Reflecting on New Ways to Connect

By Lori Choi, Partner & Wealth Manager

I recently had the pleasure of attending the Transforming Family Philanthropy Retreat with an inspiring group of young people, all seeking to align their family giving and investing with social justice values.

Organized by Resource Generation (RG), the retreat was a thoughtful combination of racial and economic justice education, skill-building workshops around social justice, impact investing, and managing family dynamics. Veris was happy to sponsor this conference, and we were thrilled that several Veris clients attended as well.

This was my fourth time attending an RG retreat, and each past conference has influenced my views and understanding of social justice in some way.

I recently attended the Transforming Family Philanthropy Retreat and I found myself moved to apply the social justice philanthropy principles to the world of impact investing in new ways.

In particular, the principles that resonated most deeply with me were focusing on the root causes of problems rather than the symptoms (e.g. through advocacy, organizing, and engagement), and involving those most impacted by the problem into the decision-making process.

Throughout the weekend, I kept asking myself – how could these principles work in impact investing?

Three Ways To Have Impact

The first idea that came to mind was something we had been incubating after hearing clients’ desires for a greater connection to their impact investments. Why not invite clients to visit the impact organizations, so that they can see first hand the people and communities that they are supporting with their investment dollars? We continue to work on this idea, and welcome your input on how Veris can help you develop relationships with your impact investments.

The second idea is how we can share decision-making power with communities most impacted. This is a difficult principle to apply, even within impact investing. However, I was reminded of RSF Social Finance’s approach to determining interest rates for investors and borrowers. The group hosts quarterly Pricing Meetings2 that bring together the stakeholders in the fund – investors, borrowers, and staff – to determine mutually beneficial rates that reflect the needs of the entire community. While this approach may not be applicable to all asset classes, it serves as a good reminder to consider the integrity of the “how” in an investment, and not just the “what.”

The last thing that came to mind for me is how the impact investment industry has been able to tackle some of the root causes of problems created by corporations. Although public equities may be dubbed by some as not truly “impactful” even with the integration of ESG criteria, I look at this asset class as an example of what is possible. Many of our equity impact managers, including Boston Common, Trillium Asset Management, Calvert Investments, and Pax World, have been doing this work for years. They have been tirelessly engaging corporations in dialogue about questionable practices on behalf of shareholders, and leveraging proxy voting and resolution writing to change behavior. I feel encouraged that this shareholder activism is an element of impact that we support at Veris.

I look forward to thinking more about how Veris can help our clients increase their connection to their impact investments, and hope that you will speak with your advisor about any ideas you may have too.

 

Veris Guest Blog: Navigating Rough Waters

By Timothy P. Dunn, CFA, Founder, Managing Member and Chief Investment Officer of Terra Alpha Investments, LLC

Adapting to a Water-Stressed Future
Water is a resource needed by everyone on the planet, but few fully appreciate the accelerating risk that a lack of water might mean to a company or an investor.

In this blog, we outline the challenges facing companies and investors as water becomes a scarcer resource. We offer a number of suggestions about how to address the investment and operational risks in a water-stressed future, and we provide further analysis in our white paper, Navigating Rough Waters.

Environmental Productivity
At a higher level, though, this blog is about environmental productivity, an emerging idea in investment analysis.

Environmental productivity focuses on the efficiency with which companies use and impact natural resources. In our view, the more efficient a company is in using resources such as water, the greater the likelihood of higher risk-adjusted returns for investors. Environmental productivity is a game-changer for investors thinking about how to deploy capital.

This new investment approach is possible because of the growing availability of quality data about corporate carbon and water usage, as well the other environmental impacts, such as waste output. The good news today is that we now have an expanding body of actual data to gauge the usage of precious environmental resources. In the days and years ahead, more environmental impacts will be factored into investment analysis.

Environmental Productivity WaterA Thirsty World
With regard to the stress on global water resources, it’s useful to put the big picture into perspective.

In 2015, the World Economic Forum called the global water crises “the biggest threat facing the planet over the next decade.” The demand for water is rising faster than the world’s population. Between 2007 and 2025, water use is predicted to increase 50% in developing countries and 18% in developed countries. By 2030, experts project a 40% gap between global supplies of and demand for freshwater.

At the same time, the global supply of water is becoming more variable and unreliable. Only 2.5% of Earth’s water is fresh water. By 2025, 67% of the world’s population is expected to be living in water-scarce regions, compared to about 20% in 2015. Rising global temperatures can cause faster glacial melting, more evaporation, and less snowfall, all of which raise the risk of 
drought. The severity and frequency of extreme droughts and floods are increasing.

Exacerbating the problem is that water infrastructure worldwide is dated and inefficient. In the U.S. alone, our existing infrastructure loses about 2.1 trillion gallons of water each year, or 1.7% of annual water usage. From a business perspective, water constraints are having a bottom line impact. In 2015, 405 global companies reported detrimental water challenges that totaled more than $2.5 billion.

