22 Portfolio Companies across Four Asset Classes Report Impact as part of KKR’s Green Solutions Platform (GSP)
KKR & Co. L.P., a leading global investment firm, recently announced that it has re-launched its pioneering environmental initiative under a new name, and with an expanded mission. KKR’s eight-year-old Green Portfolio Program (GPP), which focused on promoting eco-efficiency best practices across participating portfolio companies, will be expanded to an initiative called the Green Solutions Platform (GSP)
The launch of the GSP follows nearly eight years of meaningful environmental and financial impact from the GPP. During that time period, 27 companies participated with 25 of those companies reporting the following cumulative results thanks to companies’ eco-efficiency efforts: nearly $1.2 billion in avoided costs and added revenue, more than 2.3 million metric tons of avoided greenhouse gas (GHG) emissions, 27 million cubic meters of avoided water use, and 6.3 million tons of avoided waste.
Evolving beyond this focus on eco-efficiency, the GSP will mobilize a broader spectrum of possible environmental and business impacts. The re-launched program will continue to drive efforts in eco-efficiency, but will also promote and champion participating companies’ environmental innovations and solutions offerings to environmental challenges as part of their business mandate.
“We recognized that our companies have environmental opportunities that go beyond eco-efficiency,” said Henry Kravis, Co-CEO and Co-Founder of KKR. “Therefore we developed an approach that spurs innovation and expands environmental solutions.” George Roberts, Co-CEO and Co-Founder of KKR, added, “Our decision to transition an already-successful program was in response to the evolving nature of our companies’ needs and abilities. We will continue working with our program partners to find new ways to drive both business and environmental value.”
As part of today’s GSP announcement, KKR released results for 22 participating companies across four asset classes, including private equity, special situations, real estate and infrastructure. The majority of the reporting companies focus on eco-efficiency, with 19 case studies spanning a range of geographies and material issues. One company reported on eco-innovation and three companies reported on eco-solutions.
“This year’s announcement includes KKR’s largest number of participating companies at any one time in the history of our environmental program,” said Elizabeth Seeger, Director at KKR and a leader of the program since 2008. “We know that this program will continue to evolve, but we are already very encouraged by the range of companies engaged beyond our private equity portfolio and the opportunities that we have found that are broader than eco-efficiency.”
Private equity portfolio companies reporting results include Alliance Tire Group, Bis Industries, Capsugel, CITIC Envirotech Ltd., Dalmia Cement, First Data Corporation, Gardner Denver Nash, Gardner Denver Thomas, GoDaddy, HCA, Lake Region Medical, Panasonic Healthcare, Pets at Home, PortAventura, Sundrop Farms, Sungard Availability Services, Tarkett, Toys “R” Us, and US Foods. Coriance, an infrastructure portfolio company; Pacific Retail Capital Partners, three shopping malls in KKR’s real estate portfolio; and Ursa, a special situations portfolio company, are also reporting into the program.
KKR will continuously engage with key stakeholders for feedback and input as this program grows over time. Longtime partner Environmental Defense Fund will continue to provide strategic advice to KKR and the new GSP.
“We’re proud to see this effort that we worked with KKR to launch eight years ago continue to evolve, expanding beyond the bottom-line benefits of eco-efficiency to the potential top-line benefits from companies making environmental solutions core to their business models,” said Tom Murray, Vice President of corporate partnerships at Environmental Defense Fund.
For more on KKR’s Green Solutions Platform (GSP) and participating portfolio companies, visit www.green.kkr.com
To read KKR’s annual Environmental, Social, and Governance (ESG) and Citizenship report, visit www.kkresg.com
KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world?class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners’ capital and brings opportunities to others through its capital markets business. References to KKR’s investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (NYSE:KKR), please visit KKR’s website at www.kkr.com and on Twitter @KKR_Co.
Drawing on more than 100 years of combined industry experience, Whole Foods Market’s product experts have pinpointed 10 top food trends to watch in 2016. From “old-world” ingredients and new vino vehicles to emerging flavors and sourcing trends, this year’s forecast covers a lot of ground:
Uncommon meat and seafood. Lesser-known meat and seafood options are making their way from restaurant menus and local obscurity into mainstream American kitchens. Thanks to heightened awareness around food waste, renewed interest in artisan butchers and a host of other factors, once-overlooked cuts like sirloin top, pork T-bone chop and Denver steaks are becoming fair game for at-home cooks. Offbeat—and more sustainable—seafood species like Responsibly Farmed Paiche and wild-caught blue catfish are also making a dinnertime debut, easing pressure on popular picks like salmon, tuna and shrimp.
Wine in a can. As American wine drinkers become an increasingly young, diverse and playful bunch, winemakers are taking note. Options that provide accessibility and convenience without trading quality, will continue to gain traction. Cue the aluminum can—a portable, easy-to-chill option that’s well suited for single servings and active, outdoor lifestyles. And with choices like Infinite Monkey Theorem and Presto Sparkling wine (coming soon to Whole Foods Market), today’s pop-tops are the new popped-cork.
Plant-based everything. Plants are playing a meatier role in a surprising number of products, and not just for vegan and vegetarian alternatives. This year’s plant-forward movement will be all about harnessing the power of plants—from quinoa protein in hair care products to vitamin-rich veggies in frozen dessert pops. Look out for Whole Foods Market’s 97 percent plant-derived hair care line, Kite Hill nut-based cheeses and 365 Everyday Value Fruit & Veggie Bars.
Culture Craze: Fermented foods and probiotics. Whether shoppers are seeking gut health or go-for-it flavor, fermented foods and probiotics are growing like good bacteria—and they’re not just for hippies anymore. Fiery picks like kimchi and gochujang will continue to gain steam, while innovative options like chiogga beet kraut and non-dairy tonics will add variety.
Non-GMO-fed verified products. As shoppers demand more transparency in their food, the non-GMO movement will continue to gain momentum. Whole Foods Market currently offers more than 11,000 non-GMO verified choices and 25,000 organic options, with even more in the pipeline. Growth and innovation in the animal protein category will be especially strong, thanks to the recent development and approval of non-GMO verification methods for animal feed. Non-GMO-fed verified fresh eggs, chicken, pork and even sausages from brands like Fork in the Road will be worth watching.
Graze Craze: Grass-fed 2.0. With new grass-fed products—from milk, eggs, yogurt, butter and cheese options to packaged meat snacks and even protein powders—sprouting up across the store, grass-fed has proven it’s no longer a niche category for health fanatics or Paleo devotees. Brands to keep an eye on include Sweet Red Cheddar, Maple Hill Creamery, Organic Valley, Kerrygold, and meat-based snack makers EPIC and TANKA.
Dried and true: dehydrated foods. Gone are the days of empty-calorie snacking. Today’s shoppers are trading up for healthier, whole-food based snacks with simple, quality ingredients. Unlike the kale chip craze of years past, 2016’s dehydrated trend takes it to new heights—from dehydrated broccoli, Brussels sprout and parsnip chips to sophisticated salmon, bison and chicken jerkies with grown-up flavor combinations. On-trend products include veggie options from Brad’s Raw Foods, Wildbrine Kimchi Crisps and new made-in-house meat jerky at Whole Foods Market.
Heirloom ingredients beyond the tomato. Heirloom ingredients are making a comeback, and not just in the produce aisle. Prized for flavors and traits that have been preserved for centuries, these “old-world” edibles are popping up in all kinds of packaged goods. Tiny But Mighty Heirloom Popcorn, Madécasse Chocolate made with heirloom cocoa and Seely’s Mint Patties made with heirloom black mitcham peppermint are just a few examples of trending products.
