"We don't have plan B because there is no planet B."
Ban Ki-moon, the former United Nations Secretary-General from 2007 to 2016
"The biggest businesses today ask, 'What kind of tax breaks can you give to us?" when, in reality, we should go to the community and ask, 'What we can do for them?'"
Hamdi Ulukaya, who came to the U.S. from Turkey 23 years ago on a student visa with almost no money. Today, he is a billionaire family office who has changed American tastes with his Chobani yogurt brand and resurrected the economy in two communities.
Sustainable Investing: The Terrifying Number 415
On May 16, 2019, the Mauna Loa scientific observatory, located on the top of a 13,679-foot-high volcano on the Big Island of Hawaii, recorded a terrifying number that set off a flurry of text messages and confidential telephone calls in the weekend that followed among the world’s leading scientists and elite global family office investors.
Due to the world’s addiction to burning fossil fuels, the Mauna Loa’s precise instruments reported the level of carbon dioxide in the Earth’s atmosphere had risen to 415 parts per million, the highest level it has been since human first inhabited the Earth. The reason 415 is a number that should terrify your family office is because the Earth’s atmosphere has not contained that much carbon dioxide since the Piolcene period more than three million years ago. During the Piolcene period, the Earth was a radically different place; there was no Greenland ice sheet, beech trees grew near the South Pole and sea levels were 50 or 60 feet (or more) higher. There was life, but no way human life could exist during the Piiolcene period when Antarctica literally had frees and forests. Scientists have been recording carbon dioxide levels atop Mauna Loa since 1958. For measurements before that date, researchers rely on data culled from ice cores.
Following the stunning news from Hawaii, Climate scientist Peter Gleick put it this way: “The last time humans experienced levels this high was ... never. Humans didn’t exist.” Ralph Keeling, the director of carbon dioxide program at the Scripps Institution of Oceangraphy — which runs the Mauna Loa lab with NOAA ― said the new baseline high is linked to the ongoing use of fossil fuels and the effects of a mild El Nino. “We are eroding the very foundations of our economies, livelihoods, food security, health and quality of life worldwide,” according to Sir Robert Watson, the chair of a massive multinational research effort to survey the impact of human development on the natural world.
The 415 number is latest in a long list of broken records, and like the others, it promises to hold the title temporarily. Atmospheric CO2 is rising at accelerating rates—currently climbing at close to 3 ppm each year, and getting faster. Every year, the world sees new levels that were previously unrecorded in modern human history. The last time CO2 concentrations hit 415 ppm was likely close to 3 million years ago. Atmospheric CO2 levels are directly correlated with rising global temperatures. But it’s the warming, itself, that often captures the most international attention. World nations participating in the Paris climate agreement have chosen to set their goals in terms of global temperatures, aiming to keep the climate from warming more than 2 degrees Celsius, or 1.5 C if possible, above its preindustrial condition, according to Scientific American.
Sustainable Investing, Global Family Offices and Financial Services
Global personal financial wealth is truly staggering, growing 12% last year to $209.1 trillion in US dollar terms. The total world-wide wealth was roughly 2.5 times as large as the world’s GDP for the year $81 trillion, according to BCG 2018 Wealth Report. Privos Capital estimates that today there are well over 20,000 single and multi-family offices world-wide managing over $25 trillion of assets around the world. In contrast, private equity and venture capital have a mere $3 trillion AUM compared to hedge funds that clock in at a tiny $2.7 trillion and shrinking. There is a whole cottage industry, from EY to Bloomberg, that throw huge resources estimating the wealth of global elite; however, the important take away from our perspective as a multi-family office is that personal private wealth, family offices, and UHNW wealth stands alone in power and sheer force in the world economy.
No matter your political party, or where in the world you live, the survival of our planet is the most pressing issue facing family offices and the financial community. The fact is that trillion of dollars of additional capital must be allocated to Sustainable Investments in the next decade to have any chance of reversing climate change and saving the oceans. Family offices have a critical role to play.
ESG Investing is becoming increasingly important to family offices in managing risk as investors demand greater ethical standards, long-term sustainability, and stewardship of the companies they invest in. As such, environmental, social and governance factors are the key NDA of our multi-family office’s investment process. Privos Capital seeks extraordinary investment results by leveraging market forces to accelerate large scale impact.
Today, Sustainable Investing assets now total $12.0 trillion in the United States—one in four dollars of the total assets under professional management, according to US SIF new Trends Report published in February 2019. As a global multi-family office LP, we believe that the entire financial community plays a critical role in allocating investment capital to address the most pressing social and environmental challenges as defined by the UN Sustainable Development Goals ("SDGs). One of our firm's core missions is to do everything in our power to improve the world’s major social and environment challenges, as identified by the the “17 SDGs.
Privos estimates that from 2014 to 2016, Sustainable Investing enjoyed a growth rate of more than 33 percent, increasing from $6.57 trillion in 2014. More than one out of every five dollars under professional management in the United States today or 22% of the $40.3 trillion in total assets - is involved in the Sustainability Investing.
Assets invested in exchange-traded funds and products around environmental, social and governance strategies grew 30% in 2018, despite a down year for equities, to $22 billion across 208 funds. During the month of January, the cohort added another $3 billion in assets while adding three new funds. Among the managers that took in the most net new assets in January were BlackRock BLK’s iShares, with net inflows of $362 million and $358 million, respectively. Vanguard was the next largest asset gatherer in January with $73 million in net flows into the Vanguard ESG U.S. Stock ETF. Among the largest funds were UBS' MSCI EMU Socially Responsible ETF and MSCI USA Socially Responsible ETF with $743 million and $709 million in net assets, respectively. UBS' MSCI Emerging markets ETF assumed $166 million in net new assets in January, the most among its peers, as reported in P&I.
Privos is a leading multi-family office active in impact, sustainable investments (SI), ESG, SRI, the 17 SDGs, and philanthropy. Our approach to ESG goes beyond traditional negative screens. Our people have an unique world-class approach to sustainability for our family office LP partners that helps us identify investment opportunities worldwide. Our focus on sustainable competitive advantages and the impact of disruptive change has always incorporated governance. We believe that the Sustainable Development Goals (SDGs), which went into effect January 2016, present a new business opportunity to the global family office financial community to have a new conversation around sustainable investments and global growth.
As a firm, we will not allocate, invest, form a partnership, or work on a global family office transaction that does not embrace and promote ESG factors and incorporate our vision of Sustainable Investing and Impact Investing. We believe it is our mission to help increase the flow of private capital to reach SDG-related, ESG, SRI and Impact related investments around the world. We will only work and partner with those family offices, asset management, wealth management, investment banks, fund managers, law firms, and vendors who share share our vision to build sustainable investment solutions to meet these vital goals that can truly save our planet. Over the past decade, impact investing and other forms of sustainable investing have become a world-wide trend, driven by family offices who are demanding more accountability for ESG issues, as well as momentum to fight climate change from the Paris Agreement.