The point is clear: Ignoring water-associated risks is a significant peril to companies, investors and of course humans.

What Investors Should Do
So what is an investor to do?

In our view, it’s essential to incorporate environmental factors, including corporate water usage and water stress exposure, into investment analysis and portfolio creation. As important, investors need to request that companies measure and report their water usage and impact information on a routine basis.

Among the water-related issues that should be consider in portfolio construction:

  • Identify material amounts of potentially stranded assets due to water risks. Has the company provided locations of their largest assets and are any exposed to negative changes in weather patterns or sea level rise?
  • Identify operational risks due to availability of water or changing weather patterns that could disrupt production facilities and supply chains.
  • Identify operational opportunities of a company versus its peers, and/or in terms of improvements in operations, to lower costs related to water.
  • Incorporate efficiency factors into earnings forecasts.
  • Incorporate balance sheet and operational risks into the valuation process.

In fact, some institutional investors have already begun factoring water risk into the investment analysis. Norges Bank Investment Management and CalPERS have publicly stated they consider the water risks of their portfolio holdings. Private equity firms Carlyle Group and KKR, among others, expect their portfolio companies to assess and manage their water risks and seek to improve water-related efficiencies. This is what we do at Terra Alpha Investments. 

What Companies Should Do
For their part, companies need to do their own risk assessment. All potential physical (quantity and quality), reputational, and regulatory risks must be acknowledged and assessed. The risks will vary depending on where the company operates.

To properly size those risks, it’s critical for firms to evaluate their total water usage. A full water risk analysis includes measuring direct water usage, waste, value chain footprint, and assessing local conditions in areas of both current and future operation.

Additionally, a company’s water footprint must be regularly monitored and operate under the assumption that water-related events can suddenly appear and can have severe ramifications. A water footprint is not static.

Once measured, it is critical for companies to publicly disclose water risk data. Water is a material factor that aids investors in their investment analysis. Full disclosure also gives companies the ability to optimize water efficiency and minimize water risk. Investors should expect transparency of material information.

More and more companies are recognizing the importance of water disclosure. In 2013, which is the latest data available, 1,025 companies publicly shared their water metrics. As disclosure rates continue to rise, a company can more accurately benchmark performance against that of their peers.

The Bottom Line
As world population grows, water demand will only grow. Every company, as well as every investor, would be well-served to make sure they understand water-related risks.

Timothy P. Dunn, CFA, is Founder, Managing Member and Chief Investment Officer of Terra Alpha Investments, LLC, an advocacy investment firm.

*The information presented by Mr. Dunn is not an endorsement of Terra Alpha Investments by Veris Wealth Partners

Happy International Women’s Day!

By Rebecca Orlowitz, Wealth Management Associate, and Luisamaria Carlile, Senior Wealth Manager

We at Veris wish you a hopeful and strong International Women’s Day.

In honor of this occasion, our Veris offices recognize three amazing organizations that are advancing women and girls. Their work highlights what’s possible with a local community organization, a well-known global entity and a business oriented organization.

Roseli_Oasis_group-1000pxlOasis For Girls

Oasis For Girls partners with girls and young women of color from under-resourced communities in San Francisco. The program helps them cultivate the skills, knowledge, and confidence to discover their dreams and build strong futures. Programs include Life Skills and Career Exploration to counter risk behaviors for girls vulnerable to drug and alcohol use, dropping out of school, or becoming ensnared in the juvenile justice system.

Learn more here: https://www.sfoasis.org/

 

 

unicefgirlsbannerUNICEF

UNICEF’s work to promote gender equality and empower women focuses on education. Keeping girls in school and avoiding early marriage or work is the single most effective policy for raising overall economic productivity. It is also key to lowering infant and maternal mortality, educating the next generation, improving nutrition and promoting health. With millions of child refugees around the world, it is more important than ever to support access to education — especially for girls. UNICEF-funded schools provide safety and a sense of normalcy for children to grow and learn. Mothers who have had some education are more than twice as likely to send their own children to school as are mothers with no education.

Learn more here: https://www.unicef.org/mdg/gender.html

 

handsCatalyst

Catalyst’s mission is to accelerate women’s workplace inclusion through research, tools and services, events, and recognition programs. Its work raises awareness of how inclusion benefits today’s global businesses, and provides guidance and solutions on how to enact real change.  Catalyst has more than 800 supporting organizations around the world including companies, firms, business schools, and associations that collectively employ millions of women. Their latest call to action is #DisruptTheDefault, encouraging companies and individuals to shake up the way we think, speak, and act, and pushing boldly for meaningful change in the workplace and world for women and men.

Learn more here: https://www.catalyst.org/

Veris supports the spirit of International Women’s Day and is committed to the social and economic progress of women and girls. To learn how Veris is empowering women and girls both in the U.S. and abroad, click here to see our white papers about Gender Lens Investing.

 

Impact Investing in Denver

By Casey Verbeck, Director, Business Development

It’s hard not to be awed by the natural splendor of the Rockies, or for that matter, the zeal with which Coloradans are now embracing impact investing.

