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Evolutions in Sustainable Investing
Strategies, Funds and Thought Leadership
Cary Krosinsky (Author), Nick Robins (Author), Stephen Viederman (Author)
9780470888490, Wiley
Hardback, published 24 January 2012
512 pages
23.1 x 15.9 x 3.8 cm, 0.748 kg
"A genuinely comprehensive account... a clear road map for beginners and experienced investment practitioners alike." (Ethical Corporation)
Sustainable Investing is fast becoming an essential method of generating long-term returns, moving beyond the negative approaches to socially responsible investing that have dominated the field. This book, our second on the subject, provides over 15 case studies of leading global investors and companies demonstrating how they successfully apply sustainability aspects to their core strategies. Learn from prominent thought leaders Dan Esty and Paul Hawken among others who have contributed key chapters. Our chapter on performance shows clearly how these strategies have been working once negative approaches are parsed out by those examining fund returns. This book also examines in great depth what data exists, and what's on the horizon, to best measure & capture sustainability successfully. Regional perspectives, including 3 chapters on Asia, and focuses on Canada, Australia, Africa & India are also included, as is a look across asset classes. Sustainable Investing, when performed with a positive perspective, has been outperforming the mainstream, unlike negative approaches designed to match benchmark returns. From eco-efficiency to sustainability-driven innovation and beyond, investors of all shapes & sizes need to know how best to position themselves for the radical market shifts underway.
Acknowledgments xix About the Editor xxi About the Contributors xxiii Introduction xxxv Chapter 1 The Sustainability Imperative 1 Sustainability: A Business Megatrend 1 Getting the Vision Right 3 Getting the Execution Right 4 Building a Sustainability Performance System 6 Summary 8 Note 9 Chapter 2 Jupiter Ecology 11 Roots of the Fund 11 Jupiter Ecology’s Investment Process 12 Good Governance 16 Building a Following 17 Building on Firm Foundations 18 Assessing Companies for the Long Term 19 Voting and Engagement: Participating in the Process of Change 20 Finding Great Green Companies 21 Fund Performance 24 Notes 25 Chapter 3 A Predictor of Performance 27 Investment in Natural Capitalism 27 Discovering Opportunities 28 Identifying the Companies of the Future 30 Summary 32 Chapter 4 Highwater Global 35 Hawken Takes on Domini 36 Fund Drivers Based on Global Sustainable Themes 38 Finding Investment Opportunities 38 Sustainable Investing Is Responsible Investing 44 Summary 45 Notes 46 Chapter 5 Further Context 47 Starting Point for Measuring Sustainability 48 Sustainability 2.0’s Five Factors 49 Summary 51 Notes 51 Chapter 6 Sustainable Asset Management 53 SAM’s Origins and Evolution 54 Building a Sustainable Investing Practice: Basic Business Segments 56 Measuring Intangibles: Sustainability Research Methodology 57 Sustainability Lens: Active Portfolio Management 62 SAM and Performance 63 SAM’s Extended Family: Dow Jones Sustainability Indexes 66 Sustainability Advocacy and Company Engagement 74 Summary 76 Notes 77 Chapter 7 Domini and BP 81 Domini Social Investments 83 Safety, Environmental, and Ethical Concerns 84 Domini Investment Philosophy 84 Business Model Analysis: Key Performance Indicator Alignment Model 85 Integrating Business Model Alignment and Stakeholder Relationship Strength 87 Notes 90 Chapter 8 The Story of Calvert 91 Unconventional History 91 Calvert’s People 93 Calvert’s Methodologies: Signature, Solution, and SAGE 96 Calvert’s Performance 102 Summary 105 Notes 106 Chapter 9 Winslow 107 Blazing a Trail 107 Investment Process 108 Performance Considerations 112 Summary 