As a firm, we believe that Sustainable Investing provides our multi-family office with the knowledge and expertise to generate better returns. We integrate Environmental, Social and Governance (ESG) factors in our investment process. But more than negative screens, we invest our enormous power of capital, power, and world-wide influence to effect positive change in our global communities and for our family office partners, owners and stakeholders. ESG factors are fully integrated into our international firm and guide how we work with our LP partners, how we manage our operations, and conduct philanthropy. We incorporate ESG data into our investment process. We allocate to sustainable investments and products across all asset classes, including equities, fixed income, real estate, alternative investments, index solutions and thematic investments. In real estate, we consider sustainability essential in developing and managing investments at our multi-family office.
United Nations 17 Sustainable Development Goals (SDGs)
To reduce extreme poverty, fight inequality, protect the planet and ensure prosperity for all, the United Nations has set up the 2030 sustainable development agenda with 17 Sustainable Development Goals (SDGs) calling for action to all countries and private investors to help change the world.
Consider the following statistics which the United Nations recently published:
- 767 million people lived below the extreme poverty line in 2013 and 793 million people were undernourished in 2014-2016.
- 9% of primary-school-aged children worldwide were out of school in 2014 and 1 in 10 children worldwide were engaged in child labour in 2012.
- More than 3 billion people, most of them in Asia and sub-Saharan Africa, lack access to clean cooking fuels and technologies.
- The proportion of the urban population living in slums worldwide is still 23 per cent in 2014.
- In 2013, nearly a third of marine stocks were overfished.
- Gender inequality persists worldwide, women face structural disadvantages in escaping poverty.
FSB’s Task Force on Climate-Related Financial Disclosures (TCFD) Published May 2019
For global family offices, the stark realities of a changing climate affecting their children's lives will drive the point home. For other family office investors, they recognize that the current climate change disaster is starting to effect their wealth. For instance, a recent report from the UN published in May 2019 entitled, Changing Course: A comprehensive investor guide to scenario-based methods for climate risk assessment, in response to the TCFD, stated that delaying the implementation of climate policies could cost the world’s top companies $1.2 trillion over the next 15 years.
As much as 13.2% of overall portfolio value is at risk if temperatures rise 1.5 degrees, the report says. "Considering that total assets under management (AUM) for the largest 500 investment managers in the world total $81.2 trillion, this would represent a value loss of $10.7 trillion." Twenty institutional investors from eleven countries, convened by UNEP FI and supported by Carbon Delta, worked throughout 2018–2019 to analyze, evaluate, and test, state of-the-art methodologies to enable 1.5°C, 2°C, and 3°C scenario-based analysis of their portfolios in line with the recommendations of the FSB’s Task Force on Climate-related Financial Disclosures (TCFD). The outputs and conclusions of this Pilot are captured in the report and aim to enhance the understanding and ease adoption of the TCFD recommendations by the wider investment industry. To read the 2019 report, click here: https://www.unepfi.org/wordpress/wp-content/uploads/2019/05/TCFD-Changing-Course.pdf
According to the Report: “Climate change - of about 1°C of warming today relative to pre-industrial times - is already having disruptive effects on economies across the globe, through both its physical manifestations and the mitigation actions aimed at avoiding these. On the physical side, extreme weather events are increasing in frequency and intensity, resulting in severe repercussions for livelihoods, communities as well as, through impacts on operations, supply chains and customers, for companies. Without policy action, these effects will only intensify as the global mean temperature continues to increase (IPCC, 2018). On the transition side, policy and technology shifts have begun to affect the competitive positions of emissions-intensive companies relative to providers of low-carbon alternatives. The Paris Agreement—ratified by 185 Parties—aims to ensure that the increase in average temperatures above pre-industrial levels is kept to ‘well below’ 2°C by 2100 (UNFCCC, 2015). Continued physical climate change and rapid policy action to limit it present investors with potentially unprecedented and uncertain financial impacts that they will need to manage.”
In the Forward to the Report, Mark Carney, the current Governor of the Bank of England, states, as follows:
“In 2015, I spoke of the ‘Tragedy of the Horizon’ – the catastrophic impacts of climate change will be felt beyond the traditional horizons of most banks, investors and financial policymakers, who do not have the direct incentives to fix them. Since then, important progress has been made from the Paris Accord to advances in managing the risks around climate change and optimising the returns in the transition to a low carbon economy. For the first time, a path to break this Tragedy is becoming possible. Institutional investors, as guardians of long-term saving, have the horizons to appreciate climate risks and opportunities and many are developing the skills to manage them. But to appropriately price climate risk and to reward innovation, investors need the right information. The work of the Task Force on Climate-Related Financial Disclosures (TCFD) is vital to improving the reporting and understanding of climate-related financial risks. Since the TCFD’s recommendations to the G20 Leaders Summit there has been a step change in the demand by investors for better climate reporting. TCFD supporters now manage almost USD 110 trillion on assets. Momentum behind TCFD’s voluntary disclosure recommendation is creating a virtuous circle by encouraging learning by doing. As companies apply the recommendations and investors differentiate between firms using better information, adoption will continue to spread, disclosure will become more decision-useful, and its impact will grow. Translating climate models into economic and financial impacts is difficult, even more so for investors who depend on the information provided by firms. Initiatives like UN Environment’s Finance Initiative are invaluable for sharing of good practice—such as in scenario analysis—so firms can make their approach more granular and sophisticated. Much remains to be done. This report will help us maintain momentum as we continue along the virtuous circle where more companies disclose more information, investors make better informed decisions, and sustainable investment goes mainstream.”
Our Investment Stewardship team promotes sustainable business practices aligned with long-term value creation. As family offices often hold large ownership stakes in leading companies in each country, it is important how a family office engages corporates, clients, and the broader investment community on governance and stewardship
ESG Engagement is the essential stewardship program at our multi-family office which helps us assess a family office’s approach to governance, including the management of relevant environmental and social factors. We focus on a range of ESG issues likely to impact our firm’s long-term economic interests, including board succession planning, governance, leadership, operational excellence and long-term financial performance. For instance, we hold engagement meetings that include an agenda, anticipated outcome which help formulate a family office’s approach to an issue, improve the disclosure of a family’s portfolio company, or inform a voting decision.
PRI in Person 2018
Our Chairman & CEO attended the 2018 PRI in Person, held in San Francisco, on September 12-14, 2018. PRI in Person is a world-class leading LP global conference on sustainable investment, offering a platform for PRI signatories and other investment professionals to learn, network and collaborate in person over a three day period. The annual event allows attendees to discuss topical issues and share experiences from their own organization and region with peers from around the world. The 2018 conference ran alongside the Global Climate Action Summit, a major event organized by the State of California, which will bring together leaders from government, business and the global community to inspire greater global ambition to act on climate.
In line with this, investor action on climate change was a key focus for PRI in Person 2018, but the conference also covered other themes including ESG integration, active ownership and emerging E, S and G issues. Privos was honored to attend PRI in Person, and we encourage other asset owners and family office LP to become signatories to PRI. In 2019, PRI in Person will be held in Paris, and we look forward to participating in the event next year. As a multi-family office, our people regularly attend other world-class leading sustainable investing events, including SOCAP, US SIF, Responsible Investor (RI), TBLI, Phoenix Impact Conferences, GRESBY, Ceres, GIIN, and others. A list of the leading sustainable events for your family office to consider attending is listed at the bottom of this page for your review. We encourage your family office to join these world-class organizations.