Over the past few years, the Mile High City, always known for its progressive thinking about the environment, has emerged as a hotbed of impact investing.

The proof points are not only the growing interest we see in Veris’ Boulder office, but also by the number of impact investing events taking place here. In fact, there will be at least four important gatherings this year. They include the following:

  • Colorado Impact Days, March 2-4. This event is part of the Colorado Impact Initiative whose goal is to raise $100 million to help fund impact-minded entrepreneurs.
  • Impact/SRI & ESG, Sept. 19. Financial Advisor IQ and Private Wealth will again by hosting the 5th Annual Impact/SRI & ESG summit in Denver.
  • SRI Conference, Nov. 9-11. The 27th Annual SRI Conference has come back to Denver and will bring together thought leaders to discuss impact investing solutions, financial products and key industry topics.

What’s Driving the Interest?

From our vantage point, we see at least three major drivers accelerating the interest in impact investing.

First, Millennials, those born between the early 1980s to early 2000s – are passionate about impact investing. They immediately see the benefit of aligning their values and their wealth, whether it is community wealth building, creating solutions to global warming, sustainable agriculture, or gender lens investing.

Increasingly, Millennials are having more influence on the investment decisions of their parents and grandparents. As a result, a growing number of Baby Boomers are also beginning to understand the power of impact investing.

This important shift is not only taking place in Denver, but across the country. Millennials, among other demographics, are re-shaping how people think about managing their wealth. It’s very exciting to see this new wave of enthusiasm for having impact with your wealth.

Foundations Making A Difference

Second, foundations are recognizing, they also can create impact with their portfolios.  They have the opportunity to further their mission by aligning their endowments with their mission, expanding their programmatic granting.

In talking to foundations in Colorado, I have found many are surprised (or disappointed) to learn their capital does not support sustainability. Too much capital is invested in the fossil fuel economy or simply doesn’t factor social and environmental impact into investment decision-making.

Foundations and other institutional investors increasingly realize by making impact investing a priority, they can influence the behavior of companies and invest in solutions to create a more sustainable world.

Smarter Way To Invest

Finally, more savvy investors are realizing the implications of having exposure to fossil fuels or companies not considering social and environment factors in their business planning.  These investors increasingly understand that companies focused on sustainable solutions in their operations, product and services are creating the best ideas for today and tomorrow.

The conversation is shifting, and today, being a responsible investor means investing in companies that are mindful of all the environmental and social impacts of their operations.

The good news is more investments are available now than ever before to achieve these objectives. The key is making the commitment to learn about impact investing approaches and adapting your investment strategy to align your values with smart decisions.

*  *  *

The bottom line is that Coloradans are setting a great example with their deepening interest in impact investing. It’s incredibly motivating to be part of that movement.

 

 

2016: What’s On Our Mind

By Patricia Farrar-Rivas, CEO

2016 is already off and running fast.

Early each year, to make sure we’re focused on our investment themes, our team takes time to re-affirm our priorities so we can, in turn, help clients achieve their goals.

So what are those priorities? As a firm, Veris remains committed to developing the following impact and sustainable investing strategies:

  • Investments to counter climate change and create environmentally sound and socially just solutions
  • Gender Lens Investing, which focuses on investing in companies with women in leadership, with corporate cultures where women can advance, and in product and services supporting women and girls
  • Community Wealth Building to renew vulnerable communities
  • Sustainable agriculture and food systems
  • Mindfulness and sustainability

To provide some fresh thinking about each of these strategies, I wanted to share a number of enlightening points-of-view. They are from various media – books, newspapers, magazines, as well as a podcast. They are all terrific food for thought. So here goes.

Should We Be Scared Of Immigrants?

The Syrian refugee crisis in Europe and the inflammatory rhetoric of the Presidential campaign have completely polarized the debate about immigration. In the current environment, immigration – both legal and illegal – has become another issue that divides us.

It doesn’t need to be that way, if only common sense entered the conversation. That’s exactly what Freakonomics author Stephen J. Dubner did in his wonderful, hour-long podcast, Is Migration a Basic Human Right?

I loved this podcast because it reminds all of us about enormous benefits of immigration. One of the reasons the U.S. is so successful is that our country was built by a diverse group of cultures.

Dubner goes into the history of why immigration is a strength. He also makes another critical, if little-mentioned point:  Migration is part of the human condition. Humanity has been in a constant state of migration ever since we learned to walk on two legs. This podcast injects rationality back into the whole overheated issue.

The Radical Women We Love

Rad American Women A-Z by Kate Schatz is one of those books you just want to tell others about. Written for children, it profiles a list of pioneering women who have changed history. It features some of the most well-known – and least well-known – women of the past few hundred years.

The women are of different races, backgrounds, and professions, but all are role models with a fascinating story. I personally like the journey of Angelina and Sarah Grimke. These two sisters from South Carolina devoted their lives to ending slavery in the 1830s. They pushed the boundaries of what was then considered acceptable roles for women in public matters and remain inspirational figures 185 years later.