Alternative and wheat-free flours. “Alternative flours” are not so alternative anymore. People are going nuts for gluten-free flours made from legumes, ancient grains, teff, amaranth and, well, nuts. Chickpea flour is a quick riser, while other legume-based flours are showing up in bean-based pastas and other packaged goods.
‘Old World’ flavor adventures. World flavors with a twist continue to see significant gains, especially Far East flavors from Korea, Japan and Southeast Asia, as well as Middle Eastern ingredients. On-trend products include Saffron Road Korean Tacos, 365 Everyday Value Organic Sweet Sabi Mustard (coming soon) and 365 Everyday Value Organic Thai Curry Cashews.
This year’s predictions came from Whole Foods Market’s experts and industry leaders ( http://media.wholefoodsmarket.com/experts/subject-experts ), who source items and lead trends across the retailer’s cheese, grocery, meat, seafood, prepared foods, produce and personal care departments, and spot trends for the grocer’s more than 430 stores.
IE Expo 2016, being held on May 5-7, 2016 in Shanghai, China at the New International Expo Centre (SNIEC), will focus on environmental hot issues like water, air, solid waste and site remediation. With an exhibition area of 75,000m, IE Expo 2016 is expected to attract 1,500 exhibitors and 48,000 visitors.
As the first industry chain platform for polluted water and sewage treatment in Asia, the water sector will showcase advanced solutions and devices and allow industry players to discuss the problems of water shortage and treatment. The water exhibition will also cooperate with IFAT India and IFAT Germany to share media and visitor resources.
Meanwhile, as the solid waste industry gains increasing attention in recent years, IE expo 2016 (www.ie-expo.com) will specially present the solid waste and recycling sector. This sector will be co-hosted by Messe München (MM), MMZM Trade Fair (Shanghai) Co., Ltd. (MMZM). The society of solid waste of Chinese Society for Environmental Sciences and China Solid Waste and Chemicals Management Center and over 200 related enterprises, strategy planning departments and scientific and research institutions expected to attend. Besides, it will be divided into seven areas, namely Garbage Treatment and Recycling Usage Area, Equipment and Technology for Solid Waste Treatment Area, Measurement, Control and Laboratory Technology Area, Comprehensive Utilization of Solid Waste and Power Generation Area, Science, Research and Technology Achievement Transfer Area, Environmental Service Area and Environmental Sanitation Area.
As the first top feast of solid waste and recycling technological communication in Asia, the solid waste show sector has been widely recognized and highly valued by exhibitors and well-known industry buyers. This year, the exhibition will showcase advanced devices, technologies and one-stop solutions for exhibitors and industry players to communicate new ideas and make trade cooperation. Meanwhile, the Solid Waste Treatment Sub-Forum of IE expo 2016 Summit will be held simultaneously. Famous experts and delegations from leading scientific and research institutions and solid waste enterprises will attend the forum to discuss hot issues like business patterns, project operation management, cooperation strategy of industry chains, as well as industry and project investment.
Current Situation of China’s Solid Waste Industry
As rapid economic growth and population growth led to increased solid waste in recent years, the inadequate solid waste treatment capacity and pollution issues have become two of the most important environmental issues for the Chinese government and industry players. To address the solid waste issues, the Chinese government will invest RMB 2-4 trillion in the solid waste industry during the “Thirteenth Five-Year Plan”. Therefore, some industry players predict that the solid waste industry will see an enlarging market and boost the whole environmental industry in the next five years.
Characteristics of China’s Solid Waste Industry
Apart from waste water and gas pollution, solid waste is the third major pollution issue in the environmental area. Solid waste is generally composed of transport, disposition and conversion waste. Its four major characteristics are:
Great varieties: According to theLaw of the Prevention and Control of Environmental Pollution by Solid Waste, solid waste can be divided into over 1,000 kinds by attributes and over 10,000 kinds by their commercial value.
Complicated treatment process: Solid waste will be disposed in series of steps including burying, smashing, sorting, composting, re-utilization and biological treatment.
Huge market value: According to a survey of YOKOHAMA METAL CO.,LTD., over 0.15kg of gold, 100kg of cooper and 3kg of silver can be extracted from 1,000kg discarded mobile phones.
Underdevelopment: The solid waste recycling sector is highly scattered and underdeveloped. And new sectors related to solid waste recycling, such as collection of solid waste recycling big data to predict consumption trends and construction of waste bank to recycle high-value solid waste, may emerge in future.
Policy Trends of China’s Solid Waste Industry
According to the new Law of Environmental Protection released in 2015, the Chinese government will make great efforts to enforce environmental industry regulation and monitoring including further strengthened information disclosure to promote public participation in environmental activities and enhanced environmental standards. Meanwhile, in order to accelerate the development of the environmental market, the Chinese government introduced several policies like Regulation on the Administration of Franchise and The Way Government Purchasing Services to help industry players seek new business opportunities and increase the investment in the field of solid waste.
Future Trends of China’s Solid Waste Industry
Capital operation is key to the development of solid waste enterprises. Since China’s environmental industry became one of the eight strategic emerging industries in 2009, the total investment in this area has reached RMB 1.3 trillion. As one of the most important parts of the environmental area, the solid waste industry has attracted industry players to get involved in the related investment activities and projects. Most environmental enterprises explored their business market and completed transformation through capital operation. For instance, Beijing Enterprises Water Group, Capital Environment Holdings Corporation and Yunnan Water Investment Corporation have merged small enterprises to harvest environmental projects and entered the international market.
Brand image is also important. In order to rebuild or reshape their own brands, some Chinese solid waste companies changed their names, such as Chengdu Xingrong Environment Co., Ltd. and Tus-Sound Environmental Resources Co., Ltd., while Suez Environment Group also integrated its over 40 brands to strengthen its brand image.
The industrial chain continues to prolong. With the industrial chain continuing to prolong, the enterprises increasingly focus on front-end processing and back-end recycling. For instance, Tus-Sound Environmental Resources Co., Ltd. merged the related scientific and technological institutions and obtained the project of rural and urban sanitation integration.
Solid waste enterprises go overseas, mainly targeting Europe and Southeast Asia. Encouraged by the “One Belt, One Road” policy, well-developed companies have expanded their business into Europe and Southeast Asia and cooperated with foreign companies for market exploration.
by Elsie Maio, Founder of Humanity, Inc and SoulBranding Institute
Nearly 12 months ago, I dove into the investment ecosystem to survey from the inside the dynamics of the ‘sustainable investing’ trend. I was moved to do so by the much ballyhooed transfer of investable wealth to values-seeking millennials (estimated at $30 Trillion) and to women (estimated at $22 Trillion). How prepared was Wall Street to meet this imminent and perhaps pent up demand for well-performing investment vehicles that enhance the sustained well-being of people and the planet?
Much of that inquiry was sponsored by and published in a series of articles here in The GreenMoney Journal. After months of attending industry conferences, sharing with fellow experts on a day long panel discussion at CFA Institute, and scores of interviews with insiders, I’ve learned a lot.
In short: While Wall Street is standing in its own way on this one, it is poised to break through to create a whole new marketplace. But it will require concerted change. Right now, an amorphous collection of investment offerings, certain significant asset pools and a lot of disparate initiatives and shiny marketing communications are indeed growing, apparently willy nilly. And for it to emerge as a thriving marketplace requires leadership and some new skills.