Seven (7) ESG Themes Your Family Office Must Incorporate Into The Investment Committee Process
As sustainable investing increases in global family offices and financial community, there is still considerable confusion surrounding the terminology surrounding Sustainable Investing, ESG, Impact, and the 17 SDGs. Your family office will be exposed to terms and leading firms in the sustainability industry, such as MSCI, measuring impact, data providers, materiality, engagement. Then throw into the mix that every asset management firm and wealth advisor is bombarding you ESG and Sustainable Investing marketing materials, which often include expensive, high fee generating products as a way to increase the financial advisor’s personal book of business at the expense of you, the family office client. In fact, as you read this posting, there are today literally thousands of financial advisors from all the leading wealth management and asset management firms sitting in employer sponsored seminars today learning how to use ESG and Sustainability to grow their book of business. Wealth firms are using ESG to “start a conversation” with your family office, then trot out an ESG “product specialist” - a very smart underpaid usually low level women member of the wealth firm who “educates” your family office on the ways of the sutainable world so you write a big ticket to the wealth advisor. The only person who actually cares about sustainability at the firm pitch is the SI product specialist who is also the lowest paid and commands the least respect by her more senior peers. You all know the drill here.
So, the question becomes, naturally, how to you accomplish your mission to help save the world, learn the required lingo of sustainability, weed out the greenwashing advisors and fund managers from those who are truly doing a world class job in sustainability? Put another way, how do you find the world-class TPG Rise and Generations of the world, while avoiding others who are less committed to sustainability.
To help your family office become more familiar with sustainable investing and help you increase your allocations to impact investments world-wide, we have compiled below a quick cheat sheet for your family office to incorporate into your investment committee process, as follows:
(1) Your family office should focus on the concept of Materiality and how to factor it into your investment decision making; put another way, family offices should distinguish between companies who score highly on ESG issues that are financially material to their business, from those who score highly on issues that are not financially material to their business;
(2) Your family office should focus on implementing ESG Integration across your asset classes and global holdings;
(3) Your family office should analyze your Scoring Methodology and subscribe to important measuring tools and incorporate data from your family office’s external data providers (MSCI, RepRisk, Sustainalytics, Bloomberg, etc.);
(4) Your family office should focus on Education and providing ESG and sustainable training to your family office members, fund managers, and portfolio companies;
(5) Your family office should focus and analyze on how do you Measure ESG across your global holdings; for instance, you should ask tough questions of your fund managers and portfolio companies about if they are using the SASB accounting standards (rigorous standards-setting process in materiality focused, evidence-based and market informed), and other measuring tools;
(6) Your family office should ask tough questions to your fund managers and portfolio companies about the current hot concept of ESG Engagement, with particular understanding that ESG Engagement with privately owned companies is different from listed equities because private funds typically own their portfolio companies outright and can influence them to implement ESG in a more impactful way;
(7) Your family office should require its private equity fund managers to use the UNPRI Tools that were developed by UN Principles for Responsible Investment (PRI). Your family office should also adopt the principles of UNPRI, or join UNPRI when possible; and
(8) Your family office should attend the leading SI conferences and events to meet other family offices committed to sustainability.
Sustainable Investing Confusion: You Are Not Alone
The terminology surrounding Impact investing, ESG, and sustainable investing cause huge confusion not only in the family office world; in fact, it is public knowledge that different divisions within the same asset management firms and global financial institutions and banks cannot agree within the same firms over the definition "impact" and "sustainable investing." In fact, we have witnessed, first hand, different teams working at the very same global private equity firms, financial services firms, fund managers, hedge funds, asset and wealth management firms argue openly at meetings about what is the exact definition of an impact investment, or what constitutes sustainable investing.
So, if your family office is confused by the massive number of impact investing conferences, sustainable investing conferences, private wealth management dinners, and financial advisor cocktail parties that you are being invited to those days, you are not alone. Today, with the markets uncertain and a 2019 correction expected, asset and wealth management firms have been frantically rolling out ESG training for their financial advisors as a way to increase client AUM before the downturn. Wealth advisory firm use ESG and sustainability to “open client pocketbooks” (particularly women) to increase the advisor’s book of business.
Add to the mix that the data providers are all pilling into ESG, with MSCI, Sustainalytics, RepRisk, Bloomberg, Morningstar and others, fighting like rabid pitbulls for market share in the booming Sustainable Investing industry. For instance, MSCI uses more than 1,000 data points on ESG policies, programs and performance to focus on 37 sector-based and universal key issues grouped under 10 themes that roll up to environmental, social or governance pillars. All of these are factored into a holistic ESG score. It is any wonder that your family office is confused about impact and SI. Then there is, of course, the elephant in the ESG room, namely Aladdin, a technology system developed by BlackRock, the world’s largest asset manager. Since its inception in 1988, when it was developed as an internal risk tool for BlackRock employees, Aladdin is now found at 85 asset managers and institutional investors that have about $20tn in total assets, up from an estimated $11tn just four years ago. As a risk tool, ESG and sustainability facts into Aladdin, but your family office probably does not have access to Aladdin. That being said, Aladdin is just another example of the "fight for data" that is happening in the sustainable investing and impact industry.
The Elephant In the Room: ESG Does Not Pay
Global family offices are all talking about the elephant in the room in the ESG industry, which is the simple rule that "ESG does not pay." If your family office wants to engage in impact and sustainable Investing, you should help us in the global family office world ensure that ESG professionals - those professionals who have decided their lives to sustainability - are paid for their contribution.
To understand what is really going in the Sustainable Investing community, you only have to listen to the comments made by a senior executive recruiter, who stood up recently at a leading Sustainable Investing conference and said to a packed audience of mostly women financial services executives looking for a new career in sustainability, as follows:
"We are a top 5 global executive search firm. I have thousands of resumes and CVs coming in every month from qualified global candidates like all of you here at this leading US ESG conference, all wanting to quit their jobs, pivot, and get into into sustainable investing and impact - candidates from Goldman, Morgan Stanley, Blackrock, McKinsey, Wharton, Booth, HBS, Stanford GSB and more - every single month these candidates and their resumes flood into our offices from around the world - talented people wanting to work in impact and sustainable investing, like all of you change-the-world people here today at this event - yet, in the past there months, I have received just one real job placement for a mid-level ESG professional from a global asset management firm - one paying job - and this job actually is posted at the same salary of what a senior paralegal makes at a big law firm in New York City. You heard that right - ESG professionals - even an Executive Director or MD are lucky to earn what a paralegal makes working for a global asset management firm. So, it sounds great all this impact terminology that you are all talking about at this conference - these negative screens, MSCI, TPG RISE, Generation, the fight for data, all these 17 SGS and what have not - but the way I see it folks from my chair actually getting you all the ESG jobs, the reality is that the ESG job orders and ESG pay is simply not there. You heard me: ESG and Sustainability does not pay. If you meet anyone who works in the ESG industry, from Managing Director at a large global asset management firm to junior analyst at a impact fund - these people are all making C- or D money if they are lucky, probably D- money. So if you look around this ESG investor conference, if you see any ESG professionals with badges on, you need to know that they are all underpaid. Grossly underpaid. And, until you change that elephant in the room, nothing is going to stop the planet from blowing up by 2050. That's my view from the trenches."