The book also includes Angela Davis, Billie Jean King, Carol Burnett, Rachel Carson, and Patti Smith, among others. The book goes in alphabetical order, and I particularly liked how the letter X was handled. It was a dedication to all those women who are to come and change the world.

But perhaps the best reason I latched onto this book: My six-year-old granddaughter was enthralled by it. She especially liked the full-page illustrations of each of woman.

Combatting Climate Change

The climate change summit in November seized the world’s attention about one of the gravest threats humanity faces. As you probably saw, much was said and written about the proceedings.

In fact, it was overwhelming. That’s why I’d recommend two very informative pieces. The first is a recap of the summit’s highlights, written by the BBC. This story summarizes what was achieved and what wasn’t. It also put those achievements in context with the progress made at the Kyoto Summit in 1997. If you’re looking for an overview to help understand what happened, this is it.

A second piece that provides greater depth is The Economist’s 36-page special report on climate change published just before the global confab. With the Economist’s usual lucid prose and cleared-eyed analysis, the report laid out the key climate change issues. It’s a reference you can return to again and again.

Black Lives Matter

In too many communities in our country, people of color are disproportionately faced with limited options for education, health care, housing, jobs, and healthy food. Decades of poverty and institutionalized marginalization have cut families off from opportunities to create healthy communities.

With this as a backdrop, I was truly moved by Between The World And Me, by Ta-Nehisi Coates. Like The Fire Next Time, the 1963 classic written by James Baldwin that inspired Coates, this book is a very moving and personal piece of work.

A No. 1 New York Times best seller, Between the World and Me is the story of an African-American father writing a letter to his teenage son explaining racism in America. To hear the intimate voice of an African-American man talking to his son in the midst of a national epidemic of violence and injustice against young black men is something everyone needs to experience.

Coates sets the stage by explaining the historical evolution of racism in this country. It includes how slaves were dehumanized when they were brought to America and then puts everything into perspective right up to Ferguson, Trayvon Martin, and South Carolina. His writing is all of the more gripping because of he grew up in a poor black neighborhood.

Coates’ story reminded me of another outstanding book, The New Jim Crow: Mass Incarceration in the Age of Colorblindness. The author is Michelle Alexander, Associate Professor at Ohio State University and a civil rights attorney. With lawyerly precision, Alexander makes a strong case about why we should all be outraged by the war on drugs. She points out that even though the vast majority of drug dealers and users are white, the percentage of incarcerated African Americans is 7 to 10 times higher than that of white Americans. This is another must-read.

Sustainable Agriculture For All

One of the starting points for public health is a sound and affordable food supply. Yet, for too many Americans, the choices are limited and fast food is all too abundant. Now, in some places across the country, cities are experimenting with new ways to grow and distribute food to improve public health.

Fixing Food is a very well done analysis by Union of Concerned Scientists. This 20-page report describes the efforts under way in five cities – Oakland, Memphis, Louisville, Baltimore and Minneapolis – to increase the number healthy food options.

Of note is the report’s discussion about how many local governments and community leaders are focused on healthy food initiatives for lower-income communities and communities of color. Research shows that these communities are more likely to suffer from diet-related illnesses, such as diabetes and cardiovascular disease.  This is a highly informative report that deserves to be shared.

Intuition and Our Biases

Thinking, Fast and Slow, by Nobel Prize winner Daniel Kahneman, should be required for anyone living in our times. This New York Times best seller synthesizes the seminal work of one of the most important psychologists of our time.

The book explains two types of thinking we all engage in whether we know it or not. The first is the snap judgments and involuntary conclusions we make based on intuition and experience – fast thinking. The second is slower and more careful thinking that requires us to stop what we are doing and focus.

The first kind of thinking is a product of our evolution. We made quick decisions because our life depended on it when we lived on the savannah. As good as those instincts are today, they also have built in blind-spots we don’t experience as biases, but are biases just the same. Slow thinking is essential to make sense of the world around us and offer a counter-balance to our reflexive judgments and thinking.

Kahneman implores us to examine our own social biases, and also shows us how to understand our consciousness. It’s an eye-opening book that demonstrates just how much we don’t know about our own motivation and the way we think.

* * *

I hope these recommendations provoke some critical thinking and enlightenment for you. Please feel free to share these points-of-view with others.

 

 

Stranded No More

By Luisamaria Ruiz Carlile, Senior Wealth Manager

Impact investing is a disruptive innovation. It’s upending traditional investing, crashing through old assumptions about how investors determine risk and assess value.

Take for example, the concept of “stranded assets.” These are assets which are losing economic value well ahead of their anticipated useful life due to changes in technology, regulations, legislation, societal norms, environmental shocks or other powerful forces.

By that definition, carbon intensive assets – particularly fossil fuels – are increasingly at risk of being ‘stranded.’  It turns out that we cannot possibly consume all of our buried treasure without raising the planet’s temperature to the point of our own extinction.  And as the economics of wind, solar and other alternative fuels have improved dramatically, we now wonder if we bid up fossil fuels to the point of creating a “carbon bubble.”  The climate change math has exposed more risk than opportunity in those vast reserves.

