GMJ Spotlight Interview

Kevin Parker, CEO of Sustainable Insight Capital Management

To all appearances, Kevin Parker is a no-nonsense, purposeful kind of guy. And his credentials in global institutional finance reinforce that image. Candid, confident, even blunt, Kevin tends to keep his audience’s attention – from the podium and across the table. 

 “I come from a trading background…I get invited to speak at these conferences to say what nobody else is willing to say.”

And what he said in effect at the recent CSR Investing Summit was that the sustainability debate is over: “What had been moral is now material”.

In our interview after his Keynote, Kevin got more specific on a variety of topics including his financial firm, momentum in the ESG sector and biodynamic wine.

Elsie:  From a fiduciary perspective, why incorporate risks related to a company’s environmental, social and governance behaviors (ESG) in investment analysis?

Kevin:  In terms of what I do as a listed equities manager, the stock market trades on future cash flows and bottom line. If it’s material, I have to use it. At Sustainable Insight Capital Management (SICM) we have an agnostic view. We recognized long ago that these issues are material, and they are becoming more material.

Elsie:  What’s taken so long for the financial sector to catch up?

Kevin:  First, the financial services industry is, rightly so, a skeptical lot. The best analysts are skeptics. And, sadly dragging around the legacy of changing acronyms and alphabet soup only fueled the skepticism and doubts like, How real is this?

Lastly, enough is not being made of the examples of true failure where people have lost a lot of money.

Elsie:  What is SICM’s place in this ecosystem?

Kevin:  The world doesn’t need another active asset manager, nor an ESG manager. But it does need a manager that delivers consistent outperformance. We incorporate things into our investment approach that others may dismiss. Not 100% quant or fundamental, we’re agnostic. We have a lot of perspective, both historical and where the broader issues of sustainability are heading.

In a separate life outside my financial business life, I have lived and breathed and eaten this belief for over two decades. That’s a differentiator.

And, on the Board of Sustainable Accounting Standards Board (SASB), I like to promote the materiality of the sustainability issue itself. SASB is one vehicle to move the issue forward, to create standards for investors to use these tools.

Elsie:  Speaking of SASB, why is it considered so significant right now? 

Kevin:  What’s needed in the sustainability world are standards by which we can operate a more intelligent economy.

Just like what runs the Internet now had to be invented in the mid 1990s. It was the Finns vs. the guys in Palo Alto. Once they agreed on standards, then you saw an explosion of progress. What would New York City look like if it didn’t have standards, [such as traffic] stop signs, speeding limits?

Elsie:  You have alluded to yourself as a ‘farmer’ in reference to your biodynamic winery, Chateau Maris. There’s even a link to it on the company website. What role does the winery play for you and for the company?

Kevin:  The vineyard helped me understand the issue of sustainability confronting the planet on a much bigger scale. That it was a much larger issue than just sustainability of soils, which were dead because of the over-application of fertilizers and pesticides.

That’s when it became clear to me that the financial markets will begin to understand this and reprice risk.

[Also,] we’re mindful that the trend is gaining importance around the world — the Pope, the Bank of England. Trends tend to have a centripetal force, pulling a lot of people along. It can become difficult to discern those who know what they are talking about from those who are there because there’s a line out front.

Elsie:  You’ve forecast that ESG factors will become so integrated with other investment analytics that soon they won’t have a separate classification. How soon? How come?

Kevin:  Five years from now, the sustainable space will not be as topical as today because once it gets accepted, time will usher it in. The next generation doesn’t think about sustainability as a separate topic. They just live it.

Elsie:  Yes, the millennials are one of two storied groups expected to drive fundamental change. The other is women. What impact are women having on the growing ‘materiality’ of ESG?

Kevin:  I can’t make enough wine biodynamically now. [That demand is] largely driven by women; they are more sensitive to what they put on and in their and their children’s bodies. Women are the driving factor in the wine business around biodynamics, as they are in other areas, even clothing and cosmetics, for example. Women are a central tenet to the whole movement.

And what bigger theme is there in the 21st Century than health and wellness? We have a custodial responsibility to turn a better world over to our children.

Biographies:

Kevin Parker is the CEO and Founder of the investment management firm, Sustainable Insight Capital Management (SICM) [www.sicm.com]. A member of Deutsche Bank’s Management Board for a decade, Kevin was also the Global Head of Deutsche Asset Management from 2004 to 2012. Kevin has more than 30 years experience in the investment industry.

This interview was edited by Elsie Maio. Contact her at- elsiemaio@soulbranding.com