancy to live to 82.2, but if he does his life expectancy now goes to age 88.9 and if he gets there his life expectancy is now 93.2! You Go Guy! A female age 65 has an expectancy of 84.9, then it goes to 91.3 and then, lord willing, to 95.4! You Go Girl! The essential thought here is that we stand a good chance of being retired for a long long time! And, we better be prepared for that!!
The secret, in our mind, is to set up and tend to your Money Buckets. Yes, buckets, and there need to be at least three of them! Sometimes a fourth is appropriate, depending on the retiree’s goals. Let’s look at each bucket and its purpose in the big retirement picture.
Bucket # 1: Holds money for the early years of retirement: traditionally age 65 – 75. This bucket’s first job is to SUPPLEMENT the fixed portions of retirement income such as Social Security and Pension payments and any other regular guaranteed income streams. This bucket has a FAUCET from which is taken a steady stream of money so that the retiree’s make ends meet each month. Its’ second job is to have enough additional money so that all of the newly retired pent up needs get met: that could be painting everywhere, installing new everything, taking that long-awaited cruise, etc. Each bucket will have a DIPPER just for this purpose: dipping out some cash for “needed” items or adventures. Important thought: It Is OK if this bucket is empty when you get to Bucket # 2! That thought is LIBERATING! That means that you and an enjoyable early retirement during the GO GO YEARS!
Bucket # 2: Holds money for the middle period of retirement: traditionally ages 75 – 85. Its job for the first 10 years is to grow. This takes advantage of time, compound interests, and market cycles. When it is time to open its FAUCET it too will supplement the income stream from Social Security and Pensions, etc. Its job is the same as the first bucket, making ends meet. It too has a DIPPER, but it is more for emergencies and opportunities: to pay for the first and facilitate the second. These are the SLOW GO YEARS!
Bucket # 3: Holds money for the LONGEVITY ISSUES. There are several jobs, potentially, being done by this bucket. First, is the overall concern about paying for Long Term Care. Not a happy thought, but it will help preserve the rest of the money for Legacy and Philanthropic plans which would be a second reason for this bucket. A third reason would be to generate an income for this period because by then buckets number 1 and 2 may have run dry. Frequently people also want this income guaranteed for life for both of the spouses. In other words, and income that neither of them will ever outlive. This is done with an Annuity and often the Annuity can also take care of the Long Term Care needs, or a portion of them, as well. These are the NO GO YEARS!
Of course, each bucket has to be designed to meet the RISK TOLERANCE of each person. This system gives us more flexibility – because there are several buckets, we can manage each differently because their respective jobs are different and the last two have a long ‘runway’ before they are needed.
The diagram above will help you sort this all out and clearly depict the job, and the respective size of each bucket. I hope this helps, and feel free to call us with any questions, thoughts or observations you may have!
It is our great honor to share that Common Interests has been awarded the 2019 Flourish Prize for Global Goal #8: Decent Work and Economic Growth!
This award would not be possible without Professor Joseph Markert from Rutgers Business School, and the student authors who wrote the piece: Swetcha Ananthu, Silas Okoth, Matthew Hennessey, Jeffery Shen, and Paul No.
AIM2Flourish, a program housed at the Fowler Center, is used by professors around the world to facilitate student interviews with business leaders about positive and profitable business innovations that advance the 17 Sustainable Development Goals (Global Goals) established by the United Nations.
If you’d like to learn more, please visit the Fowler Center’s Facebook and Twitter pages to participate in the 2019 Flourish Prize Virtual Celebration where they are announcing all 17 Honorees. Check out the hashtag #FlourishPrizes2019 to see all of the reactions and related content!
How you invest your money makes a difference. This documentary was created to inspire investors to consider impact investing – investments that generate a measurable positive impact alongside a traditional financial return. The latest cut of this film features a variety of experts, including:
• Peter Turkson, Cardinal of the Roman Catholic Church
• Jon Hale, global head of sustainability research at Morningstar, Inc.
• Hazel Henderson, futurist, economist and author – one of the founders of the movement to responsible investing.
• Judith Karl, executive secretary of the U.N. Capital Development Fund
• Jonas Kron, senior vice president and director of shareholder advocacy at Trillium Asset Management
• John Streur, president and CEO of Calvert Research and Management
“Impact” also follows the entrepreneurial journeys of David Katz, founder and CEO of The Plastic Bank, and George Taylor, CEO of TRU Colors Brewing Company.
David and George embody the artistry that takes place when entrepreneurism aligns with purpose.
You can learn more about this project at http://impactu.film/, join the ImpactU community at https://impactu.me/, and get more resources about the United Nations Sustainable Development Goals through the ImpactU Foundation at https://impactu.foundation/
As a part of our commitment to expanding the reach of sustainable investing, I sat down with Citywire RIA Magazine to talk about how we approach the design and implementation of our portfolios. We talked about our Investment Philosophy, the investment models we offer to clients, and how we add new investments to our portfolios.
We even shared our Environmental, Social, and Governance (ESG) screened Moderate risk model with them so other advisors get tosee how we think about these issues.
We hope that by giving interviews like this one, we can encourage the larger community of financial advisors to take a harder look at investments that use Environmental, Social, and Governance factors. The interview also includes a discussion on the different approaches we take when clients come to us with specific requests, like Faith Based investing or Fossil Fuel Free Investing. If you’re curious, or would like to read more about our approaches, we’ve done a great blog post on the subject already!
My Partner and I are proud to be Social Entrepreneurs. Therefore, every day we talk about Sustainable, Responsible and Impact Investing (SRI). We also talk about Environmental, Social and Governance (ESG) screening and scoring. More importantly, we talk about managing risk, rates of return, portfolio growth and retirement planning. That’s our business! Making money for our clients in a Sustainable and Responsible way.
All of these subjects come from the same source – STEWARDSHIP! That’s ultimately the foundation of the discussion. We can ask ourselves: “Will future generations have what they need to live a full and productive life in the future?” The answer is evidenced by each of us, every day. The decisions we make in our daily lives tell our story; good or bad. We will follow this truth: If it is to be it is up to me!
Stewardship means mindfully behaving in such a way that if everyone did the same, we would all be better off and our future would be bright!
How can we do this stewardship thing? First, we must learn about the Circular Economy where there is NO Waste! Second, we should examine the supply chain management of corporations we buy things from. This will uncover hidden problems or harmful behaviors along the chain. The United Nations gives us a very good road map. They created the Sustainable Development Goals. They speak directly to the subject of Stewardship and show us what needs to be solved!
We can also turn to Shareholder Advocacy. This actually FORCES Stewardship when needed! This involves posting resolutions for corporate shareholders to vote on, in terms of continuing or stopping various corporate behaviors. This is the ‘walk softly, but carry a Big Stick’ approach to stewardship. Believe it or not, aberrant corporate behavior can be, and IS, changed every year by shareholder vote, or the threat of a shareholder vote! We can make a difference!
There is definitely a need for an overwhelming theme of planetary stewardship. Fortunately it is built into the SRI/ESG world by definition. I think we should actually start taking credit for it! My first step is to start actually using the STEWARDSHIP word aloud in public.