But just as impact investors are writing down the value of oil and gas in the ground, many are realizing that for too long, vast reserves of human talent have been languishing — stranded — on the economic sidelines.  Across borders and cultures, strong social biases have undervalued the economic contributions of too many people, whether grouped by gender, religion, ethnicity, economic class or some other identity.

Shining a spotlight on this very issue of undervalued human talent is the rapidly evolving field of ‘gender lens investing.’  This approach sees gender as a critical factor in the analysis of all investments – both for spotting opportunities and identifying hidden risks.  Its premise is that gender matters, and that it matters all the time.  Companies, communities and entire countries gain – or lose – depending on the gender balance they achieve in allocating capital, services, jobs and leadership opportunities.

Long a pioneer in this approach, the Criterion Institute has just released an important report titled “The State of the Field of Gender Lens Investing:  A Road Map for the Field.”  It’s a comprehensive look-back at how the field has evolved, and a push-forward of an approach that sits squarely at the “intersection” of systems of finance and investment, and movements to create gender equity in the world.

Its goal is ambitious: to transform how finance — a massive system of power — values women and girls. And in so doing, make it work for more, if not all. As it states in the executive summary: “…For gender lens investing to fulfill its promise, it needs to not only move money to investments that have gender as part of their analysis, but to demonstrate how finance can be part of a strategy addressing issues such as sex trafficking, biases in the media, the wage gap and equitable health access.”  Ultimately, gender lens investors see finance as a major lever for systems change.

Increasingly the research is making the business case for inclusion of women at all levels of economic participation:  from shop floor to board room to C-suite and from entrepreneurs in emerging markets to those in Silicon Valley. Companies with more women on boards outperform those with none. Start ups with women in leadership roles outperform those with none. And women-led hedge funds consistently outperform those led only by men.

Strong investor interest in applying a gender lens has spurred development of investment options across all asset classes, in both debt and equity products, and in public and private markets. A few individuals and foundations are now pioneering ‘gender lens portfolios’ populated with investments that in a myriad of ways support women and girls.

Gender lens investors are betting on an ‘economic dividend’ arising from a more balanced distribution of economic and social power. They see a larger – not shrunken — economic pie as investments in women and girls’ advancement spur growth and innovation. They are actively seeking diverse and inclusive enterprises that don’t just count the number of women they employ but genuinely value, develop and promote them.

When the on-ramps to opportunity grow, less and less of our immense reserves of human talent will be stranded on the economic sidelines.  As we re-calibrate how we value our resources and citizens, the future is flashing its message, and it appears to be saying:

“Go Female Positive and Carbon Neutral!”


Photo Credit: Ignite New Zealand; used under a Creative Commons License

Creative Destruction and Stranded Assets

By Anders Ferguson, Partner and Danya Liu, Associate

Over the next 30 years, whole swaths of the global economy will change dramatically. Innovation and technology, combined with global demand and shrinking resources, will fundamentally alter the way people do everything from getting electricity to sourcing their food.

It will no doubt be an exciting time for everyone, but it will be especially transformational for one group in particular: investors. With so much disruptive change coming, it will be easy to make a wrong bet. Or, just plain bad luck could translate into a loss of capital and opportunity.

The potential for significant losses to investors isn’t some far off scenario. As the market undergoes these changes, investors face an immediate threat known as “stranded assets.” The good news is that investors can benefit from helping sustainable technologies and companies thrive in the 21st century.

What Is A Stranded Asset?

Because we’re likely to hear the term “stranded asset” with increasing frequency, we think it’s important to understand what that means.

According to the University of Oxford, “Stranded assets are assets that have suffered from unanticipated or premature write-downs, devaluations, or conversion to liabilities and they can be caused by a variety of risks.”

The term has mostly described assets in the oil and gas industry that are losing value as renewable sources of energy become competitive with carbon-based fossil fuels. In fact, a stranded asset can occur in any industry, as the following definitions imply.

“We define a stranded asset as an asset which loses economic value well ahead of its anticipated useful life, whether that is a result of changes in legislation, regulation, market forces, disruptive innovation, societal norms, or environmental shocks.” – Generation Foundation.

“A stranded asset has lower market value than that recorded on the balance sheet because it has become obsolete in advance of complete depreciation.” – International Institute for Sustainable Development

Stranded Assets Grow Across Industries

“Stranded assets” are the product of creative destruction, a term coined by Joseph Schumpeter in 1942 to describe how innovation and new market forces destroy prevailing economic and business models.

Just in the past decade, we’ve seen creative destruction in industry after industry – and we’re likely to see more of it.

Kodak and Xerox, blue-chip companies of the last century, are now footnotes in history after digital technology rendered their products nearly obsolete. Amazon’s virtual retail operation is threatening even Walmart, the king of big-box retailers, and its global network of stores, trucks and other infrastructure. In October, Walmart’s stock lost $11 billion in a single day.