Here are five highlights, including a call to action to those who would take a leading position in the emergent marketplace for those estimated $50+Trillion in investable assets:
CALL TO ACTION: Step Into the Vacuum in Three Ways
The market for so-called responsible investing, or sustainable investing is waiting for Wall Street to step forward with:
1. Authentic Leadership. A business as usual approach will continue to retard the development of the sustainability-, responsible-, and impact- investing markets until leader(s):
• Step into the vacuum of confusion to galvanize momentum
– Sort out the effects of the Tower of Babel: Product categories, performance characteristics, verified data, contradictory information owing to a lack on shared definitions – SASB is a step toward that, gaining consensus from the issuer side on definitions of risk and opportunity factors such as ESG and their expression in different industries, but that mandate is not enough
• With confidence and courage. That’s both a public stance and an internal stance, often requiring greater coordination among internal business units at the large firms. So that, when marketing promises sustainable investment options, the pipeline of product sourcing and product development is ready to deliver.
And externally, organizations that put a stake in the ground and define their role in contributing to planetary sustainability and social wellbeing, like NORDEA (www.nordea.com), have momentum in the market and the ear of influencers
• Reach out and engage with the larger investing public
– build awareness of the new opportunities in their language – extend a halo of trust for the entire financial services sector by setting a new standard of transparency with down to earth engagement with the public.
2. Clarity. • Confusion is a drag on financial advisors’ effectiveness, as well as general investors’ understanding. And that impact is compounded in the already trust-deficient financial services sector. • Nuanced discipline, vs. another flavor of ‘irrational exuberance.’ The issues are systems issues and warrant careful examination and discourse.
3. Co-opetition. See the sector for what it is: an interdependent ecosystem. The ectoplasm – or marketplace – cannot nourish the parts because it is dilute and fractionated. Players will all benefit from collaborating to build the market for sustainable investments. That is build demand, supply, and access. Precedents abound in other industry sectors, including the Dairy and the PC industries. At different points in time, the companies in each of those industries formed consortia to promote clarity and generate demand for their product category, rather than their proprietary products. The ‘high tide raises all boats’ strategy can help at critical inflection points in the evolution of an industry.
Those that do step up and add value by helping to clarify, convene and cooperate will enjoy the halo of leadership. In turn, that will redound to their corporate image and reputation.
Why Those Three Actions?
The Responsible Investor – RI Conference held in New York last December is the latest group-barometer in my hands-on survey. Simultaneous with the Paris Climate talks, this gathering had a broad swath of international players in the ecosystem: asset managers, issuers, analysts, funds, foundations, advisers, as well as the public sector and policy leaders.
• The sector is even more confident and marketing more assertively. Ben Bingham, founder and CEO of 3Sisters Sustainable Management (www.3sistersinvest.com) reflected after the RI Conference, “It seems as though most of the skeptics are no longer in the room. There is a new comfort level, perhaps a result of COP21’s global consensus, but more simply a matter of time as ideas like climate change move from the category of ‘insane’ to ‘debatable’ to ‘accepted’. At 3Sisters we are not changing our decision process in approaching the millennial goals, but we will be sure to be less shy about it.”
• Tower of Babel is getting louder; lacks the shared framework for language and communication. Growing confidence is raising voices but without a common vocabulary or even nomenclature that sorts product categories, the voice of the sector is an intimidating cacophony. Lots of proprietary varieties of trees and shrubs but no clearly defined forest(s). It’s harder than ever to discern how the sector and its offerings aggregate – what they add up to – and therefore, how to approach them – as an financial advisors or investor. And as corporate issuers consider how they might respond to investor interest in the category, they choose on a one-off basis what to emphasize in their positioning, their business strategy and their reporting conventions. That inhibits understanding and therefore confidence and trust among the mainstream.
Sustainability Accounting Standards Board (SASB) is helping corporates to bring some order and continuity by co-creating industry conventions with issuers. But still they are left to create their own context for stakeholders, including investors and the investment professionals. The onus is on the observer to see the benefit and the access points to/of ‘sustainable investing’. In our experience, it’s worth the effort to help not hinder understanding among stakeholders.
Right now, only dogged diligence will reveal the overall pattern of what’s available and suitable for different investment objectives. For example, one speaker at RI Conference in New York, citing her experience with the City of Buenos Aires in Argentina, Delfina Lopez Freijido, cofounder of Acrux Partners (https://www.linkedin.com/in/dlfreijido/), said they’d found greater participation in responsible investing there than was apparent from what was reported – after personal conversations helped them penetrate the ambiguous language. ‘What is impact investing to one person is socially responsible investing to another and sustainable investing to another.’
There’s the opportunity for the sector to update the strategic marketing and communication framework that will focus demand in this marketplace.
• Material nuances are easily obscured in the emergent marketplace, to the detriment of what sustainability investors seek. The sources include:
– the politicization of underlying issues such as climate change, women’s rights, and gender diversity – inconsistent analytical lenses; inconsistent ways of interpreting data – limited data – emotional ‘memes’
Here’s one example of nuanced understanding that opened my eyes. I had come to the topic of fossil fuel divestment enthused by the campus activism that reminded me of the South African Apartheid actions taken in the 1960s and 70s as part of the student movement of my boomer youth.
And I was lucky to have the opportunity to follow up with Cary Krosinsky (www.linkedin.com/in/carykrosinsky) to explore his nuanced take on one ‘hot’ topic he moderated at the RI Conference, titled “Fossil Free Campaign and Institutional Carbon Divestment.” Cary takes a systems view of these issues, and was early to bring disciplined tools to the conversation, for instance, with the Carbon Tracker research.
So, regarding the ‘divestment’ meme, Cary’s overall point of view is that “divesting from oil is complicated. It’s not really a strategy to foster climate change solutions…for example, oil-producing countries like Saudi Arabia are happy to continue to pump oil. So, if the use/consumption, demand side of the equation doesn’t change nothing will change.”
Moreover, “university investing tends not to be focused on public equity investments. Instead, the question should be what can an academic institution do to have meaningful effect? Do research, drive innovation, engage with companies as a responsible investor, as Yale has said they will do.”
Clearly, the momentum is here for investments that merge personal sustainability and planetary sustainability. The investment community has the power to meet that demand and cultivate it. Let the leaders, clear thinkers and speakers, and co-operators emerge.
Article by Elsie Maio, who is a consultant and guide to business leaders seeking alpha + impact, she’s a thought-leader in sustainable marketing, alumna of McKinsey & Company. Ms. Maio is the founder and CEO of Humanity, Inc/SoulBranding Institute.
By Linda-Eling Lee, Global Head of ESG Research, MSCI
A long-term shift to a low-carbon economy, the emergence of a new generation of investors, and a series of institutional forces are the basis for the environmental, social and governance (ESG) trends that may be top of mind for investors in 2016.
With 2016 now underway, ESG investment trends seem likely to be shaped by the climate agreement reached last November in Paris, the coming of age of millennials, new forms of shareholder engagement and a gap between wages at the top and the bottom of the pay scale.
Here’s our view of how some of those trends may play out.
A More Precise Picture for the Bond Market
Fixed income investors may increasingly use ESG scores to inform their decisions. With rising rates of corporate defaults, a growing number of investors are taking the view that integrating ESG factors in their investment process may help them reduce risk.
A study by Barclays in November 2015  found that investment grade bonds with higher ESG scores outperformed those with low ESG scores between 2007 and 2015, after controlling for systematic exposures such as sector, duration and quality. Further, of the three ESG factors generating a statistically significant return premium during that time, governance demonstrated the largest cumulative outperformance.
Fixed income managers have traditionally lagged their equities counterparts in integrating ESG risk factors. If the credit cycle begins to contract in 2016, investors looking at ESG factors to differentiate credit quality may be better positioned to identify opportunities in a market dominated by downside risk.
Decoupling Clean From Dirty in Power Generation Assets
Investors looking to lower exposure to carbon in their portfolios could drive utility companies to explore ways to decouple clean assets from those that burn fossil fuels.
