By at least one report, the largest sustainable investment strategy is “exclusionary screening,” $15 trillion or 65% of the $23 trillion managed globally.
Viewing “ethics” essentially as a minus, or a “negative” unavoidable cost of doing the right thing, it is the opposite approach of how people at Generation Investment Management, a company that is rarely mentioned in mainstream media coverage of former Vice President Al Gore, chooses its deals.
The Al Gore ApproachGeneration’s “Narrow” Spectrum
Until 200 years ago, Al Gore contends, in a warm profile of Generation in the November 2015 issue of The Atlantic by James Fallows, that most people could not see and hence did not think that the non-visible parts of the light spectrum even existed.
“We were blind and didn’t know what we couldn’t see,” Gore suggests.
Most of what is called “financial” analysis today — price-to-earnings ratios, market caps, CNBC punditry, Federal Reserve speculation — is equivalent to the same tiny slice of the entire spectrum the human eyes can see, Gore believes.
It involves subtly shifting investment optics from “negative screening” to “holistic” and “sustainable” view as business plusses, “in the service of long-term greed.” The new approach helps better meet investor appetites for profitability and seeking alpha, as well as today’s proclivities for seeking sustainability.
Backed By Research
The most comprehensive recent research in this field, the Atlantic article acknowledges, was released last year by economists at Oxford University in collaboration with the investment firm Arabesque.
The study discussed the notion of materiality, like SASB’s implementation, and of ESG, the notion that in addition to normal profit-and-loss calculations, a firm ought to consider the environmental, social, and governance effects of what it does.
The Oxford/Arabesque report found strong evidence that “it is in the best economic interest for corporate managers and investors to incorporate sustainability considerations into decision-making processes.”
Theory to Practice
The road map. Generation originates candidate investment decisions via a set of “road map” reports, long-term views of business, environmental, and social aspects of emerging technologies or markets.
The focus list. Generation next researches specific firms, based on outputs of the roadmapping process and other inputs.
Active ownership. Generation then makes the deals, and actively participates in strategic and tactical operational reponsibilities to help the firms it invests in realize their potential.
Sample Recent Deals
– $55 million investment into Proterra, the EV bus maker.
– 5.25 million shares long into Cerner Corp, healthcare network software maker and recent awardee of a VA contract in June.
– 15.5 thousand shares long into Ansys Inc., maker of engineering simulation software used in the creation of rockets, cars, and even smartphones.
– 1.02 million shares long into Cooper Cos Inc., manufacturer of specialty healthcare products through its CooperVision and CooperSurgical units.
Read Some More -> The Atlantic, Oxford-Arabesque ESG