2019 Global Family Office Trends in Sustainable Investing
Our multi-family office is pitched every month, like your family office, by armies of traditional fund managers looking for new allocations and LPs who are suddenly slipping in a couple of ESG slides into their powerpoint decks (a practice which is referred to as “Greenwashing”) and telling us their fund is now "green." So how should your family office engage allocate more capital to ESG and sustainable investing? As a family office, we applaud your desire to move the needle forward with your own impact investments. To help your family office understand the current trends, and navigate the scores of wealth advisors, asset managers, fund managers, and now hedge fund managers who are all coming calling with new "green" ESG funds and sustainable investments, we have complied a short list (a cheat sheet if you will) that outlines the current trends in ESG and sustainable investing, as follows:
(1). The Fight for Data: Global family offices want to understand the non financial impact of their portfolios and are calling for better data to measure investment strategy and impact measurement. ESG integration allows family offices to look deeper into their investments and understand performance. There is also an increased demand for data between family office portfolio companies over time. Family offices are also looking to appreciate how their portfolios are making a difference, and they are demanding more sophisticated metrics on how to measure their investments.
(2). Hedge Funds Are Entering Sustainable Investing: Global family offices are staring to see their hedge fund managers enter sustainable investing. As we all know, hedge fund managers have been called many names over the years, but “responsible investor” is not one of them — until now. Hedge funds have committed a little more than 10 per cent of their assets to strategies that follow responsible investment principles, with some allocating up to half their funds in this way, according to research by the Alternative Investment Management Association, a lobby group, and the Cayman Alternative Investment Summit, organisers of an industry conference. The managers of these typically opaque funds, whose reputations have been hit in recent years due to sluggish returns and high fees, have responded to increased investor demand for products that marry strong performance with societal outcomes. “The same transformation that is occurring in the traditional asset management industry is now happening in the alternative investment industry as well,” said Tony Cowell, head of asset management for KPMG Cayman Islands. “This sector is only going to grow in importance as more hedge fund managers and investors work together to make an impact.” The survey of 80 investment managers, which together oversaw $550bn of hedge fund assets, showed 40 per cent had already hired a responsible investment specialist or planned to do so. Respondents said they had seen a 50 per cent increase in demand for responsible investment from current or prospective clients over the past year, according the Financial Times. That being said, JPMorgan Chase & Co. surveyed as many as 270 investors attending its recent 16th Annual Macro Quantitative & Derivatives conference; a staggering 44 percent said they had no interest in the ESG and sustainable investing. JPMorgan says the proportion of ESG naysayers is down from 54 percent when it posed the same question a year ago. But it still suggests that the quant crowd, which is by its nature even more data-driven then the rest of the investment gang, is justifiably concerned by the lack of objective statistics available.
(3). ESG in Fixed Income: the fixed income market has started to embrace sustainable investing. Debt investors are starting to wake up to the fact that their clients are demanding they engage on ESG issues. The fixed-income industry is finally realizing that ESG performance can affect investment quality. Today, credit-rating agencies are looking at ESG performance as an indicator or risk. To this end, Moody's announced in late 2018 that it would begin to factor ESG into its credit ratings.
(4). Sustainable Green Bonds: Green bonds are the hottest topic in the bond industry, with new issues surpassing $150 billion last year. Today, bond issuers are going beyondgreen and are using bonds to integrate sustainability into business strategy and signal their values. Starbucks sustainability bond is a good example of a company addressing social and environmental sustainability in their coffee supply chain. SEB, the Swedish house bank of the Wallenberg family, helped invent the green bond, and is an example of world class innovation happening in the green bond market.
(5). Family Offices Flooded With New Sustainable Investment Products: Family offices, Millennials and woman are flooding into sustainable investing creating a huge rush to create sustainable investing products. Morgan Stanley 2017 survey by their Institute for Sustainable Investing found that 86% of millennials are interested in sustainable investing, a trend which will bring billions of dollars of capital into ESG and impact investing over the next decade. Wealth management firms are rushing to offer sustainable investment products to family offices, often with high fees and marginal performance.
(6). Corporates Embrace ESG: companies are incorporating sustainability as part of their corporate strategy. Family offices are increasingly asking companies for data and evidence that they are making a long term change on the world. Corporations are changing their business practices and are learning how to address ESG activism at the board level.
(7). Private Equity Flooding into the Family Office Space: today, leading private equity firms are partnering with global wealth firms and asset managers to gain access to non-institutional capital. For instance, KKR, Carlyle, TPG and others have announced joint ventures and partnerships with leading wealth firms to gain access to the assets of family offices. We discuss this trend below.
ESG Key Data Points for Your Family Office
(1). Privos estimates today there is more than $12 trillion invested globally to SRI strategies, or one out of every five dollar managed under professional management globally. From 2014 to 2016, sustainable, responsible and impact investing enjoyed a growth rate of more than 33 percent, increasing from $6.57 trillion in 2014. More than one out of every five dollars under professional management in the United States today - 22% of the $40.3 trillion in total assets - under management tracked by Cerulli Associates—is involved in SRI.
(2). Your family office should be aware that there is no single approach to ESG and sustainable investing and there is no single term to describe it. Depending on their emphasis, investors use such labels as: “community investing,” “ethical investing,” “green investing,” “impact investing,” “mission-related investing,” “responsible investing,” “socially responsible investing,” “sustainable investing” and “values-based investing, "ESG," "SI,” among others.
(3). Traditionally, responsible investors have focused on one or both of two strategies according to US SIF. The first is ESG incorporation, the consideration of environmental, community, other societal and corporate governance (ESG) criteria in investment analysis and portfolio construction across a range of asset classes. An important segment, community investing seeks explicitly to finance projects or institutions that will serve poor and underserved communities in the United States and overseas. The second strategy, for those with shares in publicly traded companies, is filing shareholder resolutions and practicing other forms of shareholder engagement. Sustainable investing strategies work together to encourage responsible business practices and to allocate capital for social and environmental benefit across the economy.
(4). According to US SIF, SRI investors comprise individuals, including average retail investors to very high net worth individuals and family offices, as well as institutions, such as universities, foundations, pension funds, nonprofit organizations and religious institutions. There are hundreds of investment management firms that offer SRI investing funds and vehicles for these investors. Practitioners of sustainable, responsible and impact investing can be found throughout the United States. Examples include:
Individuals who invest—as part of their savings or retirement plans—in mutual funds that specialize in seeking companies with good labor and environmental practices.
Credit unions and community development banks that have a specific mission of serving low- and middle-income communities.
Hospitals and medical schools that refuse to invest in tobacco companies.
Foundations that support community development loan funds and other high social impact investments in line with their missions.