112 Notes 113 Chapter 10 Portfolio 21 115 Portfolio 21: A History 116 Theory of Sustainability and Change 117 In Search of Forward-Looking Companies 119 Results 120 Summary 121 Notes 122 Chapter 11 Northwest and Ethical Investments 123 Humble Beginnings 124 New Direction 124 Evolving Investment Approach 126 Corporate Engagement Program 128 Key Products and Performance over Time 130 Looking Forward: NEI’s Merger with Northwest Funds 131 Note 132 Chapter 12 Looking for a Green Century: Passive-Indexed versus Active Portfolio Management 133 Background 134 Green Century Funds 134 Green Century Equity Fund 135 Trillium Asset Management and the Balanced Fund 136 Trillium Asset Management Corporation 137 Carbon Footprint of the Balanced Fund 140 Seeking Safer Packaging: The Bisphenol-A Report 140 Shareholder Advocacy 141 Summary 144 Notes 144 Chapter 13 Pictet Water 145 Evolution of Investment Strategy over Time: Original versus Current Mission 147 Founders and Key Decision Makers 148 Methodology 149 Metrics: What Is Important and Why 150 Pictet’s Investments 151 Companies Pictet Has Not Invested in, and Why 153 Performance Review 154 Summary 155 Notes 155 Chapter 14 Inflection Point Capital Management and Strategically Aware Investing 159 Strategically Aware Investing 161 Beyond Environmental, Social, and Governance toward a New Model of Corporate Sustainability 162 Portfolio Construction 163 Investment Process 164 Summary 167 Note 167 Chapter 15 Environmental Metrics 169 Theoretical and Practical Needs for Sustainable Investment 170 Available Data and Metrics 172 Challenges and Opportunities Moving Forward 175 Summary 178 Notes 179 Chapter 16 Crawford Chemicals: Carbon Risk Management in an Uncertain Environment 181 Crawford’s Environmental Dilemma 182 Markets for Carbon Permits and Cap and Trade 185 European Union Emissions Trading Scheme 188 Pros and Cons of the Market for Carbon Permits 190 Predicament of Sustainability in the Chemical Industry 193 Summary 199 Notes 199 Chapter 17 Using Statistical Tools 203 Understanding the Trend 205 Summary 206 Notes 209 Chapter 18 Barriers to Sustainable Investing 211 Missing Planet Problem 212 Overcoming the Barriers 213 Strategy and Tactics 214 Notes 215 Chapter 19 The Silent “S” in ESG 217 Assessing Social Metrics to Increase Business Performance 218 Risk Management 218 Summary 220 Chapter 20 Sustainable Investing: A Ten-Year Perspective 221 The New Normal 222 Climate Change Mitigation, Adaptation, and Sustainability Research 222 Adaptation as Key to Investment and Practice 224 Ecosystem Services 226 Making Use of Data and Findings 227 Summary 230 Notes 230 Chapter 21 Bloomberg 235 Providing Investor Insight and Increasing Transparency 236 Summary 238 Notes 239 Chapter 22 Aviva 241 Aviva’s History and Investment Philosophy 242 Aviva’s SRI Investment Process 242 SRI Portfolio Construction 246 Case Study 1: Green Tires 246 Case Study 2: The Responsible Supply Chain 248 Engagement Across All Asset Classes 249 Conclusion 251 Notes 251 Chapter 23 Generation Investment Management 253 A New Model for Global Equities 254 Summary 258 Notes 259 Chapter 24 Insight Investment: Reflections and Lessons Learned from Integrating Sustainability 261 About Insight 262 Investment Research on ESG Issues 263 Case Study: Climate Change 266 Case Study: European Electricity Utilities 267 Case Study: Biofuels 268 Reflections/Takeaways from the Case Studies 269 Summary 274 Notes 274 Chapter 25 The Unexpected Role Model: Chinese Environmental and Energy Policy 277 China’s Resource Scarcity and Its Empirical Need for Efficiency 280 Shaping Chinese Energy-Efficiency Norms 288 Chinese Policy Setting 290 Translating China’s Environmental Policies into Industrial Opportunities 292 Summary 296 Notes 297 Chapter 26 Ethical Asia 301 Reporting Is on the Rise 302 CSR Works when Companies and