The agreement reached in Paris by nearly 200 countries to limit the rise of global temperatures to less than 2C (3.6F), has put the onus on companies worldwide to begin to change their practices to reduce their carbon emissions.
For example, while 550 companies in the MSCI ACWI Index are slated to meet their targets to reduce carbon ahead of schedule, we have found that 112 out of 146 of those companies in the energy sector had set no carbon reduction targets, which leaves them potentially vulnerable to costs associated with meeting new emission reduction regulatory standards.
There are few options for investors seeking to invest in the growth of renewables through large, listed utilities. Companies with the largest renewable energy capacity often have significant fossil fuel operations, too.
Some of those companies have begun to experiment with splitting off renewable assets into separate entities. In the U.S., SunEdison and NRG Energy have listed ‘YieldCos’, which aim to capture predictable cash flow from owning and operating their renewables power generation assets. In Europe, the German utilities, E.ON and RWE, have proceeded in different ways to spin off renewable and legacy fossil fuel generation into separate entities.
Unless large utilities do more to separate renewables from legacy carbon-intensive assets, we anticipate that institutional investors may allocate to asset classes that can offer more pure play exposure to low carbon energy assets of the future that the public equities universe may not.
Wealth Management for a New Generation
In the U.S. in particular, the emergence of the millennial generation means that wealth management advisers are navigating a handoff to a younger set of investors for whom ESG matters may be paramount, according to several studies .
Millennials also tend to be tech savvy. So-called robo-advisory platforms, which automate many interactions at lower cost and, in some cases, with greater transparency, compared with traditional providers, are slated to handle 5.6% of total U.S. investable assets in 2020, up from a half of one percent last year, according to consultant A.T. Kearney.
Wealth managers may respond by seeking to go beyond traditional descriptors of investment strategies such as cap size, market exposure and historical returns to provide a new dimension of transparency where their clients can see the ESG practices of companies within their portfolios and how those companies comport with their values and philosophies, at the fund level.
We categorized investor preferences along three dimensions: Values (e.g., avoiding businesses involved in tobacco, weapons or human-rights violations), Impact (e.g., capturing measurable social returns) and Long-Term Horizon Investors (e.g., mitigating against water scarcity, energy costs or climate change).
Power in Numbers for Institutional Investors
The coming year may see a notable shift in institutional investors’ role in addressing key corporate governance weaknesses. Some of the largest investors have banded together to produce changes in boardrooms across the market rather than exclusively engaging with individual companies.
A notable example has been the Boardroom Accountability Project, a national campaign spearheaded by the Comptroller of the City of New York that, in collaboration with other major institutional investors, targeted 75 U.S. public companies.
The stated goal of the campaign is to increase shareholder value by asking boards to adopt proxy access.
A potential target for similar sorts of engagement may be refreshment of boards. Two out of three U.S. company boards have at least one director who has served 12 or more years, according to MSCI ESG GovernanceMetrics, which covers approximately 3,000 U.S. companies. Such efforts might also seek to address the lack of gender diversity among these same boards.
Turning the Spotlight on Pay Inequality and Performance
Sixty-two people globally own the same wealth as half of the global population, according to Oxfam.
The debate on income inequality is likely to shift to a focus on the gap in pay between CEOs and the rest of companies’ workers. A year from now, U.S. companies will be required by the Dodd-Frank Act to disclose the ratio between the pay of their CEO and that of a worker at the median of the company’s wage scale, a ratio that has grown to 300-to-1, from 30-to-1 four decades ago, according to the Economic Policy Institute.
The run-up to the release of pay-ratio data seems likely to raise questions not only on how pay gaps within companies contribute to growing wage inequality, but also how pay gaps relate to company performance. An analysis by MSCI in January 2016 found that for 591 companies in the MSCI ACWI Index there was no significant difference in operating profit margins between companies with a high pay gap and those with a low pay gap over the five years that ended in 2014. On average, companies with low pay gaps tended to be more profitable than companies with high pay gaps.
Article by Linda-Eling Lee As Global Head of Research for MSCI’s ESG Research group (www.msci.com/web/msci/esg-ratings), Linda-Eling Lee oversees all ESG-related content and methodology and chairs MSCI’s ESG Ratings Review Committee. She leads one of the largest teams of research analysts in the world who are dedicated to identifying risks and opportunities arising from material ESG issues. Linda received her AB from Harvard, MSt from Oxford, and PhD in Organizational Behaviour from Harvard University. Linda has published research both in management journals such as the Harvard Business Review and MIT’s Sloan Management Review, as well as in top academic peer-reviewed journals such as Management Science and Journal of Organizational Behaviour.
 Desclee, Albert, Lev Dynkin, Anando Maitra, and Simon Polbennikov. ESG Ratings and Performance of Corporate Bonds. Barclays Research, November 2015.
Jacky Haynes,Senior Director of Supplier Responsibility at Apple is interviewed by Bennett Freeman, former Senior VP for Sustainability Research and Policy at Calvert Investments
[ Originally published in GreenMoney – May 2015 issue ]
Introduction by Bennett Freeman,who was the Senior Vice President for Sustainability Research and Policy at Calvert Investments for nine years from April 2006 through April 2015.
Over the last decade, Apple has become the most iconic brand and valuable company in the world. It stands for innovation—innovation in its technology, design and product experience. And it has been a magnet for responsible investors, whose portfolios have been served well by holding the company.
At the same time, like its peers and competitors in the consumer electronics industry, it faces tough issues around labor and human rights in its relationships with its suppliers—some of which manage massive workforces in countries such as China. Apple has been a leader in the supplier responsibility space, but has learned that it is difficult—if not impossible—to achieve the same level of perfection on these issues as they do in their products.
Jacky Haynes, Apple’s Senior Director of Supplier Responsibility, has been at the forefront of the company’s efforts to manage these relationships. Unlike many of her peers at other companies, she has built her career in operations and on factory floors, giving her a unique perspective on how supply chains and assembly lines work—and an unusually informed perspective on workers and workforce management. Jacky has been tireless in her work with Apple’s suppliers, but is the first to admit that she is constantly learning new lessons along the way on how the company can continue to improve its approach to these complicated issues
Bennett: Unlike many other companies, Apple’s Social Responsibility team sits within its Operations team. What are some of the insights you bring from your many years on the operations side of Apple to the company’s Social Responsibility function?
Jacky: The way we think about supplier responsibility at Apple is that it’s entirely intertwined with operations. We can’t do the work we do, deeply embedded in the supply chain, without the operations team. They are as likely to knock on my door to ask for help as I am to knock on their door. I came into this role with 30 years of experience in operations, so I have real experience and relationships in that world. I can tell you without a doubt I would not have come back from retirement to take this job if we did not have a management team, up through and including our CEO Tim Cook, who was totally committed to the work we are doing.
At Apple, we believe that every worker in our supply chain has the right to safe and ethical working conditions. That’s just not a slogan on our website; it’s something we live and breathe every single day. And it’s not just the responsibility of my team; it’s also the responsibility of the hundreds of Apple employees in our factories every single day. One of the things that really distinguishes the work we do in supplier responsibility is that we have boots on the ground all the time. I don’t believe that my job can be done from behind a desk, so I spend a lot of time with my team in the factories talking to managers and attending audits.
Bennett: In the wake of The New York Times investigative reporting on Foxconn in early 2012, Apple faced sharp scrutiny regarding its supply chain practices and has addressed these issues by joining the Fair Labor Association (FLA) and strengthening its policies and management systems in recent years. What improvements have been made and what lessons has the company learned?