Religious institutions that file shareholder resolutions to urge companies in their portfolios to meet strong ethical and governance standards.
Venture capitalists that identify and develop companies that produce environmental services, create jobs in low-income communities or provide other societal benefits.
Responsible property funds that help develop or retrofit residential and commercial buildings to high energy efficiency standards.
Public pension plan officials who have encouraged companies in which they invest to reduce their greenhouse gas emissions and to factor climate change into their strategic planning.
(5). What are sustainable products: sustainable and responsible investing spans a wide and growing range of products and asset classes, embracing not only public equity investments (stocks), but also cash, fixed income and alternative investments, such as private equity, venture capital and real estate. SRI investors, like conventional investors, seek a competitive financial return on their investments.
(6). Performance Issues: several research studies have demonstrated that companies with strong corporate social responsibility policies and practices are sound investments. Studies with such findings have come from Oxford University, Deutsche Asset & Wealth Management, Morgan Stanley Institute for Sustainable Investing, TIAA - CREF Asset Management and the United Nations Environment Programme Finance Initiative, among others. For example, in 2015 Deutsche Asset & Wealth Management and Hamburg University conducted a meta-analysis of over 2,000 empirical studies, making it the most comprehensive review of academic research on this topic. They found that the majority of studies show a positive correlation between ESG standards and corporate financial performance.
(7). Family Offices and Shareholder Engagement. According to US SIF, wning shares in a company gives investors a channel through which to raise environmental, social and corporate governance issues of concern. By filing or co-filing advisory shareholder resolutions at US companies, which may proceed to a vote by all shareholders in the company, active shareholders bring important issues to the attention of company management, often winning media attention and educating the public. Moreover, resolutions need not come to a vote to be effective. The process of filing often prompts productive discussion and agreements between the filers and management that enable the filers to withdraw their resolutions. From 2014 through the first half of 2016, more than 200 institutional investors and money managers collectively controlling a total of at least $2.56 trillion in assets filed or co-filed shareholder resolutions on ESG issues. Investors filed more than 700 resolutions relating to environmental, social and key governance issues for the 2016 proxy season. Included in this group were resolutions asking firms for better disclosure and oversight of their political contributions and activities.
Recent social and environmental resolutions have addressed climate change, equal employment opportunity, human rights and sustainability reporting. In addition, investors also filed resolutions questioning companies on their governance structures and practices, particularly those involving board elections, executive pay and responsiveness to shareholders. In recent years, these proposals have been gaining traction, and frequently receive majority support. In addition to filing or co-filing shareholder resolutions, investors can also actively vote their proxies, engage in dialogue with corporate management or join shareholder coalitions as a means to encourage companies to improve their environmental, social and corporate governance practices. In addition, investors can participate in public policy initiatives, working with government regulatory agencies, and testify and report on ESG investment issues to Congress.
What is a SDG and Why Your Family Office Should Care
For those of you new to ESG, on September 25, 2015, the 194 countries of the UN General Assembly adopted the 2030 Development Agenda titled Transforming our world: the 2030 Agenda for Sustainable Development. Following the adoption, UN agencies under the umbrella of the United Nations Development Group decided to support an independent campaign to help communicate the agreed Sustainable Development Goals to a wider constituency. Known as Project Everyone, the independent campaign introduced the term Global Goals and was supported by corporate institutions and other International Organizations.
As a multi-family office, Privos Capital is taking the lead to help accelerate SDG Investing for global family office LPs on the themes of Sustainable Development Goals (SDGs). Family offices must state their commitment to contributing to the 2030 Agenda for Sustainable Development and to be "a catalytic driver for positive change." Family offices must provide liquidity and leadership to support the 17 SDGs which represent the "largest societal challenges of our time in our work and investments." Naturally, the more capital that is allocated to the 17 SDGs, the lower the overall cost of capital for those innovating in the sustainability around the world, which is one of the core missions of our multi-family office.
According to MSCI, ESG Investing is a term that is often used synonymously with sustainable investing, socially responsible investing, mission-related investing, or screening. ESG factors refers to industry specific key issues such as climate change, human capital and labor management, corporate governance, gender diversity, privacy and data security, among others. A mining company and a financial company, for example, may face different key ESG risks and opportunities. ESG is growing in significance amongst both institutional and retail investors. The practice of ESG investing began in the 1960s as socially responsible investing, with investors excluding stocks or entire industries from their portfolios ("negative screens") based on business activities such as tobacco production or involvement in the South African apartheid regime. Today, ethical considerations and alignment with values remain common motivations of many ESG investors but the field is rapidly growing and evolving, however, as many investors look to incorporate ESG factors into the investment process alongside traditional financial analysis.
"ESG investing is the consideration of environmental, social and governance factors alongside financial factors in the investment decision–making process," according to Remy Briand, Managing Director of MSCI ESG Research. Privos believes that as a global society, we are in the middle of a $30 trillion intergenerational wealth transfer from baby boomers to their children. And those kids - not really millennials only, but people from 25 to 40 years old - simply think about their investment decisions differently.
Privos Capital embraces the principles of UNPRI. As a multi-family office, our people participate in every leading global ESG, SRI and SDG investor conference in the financial industry including US SIF, SOCAP, Phoenix Capital, and others. We encourage all family offices both to start attending ESG and impact Investing events and to increase allocations to the 17 SDGs. For instance, our CEO was in attendance recently at the Peace Palace in the Netherlands for Phoenix Capital's Impact Summit Europe, and regularly attends US SIF, SOCAP, PRI and other ESG events. Speakers at Impact Summit Europe included the world leaders in impact investing, the true "Lions of Sustainability," as we like to call them, including Al Gore (Generation), and representatives from APG, FMO, PKA, MN, PGGM, OECD, ASN, GIIN, EIF, Natixis, DNB, Storebrand, Tridos, Unilever, Zurich, World Economic Forum, and others.
Late to the Game: Private Equity Piles Into ESG and Sustainable Investing, but Who Is Greenwashing?
Family offices have been leaders in ESG long before it was fashionable to do so. Around the world, leading family offices, families that run entire countries, have been making sustainable investments without the need to talk about it. It was just the right thing to do. Conversely, for the most part, until about 10 years ago, private equity did not have a seat at the sustainable investing table, nor did they really care about ESG until their European pension fund clients, the PGGM and MNs of the world, and the pension fund consultants (the Cambridge, Mercer, Wilshires of the world), started screaming about ESG and sustainable investments. Once PGGM and Calpers started demanding their private equity GPs think seriously about ESG (translation: at least include ESG in your fund pitch books), then private equity woke up to the fact that their deal team must think about sustainability; the result at first was what we in the ESG industry call the dreaded "greenwashing," ie private equity firm IR teams would talk about ESG but the deal teams gave it lip service only. However, thankfully the tide turned and the private equity industry woke up when the the European pension funds took the position that we are not coming into your next fund (Fund 12, 13, 14) unless sustainability is a serious part of your firm, your firm investments, and the deal team participates in ESG.