Society Are Aligned 305 Focuses in Asia: Labor and Environment 306 Summary 310 Chapter 27 Mitigating ESG Risk in Asian Portfolios 313 The Challenge: Lack of Disclosure 314 ESG Integration in Asian Portfolios 315 Funding ESG Research 317 Building Institutional Capacity 318 Use of Indexes, Benchmarking, and Screening 319 Summary 320 Notes 320 Chapter 28 Sustainable Investing and Canada 323 The Basics 324 Growth of Canada’s Sustainable Investment Industry 325 Context and Trends 325 Summary 327 Notes 327 Chapter 29 High-Risk Areas, Resources, and Sustainability 329 Blacklisted 330 Background 331 Enter Rio Tinto 336 Ordinary Business Activities 339 Summary 342 Notes 342 Chapter 30 Sustainable Investing in Africa’s Frontier Markets 345 Stronger Economics: The Case for Investing in Africa 346 Sustainability Issues in Africa 348 Role of Indexes 350 International Exposure 350 Future Trends: ESG, Media Coverage, and Networks 352 Summary 353 Notes 354 Chapter 31 Evolution of ESG in India 359 Sustainability Issues in India 359 Opportunities in India’s Sustainable Investing Market 361 Considering the Integration of ESG Factors 362 Summary 363 References 364 Chapter 32 Indexes 365 The “What” and “Why” of Indexes 366 Index Architecture 369 Research Quality and Independence 372 Lessons from the Leading Sustainability Indexes 373 Company Reactions to Indexes and Their Impacts 378 Summary 380 Notes 381 Chapter 33 How Asset Owners Can Achieve a Sustainable Investing Framework 383 Importance of Values and Beliefs 384 Integrated Allocations and Targeted Allocations 385 Risk Factors and ESG Beta 386 Quantitative Methods of Risk and Return 388 Monitoring Framework 389 Summary 391 Notes 392 Chapter 34 On Performance 393 SRI Techniques 394 ESG Affects Investment Performance 395 Trends from Performance Reports 396 Summary 398 Notes 398 Chapter 35 Private Equity 401 Private Equity as a Niche of General Asset Management 402 PE’s Fit within Sustainable Investing 404 Development Finance Institutions Leverage of Emerging Markets Private Equity 405 PE-Specific ESG Methods 406 PE Best Practices and ESG Case Studies 408 Contrasting PE and Listed Equity Investors 409 New SI Activity in the PE Asset Class 410 PE Allocations Increase 410 Increased PE Funds Focused on Emerging Markets 411 Future Sustainability Themes in PE 412 Summary 413 Notes 414 Chapter 36 Blue Wolf: Implications for Private Equity 417 Challenges and Opportunities 419 Generating Results 420 Labor Relations Coda 421 Summary 422 Chapter 37 New Business Models, Measurement, and Methodologies 423 Resources and Products versus Wealth 425 Trend of Doing More with Less 426 Improving Overall Performance 426 Summary 427 Chapter 38 Terminology and Intention 429 Values 430 Financial Performance 432 Fiduciary Duty: Universal Ownership 433 Impact 435 Mapping Techniques to Motivation 436 Summary 437 Notes 438 Conclusion41 Notes 446 Appendix A Sample Curriculum 447 Syllabus 447 Appendix B Investors 453 Index 455
David A. Lubin and Daniel C. Esty
Mark L. Trevitt
Paul Hawken
Alexis van Gelder, Dean Martucci, and Erika Kimball
Cary Krosinsky
Thomas O. Murtha and Ashley Hamilton
Colm Fay
Sam Brownell and Sara Herald
Amrita Vijay Kumar
Ashley Hamilton
Dana Krechowicz
Fernando Viana
Jenna Manheimer and Nancy Degnan
Matthew J. Kiernan
James Salo
Thomas J. Nist, Pavel Yakovlev, and Becky Weisberg
Sam Brownell
Stephen Viederman
Dan Viederman
Nancy Degnan
Curtis Ravenel
Malte Griess-Nega and Nick Robins
Malte Griess-Nega and Nick Robins
Rory Sullivan
J. Jason Mitchell
Simon Powell
Lucy Carmody and Laura Dodge
Dana Krechowicz and Alex Wood
N.A.J. Taylor
Graham Sinclair and Roselyne Yao
Sumantra Sen
Graham Sinclair
Roger Urwin
Bud Sturmak and Cary Krosinsky
Graham Sinclair
Adam Blumenthal and Michael Musuraca
Howard Brown
Lloyd Kurtz
Cary Krosinsky 4
Subject Areas: Business & management [KJ]
