This article is part of a monthly series contributed by The ESG Group at Silver Leaf Partners, courtesy of Managing Partner, Michael J. Scanlon.
An Emerging Investment Ecosystem – 2 Key Themes
Both standardization and innovation developing in impact reporting for Investors
Impact or Sustainable investing continues to build interest globally in every economic sector and geography. The practice, which has evolved over time from faith-based investing, began to take shape in the 2000s with the rise of double bottom line funds – investment vehicles focused on impact alongside financial returns. However, the parallel evolution of Environment, Social, and Governance (ESG) integration into private equity investment management has sparked more rapid growth of impact investing by strengthening both the technical basis for understanding impact, as well as the business case (i.e., returns) for pursuing impact objectives. As a result, the majority of impact funds today seek market-rate return, overturning the long-held stigma and misconception linking impact strategies to return concessions.
Though arguably still considered to be a niche investment approach, the impact investing industry is growing quickly. ImpactBase, a global database of impact investments (initiative of the Global Impact Investing Network – GIIN), as of August 2017, reportedly contained 426 impact funds, which amounted to $31.2B in aum[1]. Out of these 426, the largest contingent was within private equity and venture capital (213 funds), with real assets adding another 50 funds. North America was also the main target geography for the largest number of funds (122 funds focused on NA only).
Market Momentum
The growth of impact investing fund activity can be seen in the GIIN’s annual impact investor survey, which in 2018 reported from 226 impact investors representing $221.8B in impact investing assets[2]. Survey participants invested $35.5B across 11,136 investments in 2017, and the GIIN expects a 5% increase in this activity in 2018. Thank you, Dan Mistler for your contribution.
Further installments in this series will be out in 2019. For additional details, please contact Dan Mistler at dmistler@bridgehouseadvisors.com
[1] https://www.impactbase.org/
[2] https://thegiin.org/assets/2018_GIIN_Annual_Impact_Investor_Survey_webfile.pdf
What’s Ahead? Second Alarm for Investors
On November 30, Jeremy Grantham gave the keynote presentation at the NY CFA Society’s 5th Annual Sustainable Investing Conference. The room was packed with about 200 attendees from the investment community. Mr. Grantham’s presentation was titled “Sustainability and the Race of Our Lives.” ( ) Here is a similar video that highlights his ‘inspiring focus’ that is so needed to be smart investors.
Here are a few key points from his discussion:
1 Population growth is unsustainable. Based on UN projections, the world’s population is expected to grow 50% by 2100. Most of this growth is attributed to explosive growth in Africa while the rest of the world stays relatively flat.
2 Feeding the world’s population will become a more daunting challenge. Declining soil health and grain productivity suggests that crop yields should flatten out or decline. Although there is not much scientific work on this issue, Mr. Grantham suggests that warming global temperatures are leading to a catastrophic decline in flying insects that pollinate our crops.
3 Climate change is happening now. Mr. Grantham painted a dire picture of recent trends including a rise in average temperatures, warming oceans, and increased incidence of extreme weather events.
4 Renewable energy provides hope. Improvements in renewable technologies and declining costs are positive trends. That said, Mr. Grantham does not think the world can limit climate change to below 2 degrees. He is investing in autonomous electric vehicles and an electric aircraft venture for short-haul flights. He is also a proud Tesla Model 3 owner.
See below for a link to Mr. Grantham’s August 2018 paper. This summary was provided by Kuni Chen, CFA who is a member of the Sustainable Investing Thought Leadership Group.
Link to the Video Here: https://www.morningstar.com/videos/870606/watch-jeremy-granthams-race-of-our-lives-speech.html
2018 Champions Award Winner
IKEA: Outstanding Champion for our Healthy Planet
IKEA is now recognized for its circular way of working. Even though IKEA uses over 1% of the world’s consumable wood supply everyday, it is a unique Carbon Neutral company, as a furniture retailer / consumer company. “Transforming IKEA into a ‘circular’ business is one of our biggest challenges,” says Peter van der Powl, who collected an award for IKEA at this year’s Circulars – set up to recognize the work of individuals and organizations towards creating a circular economy. “We are only in the beginning. This prize is inspiring and indicates we are on the right track.”
IKEA is an example of a company that is prioritising the move to a circular economy, winning this year’s Accenture Strategy Award for Circular Economy, part of the major new awards developed by the World Economic Forum and the Forum of Young Global Leaders. Also being ranked #1 by the 2017 Sustainable Cotton Ranking report for second year in a row, using more Sustainable sources for less water use, less fertilizer and pesticides, while also increasing profit for farmers !
“If the last decades were about mass consumerism, now are are getting towards mass circularity,” said IKEA’s Chief Executive, Jesper Brodin, at the Work Economic Forum Annual Meeting in Davos in 2018. A furniture retailer choosing to re-sell and re-use its own waste products is one step along that journey. Added thought by Peter van der Poel, ” It’s about smarter use of resources and, from the very beginning, designing products so they can be repurposed, repaired, reused, resold and recycled” ! AMEN.
Thanks to our many institutional investors for supporting our goal and commitment to this ethical, sustainable and resource responsible investing world.
The ESG Group at Silver Leaf Partners – Michael J. Scanlon, Founder 212-632-8429 (office)
mjscanlon@silverleafpartners.com; Member/ FINRA
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