Today, there is what we call Private Equity ESG 3.0 where leading private equity firms are waking up to the fact they are losing pension fund mandates to their competitors who are more sophisticated about ESG. For the losers, for the private equity funds who didn't jump on the ESG bandwagon, it is hard to play catch up when you are losing the ESG game. The result is that you are seeing leading private equity firms dangling, like candy, joint venture (JVs) with global wealth firms whose MDs couldn't get hired by the very private equity firm that comes courting them, begging for their wealth cannel and ultra-high net worth clients. Yet, what the wealth firms don't see is that the very private equity firm that you are doing a dance with will, in the end, acquire you and fire the very wealth management executes that inked the JV in the first place. Few people truly appreciate the movement here, yet you are seeing a whole new wave of global private equity firms now targeting wealth clients, setting up joint ventures, and using ESG as a way to win more mandates from their pension fund, LPs and consultant relations. Private equity is also using ESG as a way to source sustainable deal flow from global family offices in addition to using ESG as a way to raise LP capital and the wealth firms have no idea what is about to hit them in the market.
For instance, KKR & Co LP has set up a business to invest in budding companies which have societal or environmental benefits, marking the U.S. private equity firm’s foray into dedicated so-called impact investing, sources aware of the plans said. The move underscores how buyout firms, long associated with saddling companies with debt and slashing costs and jobs, are now seeking to offer products to investors that also appeal to an environmental, social and governance (ESG) business agenda. KKR’s new unit will seek investments in smaller medium-sized companies focusing on areas such as renewable energy, education and environmental management, according to one of the sources, who spoke on condition of anonymity as the information is not public, according to Reuters.
Other private equity firms are beginning to launch similar offerings focused on investors’ social responsibility agenda. TPG Capital’s $2 billion Rise Fund, for example, invests in five areas including agriculture and education, and counts musician and activist Bono as a founding stakeholder. According to Impact Alpha, for those of us actually interested in measuring impact, the Big Three private-equity firms, and fund managers at shops like Carlyle Group, Blackstone and Apollo Global Management that may follow them, will be on the hook for impact measurement, by choice. KKR has told investors its planned $1 billion Global Impact Fund will invest in businesses that deliver “commercial solutions that solve global challenges in credible and measurable ways." KKR will require portfolio companies to be aligned with specific UN Sustainable Development Goals and to measure and report on specific impact outcomes
Bain Capital’s $390 million Double Impact fund has been on a dealmaking roll in the past few weeks, taking stakes in two sustainable meals restaurants, an online, for-profit school. Bain has promised to report on the fund’s impact under the so-called GIIRS rating standard. Conversely, in 2016, IFC and Apollo announced a $1B credit fund targeting distressed assets in emerging markets. They each plan to invest $500M in a joint platform. Surprisingly, Blackstone does not have a dedicated ESG double impact fund like Bain; however, the firm does have a head of sustainability who focuses on savings and energy costs.
Meanwhile, TPG Growth’s Rise Fund has perhaps the most mature impact measurement framework, developed with the help of Bridgespan, the strategic consulting firm. TPG’s Bill McGlashan told Impact Alph that each Rise Fund investment is underwritten not only for financial targets, but for a specific “impact multiple of money,” – a dollar-value it expects to deliver in a quantifiable output that can be linked (i.e. by research) to a positive outcome. The skeptics were particularly aroused by the Rise Fund’s latest deal, an investment in the spinoff of Chinese internet giant Baidu’s financial services arm. The Rise Fund was one of three TPG funds that put up $1 billion, with $900 coming coming from Carlyle, Taikang Insurance, Agricultural Bank of China International and other investors. The Rise Fund cited Baidu FSG’s participation in the World Bank’s Universal Financial Access 2020 initiative 2020. In 2015, the World Bank Group committed to enabling one billion people to gain access to transaction accounts; the next year Baidu pledged to open 10 million such accounts. That’s more than some other partners, but only one-tenth as many as the 100 million pledged by Chinese internet rival Ali Baba’s Ant Financial group, for example.
A Call To Action: The Yahoo Finance Story
As a family office, we urge you to become more engaged in ESG and sustainable investing. One person can make a huge different in sustainability. For instance, a friend of our firm, an executive in New York working at Yahoo! Finance, recently and quietly took the initiative to add a new section to the popular financial website portal that provides ESG ranking and scores that are accessible to Millennials, women and everyone who has an internet connection and may not have the resources to subscribe to expensive MSCI data. Today, due to the call of action of just one world-class risk taking person, subsequently embraced by the entire go-fast, incredible team at Yahoo! Finance, the entire internet-free world now has a free ESG ranking system in which to make more informed decisions. You should look at Yahoo Finance ESG data, it is really incredible. The lesson is clear: one person can make a difference; it is just one person working at Yahoo! Finance who changed the world, which will over time - long after he retires - will continue to bring the world an ESG ranking system that will, of course, help drive capital to those companies that are the most sustainable.
Privos 2019 Lions of Impact
At Privos, we announce every year a "Lions of Impact List," which is our internal list of the best sustainable firms in the world who embrace the values that we hold dear at our firm. We believe that if your family office studies carefully the following firms, or engage in any way with these leaders in the ESG industry, you will accelerate the impact your family office is making in your community, country, and around the world.
Thus, we are happy to announce the Privos 2019 “Lions of Impact” include the following individuals and firms: Michael Bloomberg (Bloomberg Inc.), Innovest, Sustainalytics, Larry Fink (BlackRock), MSCI, Yahoo! Finance, Eaton Vance, Generation Investment Management (former U.S. vice president Al Gore and David Blood), Ellevest (Sallie Krawcheck); Pax World Funds; Walden Asset Management (Tim Smith), TPG $2B RISE Fund, KKR Global Impact Fund, and Lisa Woll (US SIF). We also include in our Lion of Impact each and every one of the foundations listed below, such as the Gates Foundation and Red (Bono’s Foundation) who make sustainable investing and impact the core focus of the world-class world they do everyday around the world. Family offices must partner more with foundations to effectuate fast and deep change that the financial services industry simply cannot take on given their mandate to sell product and increase AUM.
We also refer you to other media publications and financial sites various list of the leaders in ESG, including an excellent recent issue of Barrons which our firm applauds for taking the risk to devote an entire issue to ESG and sutainable investing. These publications do a better job than we can possible do here educating you on ESG and sustainable investing. Clearly, impact sells today, which is great news for the planet and future generations.
The 17 SDGs
Our planet faces massive economic, social and environmental challenges. To combat these, the Sustainable Development Goals (SDGs) define global priorities and aspirations for 2030. They represent an unprecedented opportunity to eliminate extreme poverty and put the world on a sustainable path. Governments worldwide have already agreed to these goals. Now it is time for family offices to take action. See, sdgcompass.org
As a multi-family office LP, our firm's core DNA is investing and allocating to ESG, SRI and impact investments that address the most pressing social and environmental challenges as defined by the UN Sustainable Development Goals (SDGs). The SDGs, officially known as Transforming our world: the 2030 Agenda for Sustainable Development, is a set of 17 "Global Goals" with 169 targets contained in paragraph 54 United Nations Resolution A/RES/70/1 of 25 September 2015. The SDGs are built on the Principles popularly known as The Future We Want. The SDGs include targets covering a broad range of sustainable development issues, including ending poverty and hunger, improving health and education, making cities more sustainable, combating climate change, and protecting oceans and forests. Privos will not invest in a transaction or make an allocation that does not involve one of the 17 SDGs.