The same kind of creative destruction is happening in the transportation and hospitality industries. Uber, Lyft and other tech-inspired transportation providers are diminishing the value of the taxi industry and their huge fleet of vehicles. Likewise, Airbnb threatens the hotel and time-share industries as more people choose to rent out their homes.

The electric utility industry is also ripe for disruptive change. Barclay’s downgraded the corporate bonds of the entire electric utility industry in May 2014, according to Barron’s.  The Barclay’s report said that over the next few years, “declining cost trends in distributed solar photovoltaic (PV) power generation and residential-scale power storage is likely to disrupt the status quo.”

Stranded Assets and Fossil Fuels

The previous examples demonstrate the breadth of the coming change, but it is especially problematic for the fossil fuel industry. Because the burning of fossil fuels is the single largest contributor to climate change, investors owning these assets face potentially large losses, especially as we see more stringent climate policy being enacted in key markets like California and China.

With the divestment movement gaining momentum, investors could face unwelcome outcomes if they are not realizing and addressing the risks of stranded assets in their portfolios.

To that point, California Governor Jerry Brown signed into law in October a bill requiring the $291 billion California Public Employees’ Retirement System and the $184 billion California State Teachers’ Retirement System to liquidate holdings in coal companies by July 1, 2017.

The combination of public policy and green technology is rapidly weakening the dominance of fossil fuels as an energy source. The resulting shift may eventually leave fossil fuel reserves partially unburnable – or stranded. If everyone is selling coal plants, for example, the real issue is whether you want to be the last investor owning one.

We hope to see more oil and gas companies, as well as investors, incorporate this kind of risk assessment into their strategic planning. For the time being, we believe exposure to stranded assets should be incorporate into any risk analysis.

In the long run, whether assets are related to fossil fuels, the electrical grid or real estate, investors need to address the growing risks in “stranded assets.” Failure to do so may have dire consequences.

Veris Guest Blog: Call To Action: Let’s Make 100% Clean Energy Our Goal

By Dave Kirkpatrick, Managing Director at SJF Ventures

Last week, I visited Dan Shugar, CEO of NEXTracker, a global leader in tracking systems for solar power plants. NEXTracker, which operates the 70MW Javiera Solar project in Chile, is one of the emerging leaders in the cleantech energy revolution now under way.

Dan and his team grew the company faster than any I’ve seen over the past 15 years. Then he consummated this success with a $330 million sale to Flex last month. Dan will be leading NEXTracker within Flex to continue to drive down the cost of solar globally. Dan and NEXTracker investors are donating to a 100% clean energy initiative at the Sierra Club to continue to support the rapid transition away from fossil fuels. This isn’t the first time Dan has been so generous and thoughtful. Earlier, he helped kickstart the Beyond Coal initiative after selling Powerlight to Sunpower.

An Aspirational Goal

In thinking about Dan, it occurred to me that just as ‘zero waste’ was an aspirational goal mobilizing many companies over the last two decades, so too, will this new goal of 100% clean energy in the next two decades.

The world will be a much better place if we achieve that goal. We’ll benefit from great jobs, community revitalization, energy independence, and carbon reduction driven by this next wave of cleantech companies. It will be nice to again prove the naysayers wrong about the promise of sustainability.

Back in the mid-1990s, several recycling advocates, including myself, began promoting the goal of zero waste. We were frustrated by the incremental efforts at 10% or 20% recycling and wanted to focus individuals, cities, and companies on a more aspirational and ultimately attainable goal. We drew attention to broad source reduction, reuse, composting and advanced recycling.

At the time, the concept was derided by many in the waste management industry as unrealistic. Yet over time, it gained acceptance and now many cities and corporations have set zero waste as their goal. Cities that now have zero waste goals include Seattle, San Francisco, Los Angeles, San Diego, Dallas, Minneapolis and New York.

Many corporations have also set their sights on zero waste as a paradigm shift for their business culture. The reason is simple. A goal of zero waste drives innovation, reduces expenses, builds more efficient operations and inspires employees and customers. Several operations or factories have effectively achieved ‘landfill free’ zero waste, including Proctor & Gamble, Subaru, Ford, Sunpower, Cargill, Unilever, Miller Coors, and Eaton.

These companies and a handful of others are helping their customers profitably reuse and recycle returned or damaged retail goods, mobile phones, utility equipment, organic material, biotech equipment, vehicles, municipal discards, e-waste, scrap lumber, and plastics. We continue to look for the next wave of great entrepreneurs who can find wasteful sectors of our economy where they can capture value and transform material and product flows.

100% Clean Energy

We should apply the same spirit that led to the zero waste goal in recycling, reuse and asset recovery in creating a goal of 100% clean energy in corporate America.