Jacky: In fact, we’d been working on these issues for some time. We had what we believed to be—and still do believe—one of the strongest codes of conduct in the industry. I think we had to learn that this work is a journey. We really looked at ourselves and realized that we don’t know if, when and how we’ll ever be done, no matter how good of a job we are doing.
We care so much about perfection in our products. We want that same level of perfection in our supply chain, but it’s very hard. So I’d say looking in the mirror and dealing with that reality was a very, very difficult thing for us to do, and so we redoubled our efforts on many fronts.
Our first lesson was that we needed to be sure that we were designing supplier responsibility programs with the same level of attention to detail and innovation that we bring to our products—and we need to be able to do that at Apple scale. And for Apple, scale means that our top 200 suppliers manage over 750 facilities worldwide at all levels of our supply chain—and manage over 1.5 million workers. So that’s the challenge ahead of us.
We learned that we really needed to focus on tackling the root causes of any issues we observed within the supply chain. For example, we saw that workers weren’t wearing the appropriate personal protective equipment. It wasn’t that workers were intentionally violating the policy, but that factories didn’t have properly trained people to evaluate workers’ health and safety and put a program into place. So we took that observation, among others, and launched the Environment, Health, and Safety Academy to try to address the root cause of some of the health and safety violations.
And then finally, we realized we needed to be more transparent and open around the work that we are doing. If you look at our reports for the past three years, we have increasingly added transparency into our reporting, including listing our suppliers, our smelters in the conflict minerals program, and the standards that sit behind our code of conduct. We think it’s really important to talk to our friends, our critics, and our partners about the work that we are doing, because hopefully we can inform them and they can inform us, and we’ll improve.
Our relationship with Ma Jun and his organization, the Institute of Public and Environmental Affairs, started around this same time. It was a very delicate dance in the beginning as we both got to know each other, but it has turned into a tremendous working relationship. In 2014, we had about 35 facilities that we had cleared from his database, and we are also doing a tremendous amount of proactive work with him, including publishing emissions data. We went from last to first in his ratings, and we value this relationship highly because we have tremendous respect for his organization and the work that we’re doing together. It shows the power of what can happen when you are more open and engaged.
Bennett: Many believe that supply chain audits have their limitations and there are mounting indications of “audit fatigue” on the part of suppliers. What tools is Apple using beyond audits to help its suppliers comply more effectively with labor laws and to respect workers’ rights?
Jacky: It’s in vogue today to slam audits, and there are a lot of good reasons that people should ask questions. Having said that, we do believe that a good audit program is an essential part of what we do. In fact, we performed 630 audits in 2014, which is up from 451 we did in 2013. It’s not the only thing we do, and it would never be sufficient on its own—but audits give us the chance to put boots on the ground and have a presence in these factories. We always have an Apple person in every audit, and I will tell you that this is very, very critical because it really gets the supplier’s attention and it really changes the tone and tenor of the audit. It is important to us to have this core of people who know our values and our structure in addition to the third parties that we bring in.
The second thing we do is closed-loop remediation with our factories, which means we ensure the factories close things out and we look for recidivism when we go back to audit them again. And then finally, I’m an engineer. I want metrics. I want metrics that will show if I’m improving or not improving. That allows us to use the audits as a core component of a supplier’s scorecard.
Audits aren’t enough, however. We spend a lot of time developing programs both to help our suppliers get better and also to provide resources for workers. For example, I referred earlier to our Environment, Health, and Safety Academy. We’re requiring that all of our suppliers send at least three people through this program. We also have our Supplier Education and Development program, our SEED program. We’ve donated millions of dollars in equipment and support so that workers can get training in everything from administrative and Bachelor’s degrees to training in English. And we are currently doing a pilot to explore how we can use technology—workers’ own smartphones—to hear from workers before an audit and to get feedback on their health and safety training.
Bennett: How does the company ensure suppliers maintain compliance with your supplier code during times of stress in the production system leading up to a product launch or the holidays?
Jacky: The time of product launch is a stressful time in our factories. It’s a stressful time for all of us who are trying to bring these fabulous products to market. One of the things that we have learned is that we need to get into our factories in advance of the ramp up. So this year for the first time we talked to our key suppliers at their facilities about more than manufacturing capacity. We asked questions about whether they had enough dorms and if they had enough people who could be talking to workers to ensure they were not having fees taken from them or ID cards held. We started way back in the planning process with factory surveys, and for our 22 most involved suppliers, we followed-up with bi-weekly visits to look at hiring plans, to interview workers, and to see how things were going.
Bennett: In recent years, Apple has been engaging more with the broader CSR community. What has been the result of that increased transparency?
Jacky: Tim Cook has been very clear: we will double down on secrecy around our products, but we want to be increasingly open about the work we do in our supply chain and in the environment.
We believe we have a lot to learn. We work very hard at this, but there’s a lot we can learn that makes us better. And we also know that we have a lot to share, and so I think it would be irresponsible to keep those things to ourselves. When it comes to supplier responsibility, we want people to steal from us, and hopefully they will let us steal a little bit from them too.
Jacky Haynes is Apple’s Senior Director of Supplier Responsibility. She leads a team created to ensure that all Apple suppliers around the world protect workers’ rights, provide a safe and healthy workspace, and minimize their impact on the environment. Ms. Haynes joined Apple in 2000 and spent eight years overseeing Apple’s business-process reengineering and business intelligence teams. Prior to Apple, she worked for the IBM Corporation from 1981 to 1994 in manufacturing and customer relations roles.
Bennett Freeman was Senior Vice President for Sustainability Research and Policy at Calvert Investments for nine years from April 2006 through April 2015. He led Calvert’s shareholder advocacy and public policy initiatives, contributed to the modernization of Calvert’s approach to responsible investment, and supported the development of innovative new Calvert funds. He served as Deputy Assistant Secretary of State for Democracy, Human Rights and Labor from 1999-2001.
[Article was originally published in GreenMoney Journal – May 2015 issue]
by Christopher Lindstrom, Co-founder of Catalyst Bioenergy Group and the great-great grandson of John D. Rockefeller
As I write this COP21 meetings (www.cop21paris.org) are over, having culminated with a commitment to keep the planet’s temperature rise to 1.5 degrees Fahrenheit. However, the path to achieve this goal is still vague with many questions remaining about how to implement.
As the real work begins, we must find strong leadership among younger generations—the ones who will suffer the most severe consequences of climate inaction—to break through the inertia of the old industrial economy in favor of a new regenerative world. After all, climate change is a symptom of a system of extraction, a system rooted in a worldview formed by a reductionist and linear thought process and relationship to life itself. I, and many of my peers, have major doubts that we will be able to realistically address climate change, and all of the other environmental and social crises that are wrapped up in it, within the existing framework. We need regenerative systems thinking. Reducing emissions is not enough. Nor is it enough to just replace fossil fuels with wind, solar and electric cars. The work is greater, more nuanced and more systematic: for we must regenerate the natural and social capital that has been depleted by over 150 years of callous extraction. There is a new generation of entrepreneurs and activists that are stepping up to this challenge by bridging philanthropy, investing, and systems thinking with social and environmental accounting.
As a fifth generation member of the Rockefeller family, I am aware of the best and worst of my family’s iconic role in the time bomb of fossil fuels. John D. Rockefeller, the founding patriarch and my great-great grandfather, helped set in motion the unprecedented human experiment making standardized oil the world’s primary energy source. By 1879 a small group of men, including his brother William, Henry Flagler and Samuel Andrews dominated 90 percent of the American oil refining industry amassing unprecedented sums of money, recycling it back into banking and finance, and shaped virtually every sector of the economy from agriculture, healthcare, transportation, chemicals and the military as extensions of the fossil fuel economy. After a superficial government crackdown on monopolies, his company, aptly named Standard Oil, split into several subsidiaries that we now know as Chevron, BP Amoco, and ExxonMobil.