Privos Capital endorses the United Nations-based Principles for Responsible Investment Initiative (UNPRI) and works with family office LP partners to implement UNPRI’s infamous Six Principles for Responsible investment, which were devised by the investment community. We work with our partners to design bespoke, long term programs to implement UNPRI principles across our partners core holdings. We are proud members of US SIF act active at all major SDG, ESG and Sustainability investor conferences.
The 17 SDGs are as follows:
No Poverty - End poverty in all its forms everywhere
Extreme poverty has been cut by more than half since 1990- however, more than 1 in 5 people live on less than $1.25 a day
Poverty is more than lack of income or resources- it includes lack of basic services, such as education, hunger, social discrimination and exclusion, and lack of participation in decision making.
Gender inequality plays a large role in the perpetuation of poverty and its risks; They then face potentially life-threatening risks from early pregnancy, and often lost hopes for an education and a better income.
Age groups are affected differently when struck with poverty; its most devastating effects are on children, to whom it poses a great threat. It affects their education, health, nutrition, and security. It also negatively affects the emotional and spiritual development of children through the environment it creates.
Zero Hunger - End hunger, achieve food security, and improve nutrition and promote sustainable agriculture.
Globally, 1 in 9 people are undernourished, the vast majority of these people live in developing countries
Agriculture is the single largest employer in the world, providing livelihoods for 40 per cent of today’s global population. It is the largest source of income and jobs for poor rural households. Women comprise on average 43 per cent of the agricultural labor force in developing countries, and over 50 per cent in parts of Asia and Africa, yet they only own 20% of the land.
Poor nutrition causes nearly half (45 per cent) of deaths in children under five – 3.1 million children each year.
Good Health and Well-being - Ensure healthy lives and promote well-being for all at all ages.
Significant strides have been made in increasing life expectancy and reducing some of the common killers associated with child and maternal mortality, and major progress has been made on increasing access to clean water and sanitation, reducing malaria, tuberculosis, polio and the spread of HIV/AIDS.
However, only half of women in developing countries have received the health care they need, and the need for family planning is increasing exponentially, while the need met is growing slowly - more than 225 million women have an unmet need for contraception.
An important target is to substantially reduce the number of deaths and illnesses from pollution-related diseases.
Quality Education - Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all.
Major progress has been made for education access, specifically at the primary school level, for both boys and girls. However, access does not always mean quality of education, or completion of primary school. Currently, 103 million youth worldwide still lack basic literacy skills, and more than 60 per cent of them are women
Target 1 "By 2030, ensure that all girls and boys complete free, equitable and quality primary and secondary education leading to relevant and Goal-4 effective learning outcomes"- shows the commitment to nondiscriminatory education outcomes
Gender Equality - Achieve gender equality and empower all women and girls.
Providing women and girls with equal access to education, health care, decent work, and representation in political and economic decision-making processes will fuel sustainable economies and benefit societies and humanity at large
While a record 143 countries guaranteed equality between men and women in their Constitutions by 2014, another 52 had not taken this step. In many nations, gender discrimination is still woven through legal and social norms
Though goal 5 is the gender equality stand-alone goal- the SDG's can only be successful if women are completely integrated into each and every goal
Clean Water and Sanitation - Ensure availability and sustainable management of water and sanitation for all.
Affordable and Clean Energy - Ensure access to affordable, reliable, sustainable and modern energy for all.
Decent Work and Economic Growth - Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.
Industry, Innovation and Infrastructure - Build resilient infrastructure, promote inclusive and sustainable industrialization, resilient infrastructure, promote inclusive and foster innovation.
Reduced Inequalities - Reduce income inequality within and among countries.
Sustainable Cities and Communities - Make cities and human settlements inclusive, safe, resilient and sustainable.
Responsible Consumption and Production - Ensure sustainable consumption and production patterns.
Climate Action - Take urgent action to combat climate change and its impacts by regulating emissions and promoting developments in renewable energy.
Life Below Water - Conserve and sustainably use the oceans, seas and marine resources for sustainable development.
Life on Land - Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertificaiton, and halt and reverse land degradation and halt biodiversity loss.
Peace, Justice and Strong Institutions - Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.
Partnerships for the Goals - Strengthen the means of implementation and revitalize the global partnership for sustainable development.
Best Sustainable Investing Conferences - A Review of the 2018-2019 Privos Recommended Events
For your family office, it is confusing to decide which sustainable conferences you should attend. To make it easier for you, the Case Foundation has published an excellent list of the best sustainable events for you to consider attending in 2018-19 to help your family office learning how you can accelerate your capital allocations to sustainability:
Past 2018 Events to Review
Vatican Impact Investing Conference, July 8 – 11, 2018, Rome – Hosted by Catholic Relief Services and the Dicastery for Promoting Integral Human Development, Impact Investing experts and Catholic leaders from around the world will convene in Rome to share and evaluate blended finance models and investible vehicles to address systemic challenges of great importance to both the Catholic Church and the global community. These challenges include: Climate Change, Health, Migrants and Refugees, and Youth Unemployment.
The Impact Conference at Sustainatopia, July 17-21, 2018, Moscow – This conference gathers leading Global Impact + SRI investors, funds, social entrepreneurs, foundations, nonprofits, B Corporations and policy makers. Attendees from more than 60 countries share their best practices from a global ecosystem of social, financial and environmental sustainability.
Impact Capitalism Summit Nantucket, July 18-19, 2018, Nantucket – Mainstreaming impact and showcasing stewards of capitalism are this year’s themes at the Impact Capitalism Summit run by Big Path Capital in Nantucket. This year’s conference will explore how institutional investors are finding market performance returns by looking at diversity as a potential source of arbitrage.
Endowments & Finance Summit, – September 6-7th, 2018, Washington, D.C. – This summit is a forum at the nexus of philanthropy, finance, investment and policy where C-Suite foundation leaders go to explore the shifting forces in the investment landscape, gain invaluable insights on trends, strategies, and new regulations and have candid conversations about threats to business models.
North American Family Impact Investing Conference, September 26-27, 2018, San Diego – During the two days of this conference, family business, office and foundation owners and executives share experiences of Impact Investing and debate the key opportunities and challenges that they face. Meanwhile, experts in academia and industry discuss the infrastructure and how Impact Investing can be scalable.
Mashable’s Social Good Summit, September 2018, New York – Held annually during the United Nations General Assembly week, the Summit unites a lively community of global citizens and progressive thought leaders around a common theme: #2030NOW. Attendees focus on how we can unlock technology’s potential to make the world a better place. Past speakers have included Jean Case, Shazi Visram of Happy Family, Kathy Calvin of the UN Foundation, Matt Keller of XPRIZE and many more. Watch last year’s summit HERE.