We’re optimistic we can achieve this thanks to a whole new set of energy entrepreneurs. NEXTracker, groSolar and Community Energy are all driving rapid adoption of low cost solar energy. EnTouch Controls, Ayla Networks, FieldView Solutions, RealWinWin, and B.B. Hobbs are enabling greater energy and water efficiency at restaurant and retail chains, appliance manufacturers, data centers, large commercial buildings, and farms.

The costs of solar and wind power, as well as energy efficiency, are declining rapidly. New energy sources to the grid are often from 100% renewable sources. They often displace retiring coal plants.

Energy storage costs are also declining rapidly. Tesla’s new Gigafactory is making news with its Powerwall solution, and many other companies are also driving lower costs. As business and utility models innovate to capture more of the diverse values of energy storage on the grid, this sector is likely to scale and benefit from the same low-cost, wide-adoption as wind and solar.

A New Day

The advent of low-cost storage, along with electric vehicles, creates the potential for individuals, companies and eventually communities and countries to move to 100% clean energy. Indeed, the RE100 is a global coalition of companies committed to going to 100% renewable energy including IKEA, Swiss Re, Goldman Sachs, SAP, Starbucks, Johnson & Johnson, UBS and Walmart.

Advocacy groups such as the Solutions Project have developed research on how states can cost effectively achieve 100% renewable energy. And the Sierra Club is advancing its successful Beyond Coal initiative to a 100% Clean Energy Project. Most 100% plans include not only solar and wind, but also efficiency, storage and intelligent grids, along with hydro, geothermal and tidal power.

Like “zero waste”, families and companies are effectively going 100% clean energy through onsite solar, green power purchases, efficiency and energy storage. Cities are adopting the goal as well, including Vancouver, Ithaca, Aspen, and Greensburg, KS.   Costa Rica has a target to be 100% carbon neutral by 2020. Interestingly, 83% of Americans say they support an ambitious 100% clean energy goal in a national online poll recently conducted by Global Strategy Group on behalf of the Sierra Club and HereNow.

Not surprisingly, the fossil fuel industry is fighting renewables and a 100% clean energy vision, just like the waste management industry did the recycling movement. However, more and more investors and institutions are seeking to distance themselves from fossil fuels and their risks of stranded assets through strategic divestment.

The Bottom Line

We will continue to hear from skeptics that say we need an all-of-the-above solution for energy, just like we still ‘need’ landfills for waste. That’s like saying we need some toxins in our diet and we shouldn’t strive to be 100% healthy because it is just too hard, costly or troublesome. However, as the cost of renewables and storage continues to drop and efficiency increases, we no longer have to be distracted by that false dichotomy.

As I rolled out my recycling and trash carts this week, the recycling one was filled to the brim, my compost pile is full, and my garbage cart had one small bag in it. With the 6 KW solar PV array on my roof, we are generating all the power we need in our house on a net basis. I bike to work most days and my firm buys carbon offsets for all of our air travel. It is a lot more fun for us all to work on getting to 100% clean energy and 0% waste in our lives, companies and communities.

Dave Kirkpatrick is Managing Director at SJF Ventures.

Creativity: A New Pillar of Sustainability

By Anders Ferguson and Laura Callanan

Creativity. We hack it. We map it. We study it. We rate it. We take it places. We build industries around it. We invest in it. We recognize we need it, even when it hurts. We know our future depends on it.

This is the first in a series of blog posts which will explore the radical premise that creativity is a key driver of sustainability.

We will look at the role creativity plays in strengthening communities and driving change. We will appreciate entrepreneurs using the arts, design, and making to tackle topics like healthy food, climate change, the criminal justice system, and immigration. We will remind ourselves how much research science, technology, and social entrepreneurship have in common.

We will imagine creativity as an investment theme and propose how it may be integrated into impact and mission-related investment portfolios. We will review creativity standards for companies and investment funds seeking to have a positive social and financial impact. We will start the conversation about how to measure creativity’s contribution toward our sustainable future.

What Do We Mean By Creativity?

Creativity is the spark. When the spark catches, it catalyzes an expression, an experiment, a “creation.” If the spark turns into an invention, an entrepreneur can build an enterprise around it.

If the invention works and the company is profitable and grows, there can be a wide-spread change – that’s innovation. Innovation makes markets.

Business uses the word creativity, too. In fact, the Conference Board reports that creativity ranks among the top five skills that U.S. employers believe to be of increasing importance.

But the aesthetic, playful, social aspects of creativity are usually ignored by business. Business ignores creativity unless it’s easily measurable and quantifiable. Business ignores creativity unless it contributes to the financial bottom line.

Sound familiar?

If innovation drives the practical, monetizable, single bottom line, then creativity drives the social, impactful, sustainable bottom line. And just like the other drivers of social impact, since creativity is hard to measure, the value of creativity can easily be overlooked.

The Creativity Revolution

In the ongoing conversation about money and meaning, creativity is key to our next chapter. In the quest for a more sustainable capitalism, we must engage the potential for creativity to fuel change.  It’s time we talk with the techies, the research scientists, and the artists.