Today, these corporations are poster children for the extractive economy. Whether it’s the Exxon spill in Alaska, BP in the Gulf of Mexico or Chevron’s relentless assault on the Amazonian rainforest, they have all demonstrated that they are not just destructive in their practices, but with the advent of climate change, we can say confidently that they are direct threats to life on this planet. And while I may be a benefactor from the wealth that they produce, I am not afraid to say that our survival as a species depends on their dissolution or radical transformation. Thankfully, this process may be underway. After the climate march last year and continuing at COP21, hundreds of financial institutions and foundations, including the Rockefeller Brother’s Fund, have joined the Divest-Invest movement and are pledging to take their money out of fossil fuels and reinvest in clean energy. This is the tip of the spear that will end fossil fuel economic dominance.
But, again, this is going to require major shifts beyond conventional investing or politics.
Most important perhaps, is closing the gap between waste and energy. In nature, there is no waste. What is not used by one organism is energy for another. Nature is fundamentally cyclical. If that cycle is broken, life will collapse.
Fossil fuels, among other things, break that cycle. And in order to mend it, we need a new economic paradigm — an economy that doesn’t just reduce the amount of carbon that is emitted, but one that sequesters more net carbon than is released. Because waste by definition is an open loop, we must implement systems of energy that help complete the cycle by transforming waste into a resource, i.e. energy, recycled materials and soil. By doing this we can begin to address the two major causes of climate change — fossil fuel energy and fossil fuel based industrial agriculture.
As a kid, I was struck by the iconic scene from Back To The Future where Doc Brown shows up out of nowhere in his updated time machine and frantically stuffs garbage into its fuel intake. Perhaps this was some kind of subliminal message for our modern era. Perhaps, the future will require going back to our past for solutions to the present crisis. As it turns out, there have been two basic technologies from the 1800’s (if not earlier) that can sustainably generate energy from waste: anaerobic digestion and gasification. But up until now, they have been seriously marginalized. Whether it be intentional marginalization by fossil fuel interests or complexities in maintaining a consistent output from a complex process, anaerobic digestion and gasification are barely included in the lexicon of sustainability. However, they both generate renewable fuel while recycling waste resources. This gas can be used as fuel for transportation or for generating electricity. But more importantly, they also produce valuable soil by-products. And this is a key carbon mitigating aspect. While aerobic digestion produces a bio-fertilizer rich in nitrogen, phosphorus and potassium, gasification produces a char that is a very stable form of carbon, which, if placed in the ground, can store that carbon for hundreds or even thousands of years.
Next to waste, there are several other issues that must be addressed. As long as the vast majority of people in the world continue to live in destitute poverty while others have more money than they know what to do with, people will continue to ruin the environment. Human beings cannot afford to think about climate change or the environment if they are fighting to feed themselves. And those who live only for the pursuit of wealth at the expense of the vast majority of humanity will likely be just as oblivious to the environment. While this may seem out of context, I think it is a critical component of the Regenerative Economy. One of the most common sense means of helping to fight poverty is through instituting a citizens’ dividend — not unlike what Alaska has been administering to every Alaskan citizen since 2005. While this has been given from the state’s oil revenue, what if everyone in this country received a dividend based on renewable energy and sustainable agriculture? What if we were to establish a national trust where a percentage of all renewable energy was owned in common? That could function as the bases of a green energy dividend. The same could be applied for food production.
The move to a regenerative civilization will not be easy. But we should be wasting no time. If we are trying to limit global temperatures from rising past 2 degrees, radical action is needed. While we hope that governments will back up their commitments with action, I believe civil society will lead the way and make the initial investments to demonstrate the viability of this path. Foundations can exponentially increase their impact if they make the choice to leverage their assets towards regenerative investments. That could set a precedent that would help invite participation from pension funds, which have now been given the green light to invest for impact. After all, the time has come that we close the loop on investing and values. The rewards clearly outweigh the risks.
Article by Chris Lindstrom has devoted the last 15 years of his life to transitioning the economy from a paradigm of extraction to one of regeneration. Starting with money, Chris worked at the E.F. Schumacher Society organizing events on new forms of currency and developed a local currency known as “BerkShares” the received international recognition. Since 2012, Chris has been active in the bioenergy sector as an investor and entrepreneur. He is the co-founder of Catalyst Bioenergy Group.
Chris has served on the Board of Directors of the Slow Money Institute and currently serves as a director of the David Rockefeller Fund.
by Katie Hoffman, principal of the Resilience Collaborative, LLC, a firm working with investors and innovators to shift capital toward equitable and scalable climate solutions across sectors
The year I turned 26, scientists measured atmospheric concentrations of Carbon at 400 ppm for the first time in recorded history. According to former NASA scientist James Hansen, “If humanity wishes to preserve a planet similar to that on which civilization developed and to which life on earth is adapted…CO2 will need to be reduced [to] at most 350 ppm.” So the story translates: the arctic is melting. Seas are rising. Disease. Drought. Wildfires. Resource Wars. All while our human family is projected to expand to 9 billion over the next couple of decades. It’s all enough to make any person want to deny or ignore the facts, because digging deeper means challenging the very nature of the system we have built over the past two centuries. It means we have to Divest from the very infrastructure that created this crisis, and Invest in broad based solutions across every sector of society.
As I write this I am sitting in Paris, surrounded by my team planning our next set of activities alongside the 21st Conference of the Parties on Climate Change (COP21), where world leaders will come to some unbinding agreement about targets on reducing carbon in the atmosphere. Our firm’s focus in Paris is not the negotiations. While international negotiations have a place in creating solutions, our team is focused on accelerating the solutions that already exist. We are here organizing activities with an international network of investors, business and civic leaders who are dedicated to divesting from fossil fuels and other extractive industries and investing in cross-sector solutions. We are here to work with the private sector to create systems and standards that will accelerate the greatest capital shift in modern history in an equitable and organized fashion.
My road to Paris began in 2011, when I helped found a small fossil fuel divestment campaign at the University of California at Berkeley. I started the campaign because I believed the fossil fuel industry’s business model to be untenable, and did not find it prudent for my institution (or any other for that matter) to profit from the destruction of the planet. By 2012, a coalition formed nationally, and the campaign spread like wildfire (no pun intended). Within 12 months, the “fossil free” divestment campaign expanded from five campuses to 150. Churches, municipalities, individuals and family offices got engaged.
By 2013, I had worked with a small team to expand the campaign across California, working to get the University of California to create a “Divest-Invest” policy for its near $100 billion portfolio. By 2014, we successfully negotiated a policy with the Chief Investment Officer to allocate $1 billion of institutional investments towards clean energy innovation, alongside full integration of Environmental, Social and Governance (ESG) standards across the system-wide portfolio.
This University of California policy was adopted just two days before I traveled to New York to join the international Divest-Invest coalition at the People’s Climate March during the United Nations Climate Week. There we released our report before the UN stating that Divest-Invest commitments had reached a collective $50 billion assets under management (AUM). The Rockefeller Brother’s Fund, which accrued its wealth from fossil fuels, decided to commit to Divest-Invest as a part of our announcement. In light of the decision, Stephen Heinz, the Rockefeller Brother’s Fund director, stated, “We are quite convinced that if [John D. Rockefeller] were alive today, as an astute business man, he would be moving out of fossil fuels and investing in clean renewable energy.” A movement that started with a handful of students and NGOs, now reached the power center of American society.
