For me, the best parts of this year’s conference were in the facts shared that drive home ways to profit from sustainability as well as facts that shine light on growing market needs for the future. I will share a few:
1) Jeffrey Immelt, CEO of GE, shared that in 1982 10% of US GDP was related to financial services and by 2001 had grown to 45%. He said the way forward is for the US to become an exporter again, this time of high tech products that emerging markets want to buy to develop sustainably. He also said how important venture capital is to the economy and how little VC money is being sent to renewable energy. Perhaps his best statement was that the rest of the world isn’t waiting to innovate and now is the time when we determine if energy jobs are created here or abroad.
2) The “getting beyond socially responsible investing panel” was the highlight of the weekend for me (at least professionally). The lineup included:
• Peter Knight of Generation Investment (Al Gore’s PE firm)
• Greg Larkin of RiskMetrics
• Bruce Kahn from the Climate Change Advisors Group at Deutsche Bank
• Mark Fox of GS Sustain (i.e. Goldman Sachs)
• Paul Hilton of Calvert
The moderator was my former colleague and friend, Paul Herman of HIP Investor
Some quick bullets:
• There’s a new fund from Parnassus Investments that weights the Fortune 100 best places to work in an index fund that has a 12.5% alpha, proving that the way you treat your workers affects your profit and that investors can produce excessive returns based on public information (take that efficient market believers)
• HIP Investor has a S&P 100 index weighted for sustainability (ranked with factors like transparency, environment, and level of diversity throughout the organization) with a 7% alpha.
• 75% of CEO’s refuse to take on a + NPV project if it hurts their quarterly earnings. All panelists echoed the need for longer term thinking from both investors and management.
• The leading edge of sustainable investing is with high net worth and private wealth management because they have the luxury of long time horizons that are needed to realize the excess returns that are possible.
• 50% of the S&P 500 are now reporting significant ESG metrics according to Paul Herman.
•Bruce Kahn from Deutsche Bank said that both Calvert’s shareholder activism and other environmental/social activists deserve a big thank you for pushing the sustainable investing movement ahead by increasing transparency and forcing companies to understand that this can affect their bottom line.
• Stu Hart’s, UNC CSE alumni, new book, “Capitalism at the Crossroads” is a must read for the sustainable investor.
• Depending on the price of carbon in the future Exxon has between 8% and 30 % of their profit at risk. They are the second least efficient refiner of oil in the United States and eventually this will hit their bottom line either with increased capital expenditures or paying for carbon credits/tax.
• A couple of other sites to check out for more info:
All in all it was a great event and I look forward to 2010 at the brand new LEED certified Ross School at the University of Michigan, the only place they could find that will be colder than Ithaca in November.
Class of ’11