Not because we are seeking a painting or symphony about climate change (though the Gates Foundation has recently engaged artists to help get the word out about the importance of vaccines).  We need to talk to the “creative disruptors” because they have the power to transform systems, markets, and companies. They divine new solutions that most of us just can’t see.

Where “Design Thinking” focuses on needs, “Creative Thinking” focuses on possibilities, aspirations, meaning.  And that is one reason why “creativity scares us,” as Bruce Nussbaum puts it in his terrific book Creative Intelligence: Harnessing the Power to Create, Connect and Inspire.

Why Creativity Is Sustainable

The fundamentals of creativity read like a playbook for sustainability. Stewards taking a long-term view will find a lot to like.

Creativity is a team sport. Creativity both relies on and builds social cohesion. Looking at places and moments of great creative output – Renaissance Florence, New York’s Soho in the 1970s, Silicon Valley over and over again – we see communities intermingling, competing, and collaborating.

Creativity blends tradition and innovation. Whether creativity takes an aesthetic or scientific form, the next “new new thing” builds off what has come before.  There is a sense of history, perspective, and context – even when making radical change. This anchor in what has “gone before” wards off short-term thinking.

Creativity is a bulwark against a volatile, uncertain, and complex world. We cannot anticipate the problems and challenges to come, so we must be able to improvise and respond. During times of stability and plenty, incremental improvements are fine. But to answer daunting challenges, we need a bold reply.

Creativity.  It’s not just for art class anymore.

This blog post first appeared on PhilanTopic

Laura Callanan has worked on Wall Street and on Broadway, managed the endowment for the Rockefeller Foundation, and overseen grantmaking for the National Endowment for the Arts. You can read more of her posts for PhilanTopic here.

Anders Ferguson is a founding partner of Veris Wealth Partners.  He is passionate about drawing connections between the arts, creativity, and sustainability.

 

Creating Impact Through Gender Lens Investing

By Patricia Farrar-Rivas, CEO and Luisamaria Ruiz Carlile, Senior Wealth Manager

Interested in a new way to create impact in your portfolio?

Gender lens investing is emerging as one of the most exciting new ways of using capital to create positive social impact for women or girls.

Click here to download the Veris white paper, Women, Wealth & Impact: Investing with a Gender Lens 2.0.

An innovative way of allocating capital, gender lens investing is about accelerating diversity and inclusion in the workplace. It’s also about creating opportunities for women entrepreneurs and executives to obtain capital, secure leadership roles and have greater influence over decisions.

In the developing world, gender lens investing is helping to lift women and girls out of poverty and create opportunity where previously there was none. By facilitating the flow of capital to women-led enterprises and organizations that benefit women and girls, gender lens investing has the potential to meaningfully improve their quality of life.

A New Way Of Thinking
Traditional financial analysis has mostly ignored gender considerations in capital allocation decisions. By contrast, gender lens investing integrates questions and data about gender to inform and guide investment decisions. As an analytical tool, a gender lens helps investors identify investment risks and opportunities with greater effectiveness.

Specifically, a gender lens assesses opportunities to empower women by evaluating how an investment supports: 1) women’s leadership, 2) women’s access to capital, 3) products and services beneficial to women and girls, 4) workplace equity, and 5) related shareholder engagement and policy work. Investments that satisfy one or more of these criteria are presumed to deliver greater impact to women and girls.

A Growing Number Of Options
Just a few years ago, only a handful of investments were designed to achieve these objectives. Today, more than a dozen dedicated gender lens investment opportunities exist. Many other creative investment opportunities are in development. These options range from fixed-income to equity investments in private and public markets. Some investments are open to all investors, while others are proprietary or restricted to accredited or qualified investors.

Gender lens investing opportunities come in two broad categories: (1) Dedicated gender lens solutions that explicitly adopt one or more of the goals stated above; (2) Funds and managers that do not offer a specific gender lens mandated product, but who integrate significant gender criteria into their security selection and/or engage in shareholder advocacy and policy work to advance gender inclusiveness.

Each gender lens investment has its own gender criteria. Some products have women’s leadership as a singular focus and select securities based solely on the number of women on boards or in the C-suite. Still others channel capital to women – whether as coffee growers in Latin America, first-time home buyers in the U.S. or entrepreneurs seeking angel investors.

Another type of gender lens opportunity funds innovative products and services beneficial to women, such as banking services to older women in Japan, HIV prevention in South Africa, and medical devices tailored specifically to women’s needs. Lastly, a number of gender lens solutions promote diversity and gender inclusion through significant shareholder engagement and policy work. Most products apply more than one gender lens criteria.

Let’s Own Our Collective Future
As a society, we own and shape the social constructs and financial systems that govern our lives. We make the rules. We assign the value. Yet, we can feel removed from these processes and our power to bend the arc of our institutions. At its core, investing with a gender lens challenges the financial system and investors to better allocate capital with much more thought to gender imbalances.

Investing for all, and by all, has to be our ultimate goal.

Click here to download the Veris white paper, Women, Wealth & Impact: Investing with a Gender Lens 2.0.