After I returned home to California from New York, I was approached by former California state senator Tom Hayden to help write a bill to get the nation’s largest public pension funds, CalPERS and CalSTRs, to divest. Thanks to the leadership of many, including the president of California’s senate, Kevin De Leon, California became the first US state to agree to fossil fuel divestment through a legislative act in September 2015. Between the commitments from the University of California, Stanford, CalPERS and CalSTRS, California surpassed a collective $600 billion in AUM committed to Divest-Invest. With great excitement, our international coalition announced in December 2015 that commitments currently exceed $3.4 trillion AUM, spanning more than 50,000 individual and institutional investors globally. These new benchmarks indicate an adoption curve for Divest-Invest that will continue to shift toward large institutions, particularly as the largest insurer in Europe, Allianz, and the sovereign wealth fund of Norway recently joined the initiative.
The rapid growth of Divest-Invest numbers are intriguing, but the work is really just beginning. While divestment provides individual and institutional investors a tool to draw a moral and economic line, the next big leap is how and where we shift the capital. Contrary to popular belief, it is not hard to transition portfolios from fossil fuel companies without jeopardizing financial returns. Many firms have been leading to expand and launch investment vehicles that follow rigorous standards focused on ESG leadership. For example, ETHO, an Exchange Traded Fund that just launched on NYSE, is designed to optimize climate leadership across all sectors. Principium Investments, LLC has also built a series of customized portfolios that focus on ethics and market performance, paying attention to issues beyond clean energy, like gender equality and agriculture. Both firms have integrated and expanded the current “fossil free” standard, stated broadly by the political movement as the “top 200 publically traded fossil fuel companies with the largest carbon reserves.” ETHO has gone as far as excluding companies whose primary revenue is generated from the “ownership, extraction, distribution and/or sales of fossil fuels,” according to co-founder Ian Monroe.
As the “fossil free” movement grows more popular however, there are some products emerging that illustrate the need for enhanced due diligence moving forward. For example, the recent National Resource Defense Council (NRDC) endorsed fund launched by State Street claims to be “fossil free” but holds several companies whose primary business model is fossil fuel development, including, inter alia, Valero, Transocean and Phillips 66. The State Street fund has screened the companies with top reserves, because they follow a narrow definition of “fossil free” endorsed by a political movement. For investors, fiduciaries and the broader financial community, the time has come to determine what the financial universe will look like when we rigorously account for environmental and social costs currently externalized by extractive industries. A critical next step will be harmonizing standards for what constitutes overarching ESG, which necessitates more congruence between brands like Socially Responsible Investment (SRI), impact, fossil free and the like. This likely will not come from inside the walls of a conference like COP21. It will come from aligning many initiatives and conversations between suppliers, allocators and intermediaries toward specific projects that will shift key markets to adjust for climate risk.
That is why we created our firm. In a marketplace where leading climate consulting firms are also serving the needs of the very industries driving climate change — our firm is building a model dedicated to reversing that trend. We work to build bridges between allocators that want to address climate risk and those existing and emerging enterprises that need capital to reach scale. We approach this using two methods: the Propell3r (P3) and the Regenerative Capital Group (RCG). P3 is focused on building programs that incubate and accelerate entities with models that internalize climate risk and present viable financial opportunities across the risk and return spectrum. We specifically seek to provide resources and support to companies focused on agriculture, water and energy innovation. On the allocator side, we have been building RCG, which coordinates investors and capital managers seeking profitable climate investment opportunities across asset classes. Our firm sees both methods as a means to diminish barriers for suppliers and investors that want to put capital to work addressing pressing climate challenges.
It will take a groundswell to shift the necessary capital toward regenerative and renewable infrastructure that will prove resilient in the face of present and pending climate challenges. I’d like to believe we are reaching that point, particularly as more and more individuals are dedicating their human and financial capital toward addressing the interlocking political, cultural and financial roots of the problem. It is a little discouraging to think that I have been alive almost as long as governments have been attempting to negotiate climate solutions. However, when I look at my team, our mentors, and the broader economic and societal context of today, I see the strength of generations that have all the tools and resources to transform the financial system, and hopefully as a result, the climate too.
Article by Katie Hoffman, principal of the Resilience Collaborative, LLC , a firm working with investors and innovators to shift capital toward equitable and scalable climate solutions across sectors.
Welcome to the second issue in our series on “Millennials and Investing.”
By Guest Editor Patrick Davis, Community Reinvestment Fund and formerly with Calvert Foundation
The Millennial Generation has been a source of much debate in recent years. Commentators seem to disagree passionately about what the ultimate legacy of this generational cohort will be. Will millennials answer the call and step up to solve some the pressing environmental and social challenges of our time? Or will they confirm the beliefs of skeptics who have labeled them apathetic, entitled, and generally oblivious to the larger context in which they are living? To be certain, every generation is much more complex than the labels that it earns. The difference in this case is the high stakes of the time in which we are living. The collective choices of this generation may very well dictate the viability of life as we know it for all future generations. At the same time, vast improvements and efficiency gains resulting from new technologies are creating potential solutions to the biggest challenges we face. In addition to new technologies, new ideas and values that prioritize collective benefits are emerging. In this series of articles, we’ll take a look at the convergence of these dynamics through the lens of the economy, money, and meaning.
Our guest authors are each millennials themselves. They represent different experiences, but they share a common desire to contribute to a re-imagined economic paradigm that puts people and planet before a relentless pursuit of profit. Their approaches are at once idealistic and realistic. They recognize the imperative of change — that today’s systems are not suited to the reality of the challenges we face. We’ll hear from Katie Hoffman, principal of the Resilience Collaborative about the power of movements and organizing to shift institutions towards a more sustainable investment model; Chris Lindstrom, co-founder of Catalyst Bioenergy Group and the great-great grandson of John D. Rockefeller, talks about the “Regenerative Economy” and market opportunities to not only improve, but restore the environment; and Rianka Dorsainvil, the founder and president of Your Greatest Contribution, a financial planning firm primarily serving millennials, discusses trends affecting younger investors and how they think about money. I’m honored to have had the opportunity to work with each of the writers. I hope you enjoy their articles, find inspiration in their pursuits, and join all of us in forging a path to building a more inclusive, sustainable, and equitable economy for future generations.
Article by Patrick Davis, the newly appointed Vice President of Program Strategy and Development at the Community Reinvestment Fund (CRF), www.crfusa.com/ a CDFI and small business lender that invests in job creating businesses in low-income communities. Through January 2016, Mr. Davis worked at Calvert Foundation, a nonprofit financial services firm, where he worked with investors, financial advisors, asset managers, and philanthropic institutions to incorporate social and environmental impact into investment portfolios. He was responsible for the creative direction, development and implementation of Calvert Foundation’s strategy to engage new, diverse and younger investor audiences through combined online/offline campaign tactics. In his role on the Investor Relations Team, he provided strategic, operational and communications support for the launch and ongoing cultivation of new impact investing initiatives across different themes including women’s empowerment, place-based community revitalization and international development.
by Rianka R. Dorsainvil, CFP®, Founder and President of Your Greatest Contribution, a virtual fee-only comprehensive financial planning firm
Without a doubt we, the Millennial Generation, believe that we can change the world. There is a “change agent” in each and every one of us. How do I know? Well, because we are different. Huge economic, cultural, and social shifts have changed our view on the world, and as a generation, we have demonstrated a desire to leave the world a better place than it was when we entered. Although I may not realistically change the entire world, I can change a part of it. This is essentially why I stepped boldly into the world of personal finance without looking in any other direction — to be a change agent.
When I think back to my first money memory it was in fact not my own, but my nana’s. She worked well into the years in which the neighbors around us had retired, and I did not understand why she couldn’t retire too. I suspected that perhaps it had something to do with lack of retirement preparation. Conversations in my adult years led to the understanding that my nana did not have the financial knowledge or access to someone who could help her prepare effectively for retirement. Unfortunately, my nana worked until she was forced to retire due to illness and the “golden years” was not a chapter that played out in her book of life. Recognizing that my nana could have built a stronger financial foundation earlier in life is what drives me to consider how to best serve my peers today.
Who Are the Next Generation of Clients?
Millennials, currently people between 18 and 35, are more than 75 million strong and now represent the largest living cohort in history. Over the next 20 to 30 years, a massive $30 trillion dollars will be transferred from the estates of Baby Boomers to the Millennial Generation. Today, there is a general misperception that Millennials do not have assets or an income to support the need of a financial planner. Check out these statistics from Nielsen, BankRate, and T Rowe Price:
• Millennials make up 14.7 percent of those with assets over $2 million • 2.5 million Millennial households bring in more than $100K income • One in five have saved enough in non-retirement accounts to last three to five months • On average, Millennials are saving 8 percent to retirement plans • Six out of 10 expect to be financially better off than their parents
The stats above are proof that Millennials are in need of working with a trusted financial planner to establish a strong financial foundation in their impressionable years, but trust will not come easy. Millennials who have been in the workforce for more than six years entered into Corporate America when the financial markets hit the lowest point in over a decade. A college degree did not guarantee a job as in previous years. Although Millennials should be contributing to their savings and taking a more aggressive stance in the market, they are not, partly due to a general lack of trust in the financial sector. They saw their parents and grandparents retirement accounts take a major hit. But Millennials have time to recoup the market losses. Time is on our side, which means compounding interest is our best friend. Right now is the best time for us to start investing and engaging with financial planners. The landscape of financial planning services is tilting in our favor.
Changing Landscape of Financial Planning
It should be no surprise that technology is a part of Millennials’ DNA. They grew up with the Internet, experienced first-hand the evolution of cell phones and MP3 players like iPods, and are constantly thinking of ways to make their lives more efficient by leveraging technology. It is becoming imperative that we have both human touch and digital touch as we combat the digitization of financial advice. Robo-advisers are the new shiny toy on the market, but they are no threat to our profession as the human conversation about life events cannot be duplicated by a computer. However, it is up to us to communicate to clients and prospective clients the value we bring to the table in addition to asset management. Many Millennials have stated that although it’s great to have automated investing available at their fingertips, they still want to talk to a financial planner.
Alternative Fee Structures
Millennials are approaching a level in their career where they need financial advice. They are indeed becoming HENRY’S – High Earners Not Rich Yet. Millennials have not yet amassed a large nest egg, but are well on their way. It is a no brainer that the Asset Under Management (AUM) fee structure will not make business sense for firm owners if they want to take on Millennials as clients. However, there are alternative fee models such as monthly retainers or charging a percentage of their net worth that could make sense. These alternative fee structures will allow the traditional financial planning firms to start building trust with Millennial clients while they are accumulating wealth. Although there may be some truth about Millennials skipping from job to job, they do have a strong sense of brand loyalty. Firms that can adapt and offer quality services at reasonable prices to Millennials now will have them as clients well into the future.
Prior to attending the 26th Annual SRI Conference on Sustainable, Responsible Impact Investing held in November 2015, I had very little knowledge about Impact/ESG/SRI investing. I consider myself a very well versed advisor and take pride in being a comprehensive planner. However, if I did not know about the Impact/ESG/SRI movement (which has been around for more than three decades), how would my clients?
I do believe Millennials are motivated by aligning their financial decisions and their values, but maybe not in the way we may think. The vast majority of conversations I’ve had with Millennial clients are around how to make an impact with their time via volunteering and money via charitable giving, not necessarily their investments. A few have opted to take a lesser paying position in their careers because they feel they can make more of an impact personally — it’s not all about the money.
You don’t know what you don’t know. If we want to help the Millennial Generation make an impact via their investments, it starts with educating the advisors. The clients are looking to us for guidance and the more we know about impact investing the more we can share with our clients. I would encourage Impact/ESG/SRI focused firms to reach out to the “outsiders,” like me, to help educate us on the best kept secret in the investment world. Although I felt very included at the SRI conference, I left the conference with a long list of terms to look up because the presentations and conversations were very jargon heavy. For the very first time, the tables were turned and I felt what it was like from the client’s perspective, the conversations were in a second language. However it was a language I was eager to learn! If we want to gain the traction of Millennial clients, we have to break down the Impact/ESG/SRI conversation to the mere basics and spend time educating them (and the outside advisors). Yes, it will be a significant investment of time, but it will be worth it.
I wonder, is the Impact/ESG/SRI world missing an opportunity to engage the Millennials at an impressionable stage in their lives? With the inevitable wealth transfer, now is the right time to encourage heirs to be good stewards of their impending wealth. According to the Institute for Preparing Heirs, 90 percent of inherited money is gone by the third generation. This is the moment to help Millennials understand the true meaning of wealth and help them align their values with their money.
Article by Rianka R. Dorsainvil, CFP®, Founder and President of Your Greatest Contribution (YGC), a virtual fee-only comprehensive financial planning firm dedicated to serving the busy professional in their 20’s, 30’s and 40’s. As a Certified Financial Planner™, Rianka approaches financial planning with a strong emphasis on financial education and provides business owners, individuals and families with the tools to make informed financial decisions.
Rianka earned a B.S. degree in Agriculture and Applied Economics with a concentration in Financial Planning at Virginia Tech. With over six years of experience in the financial planning profession, she gained valuable knowledge at wealth management firms. She advised clients in the areas of retirement planning, estate planning, education planning and strategic tax planning.
A strong advocate for young professionals, she serves as 2016 President of FinancialPlanning Association’s NexGen community, where she focuses on the cultivation of the next generation of financial planners, actively participates in pro bono opportunities, volunteers annually with the IRS Volunteer Income Tax Assistance (VITA) program, and co-founded a mentorship program for women in financial planning at her alma mater, Virginia Tech. Through her leadership, contribution, and volunteerism within the financial service industry, Rianka was recognized by Investment News in their 2015 list of top “40 Under 40” financial services professionals. Additionally, Rianka was published in the Journal of Financial Planning where she shared her research around cultural and wealth patterns of the Millennial generation.
This new program brings together activists, board directors and corporate management to discuss how activism is unfolding in key Asian markets and their impact on corporate governance and shareholder
This new program brings together activists, board directors and corporate management to discuss how activism is unfolding in key Asian markets and their impact on corporate governance and shareholder value. A full day of interviews, panel discussions, presentations by practice experts, strategists, advisors, activists and investors makes this one-day program an invaluable gathering, needed to effectively manage through the ever-evolving landscape of proxy fights and settlements.
Since 2002, we’ve brought together (this year online) global investors, innovators, corporates and change makers looking for answers to the biggest question: who will lead the transformation we’re all waiting
Since 2002, we’ve brought together (this year online) global investors, innovators, corporates and change makers looking for answers to the biggest question: who will lead the transformation we’re all waiting for?
Since 2002, we’ve brought together (virtually this year) global investors, innovators, corporates and change makers looking for answers to the biggest question: who will lead the transformation we’re all waiting
Since 2002, we’ve brought together (virtually this year) global investors, innovators, corporates and change makers looking for answers to the biggest question: who will lead the transformation we’re all waiting for? Discover how to succeed in increasingly turbulent times. In San Francisco, you’ll find the people and ideas that matter and leave with the contacts and network to help you take the next steps.