Wealth Management Impact Investing Forum, September 2018, location TBD – The RIA Institute’s Wealth Management Impact Investing Forum gathers an intimate group of senior RIA, multi-family office and single-family office executives together with thought leaders and elite providers for an afternoon of discussion and debate about Impact Investing opportunities and risks for wealth managers. The forum focuses on the most critical Impact Investing trends in the individual investor industry and the specific ways in which wealth managers can incorporate these strategies into their portfolio profitably and with measurable impact.
Impact Investing Forum North, September 12-13, 2018, New York – The Impact Investing Forum North unites top influencers, both public and private experienced investors, money managers, and service providers that are leading the charge in the Impact Investing space. Defining Impact Investing, portfolio construction, asset class opportunities, and the role of the investor are just a few of the stimulating topics to be covered at this event hosted each year by the Opal Group.
Exponent Philanthropy, September 28-30, 2018, Philadelphia – The National conference offers timely and relevant educational content for staff, donors, and trustees at all levels of experience and serving all types of foundations (including community and family foundations) as well as individual donors, donor advised fund holders and managers, philanthropic service professionals, and thought leaders in the field of philanthropy.
Net Impact, October 25-27, Phoenix – For more than 25 years, the Net Impact Annual Conference has inspired and informed attendees on the most cutting edge and impactful ideas to change the world. An annual favorite, this event creates a space for the brightest young impact leaders from around the world. With specific paths mapped out for students, new graduates, emerging leaders, and those changing careers, all attendees will leave with their own map of their path to purpose. The event will explore examples of transformational change that defy traditional expectations.
GSG Impact Summit The SRI Conference, October 8-9, 2018, New Delhi – The Summit unites hundreds of impact leaders, entrepreneurs, investors, philanthropists, corporates, social sector and government leaders and leading market builders. Together they will explore current and future actions by the GSG, the National Advisory Boards and partners to catalyze the impact economies of the future.
High Water Women’s Investing for Impact Symposium, October 17, 2018, New York – High Water Women’s Investing for Impact Symposium has evolved into an important gathering for female impact investors who want to connect with other investors, advisors, and investment professionals. Topics include the practical realities of building an impact portfolio, the opportunities and challenges for acting, the latest developments in Impact Investing and women in the impact investment marketplace.
SOCAP, October 23-26, San Francisco – SOCAP convenes thousands of innovators in finance, entrepreneurship, business, government and philanthropy from across social and environmental issue areas to accelerate the market at the intersection of money and meaning.
GIIN Investor Forum 2018, October 30-31st, Paris – The Forum provides a unique opportunity to gain insights from industry leaders, discuss cutting-edge research, and network with over 1,000 global practitioners. Whether you are currently making impact investments or exploring the opportunities, this is an opportunity to take part in the discussions shaping the future of the market. Speakers include executives from the the Rockefeller Foundation, Bain Capital, Blue Haven Initiative, MacArthur Foundation and Catholic Relief Services, to name a few.
The Fast Company Innovation Festival, November 2019, New York – Each Fall, thousands of attendees convene in New York City for Fast Company’s unique take on the field trip with 100 plus Fast Tracks. Attendees have the rare opportunity to go behind the scenes at New York City’s most innovative companies where they experience talks, workshops, demos, networking, and sponsor activations. The 92Y also host thought-provoking keynote sessions at companies like Charity: Water, Donors Choose, Swell Investing, Ellevest, Global Citizen, Instagram, Rent the Runway and more.
The SRI Conference, November 1–3, 2018, Colorado Springs -The SRI Conference on Sustainable, Responsible, Impact Investing (formerly SRI in the Rockies) is the annual gathering of investors and investment professionals working to make money and direct the flow of investment capital toward a truly sustainable future. The SRI Conference is the place for professionals interested in responsible investing to learn and network with colleagues, and to grow and deepen their professional understanding of how to make money and make a difference—at the same time.
Social Finance Forum, November 7-8, 2018, Toronto – Now in its 11th year, the Social Finance Forum, organized and convened by the MaRS Centre for Impact Investing, attracts more than 500 investors, entrepreneurs, finance professionals, charity leaders and public service visionaries who are reshaping markets and ensuring that every dollar makes a difference.
Sorenson Winter Innovation Summit, February 6–8, 2019, Salt Lake City – The Winter Innovation Summit is the premier cross-industry event in social impact, innovation and investing. Earlier this year the Summit brought together policy makers, funders, nonprofits, and social entrepreneurs to explore the future of social innovation across the globe. More than 700 guests unite for the latest breakthroughs in social impact, innovation, and investing, skiing the greatest snow on Earth and experiencing the 2018 Sundance Film Festival which takes place the same week.
World-Changing Women’s Summit, February 2019, location TBD – gathers the most successful women in conscious business for conversations on developing yourself as an authentic, conscious leader in the workplace, how to develop a more inclusive workplace culture, best practices for raising capital and how you can scale your company while staying true to your values. Last year’s gathering included female influencers from Google, the Beneficial State Bank, Solstice, SheO, Pipeline Angels, Seed Spot and B Lab.
Economist Impact Investing Forum, February 2019, location TBD – Join Economist editors and 200 financiers, institutional investors, policymakers, academics, impact investors and philanthropists at the second iteration of Investing for Impact: risk, return and the future of the world. This past February speakers included National Geographic Chair and Case Foundation CEO Jean Case, Audrey Choi of Morgan Stanley, Case Foundation board member Sonal Shah of the Beeck Center for Social Impact and Innovation at Georgetown University, Saadia Madsbjerg of the Rockefeller Foundation, Debra Schwartz of the MacArthur Foundation, Liesel Pritzker Simmons of the Blue Haven Initiative, Amit Bouri of the GIIN and Kesha Cash of Impact America Fund.
The Heart Series, February 14-15, 2019, El Segundo, CA – Explores topics like how your company can make an impact, maintaining your brand promise to your customers and the earth, interactive experiences that promote social change, how to activate Millennials and youth and dreaming up big impact partnerships. On site attendees also have plenty of cool eco inspired perks including wellness shakes, meditation resources and massages. That’s my kind of conference! Speakers include leaders from companies like SOKO, Share Our Strength, CLIP Bar, Nerd Wallet, Blavity and Swipe Out Hunger.
Greenbiz Summit, February 2019, location TBD – Leaders from global brands will meet as they discuss and learn the opportunities at the intersection of business, technology and sustainability. Last year’s speakers included executives from Target, Apple, Bloomberg, and the World Wildlife Fund.
Harvard Social Enterprise Conference (SECON), February 2019, Cambridge – SECON draws almost a thousand practitioners, academics, students, and young professionals. Speakers include influencers and leaders from Omidyar Network, Root Capital, Accion, Mastercard, One Acre Fund, Trillium, Twilio, the Rockefeller Foundation, Accenture and many more.
Duke Conference on Sustainable Business & Social Impact (SBSI), February 2019, Durham – SBSI focuses on the theme of working towards solving our greatest social challenges through innovative methods and cross-sector collaborations. The event has grown to one of the largest conference of its kind in the Southeast, with more 500 people attendees who are making the world a better place while looking to the future of social impact and sustainability.
SXSW Conference, March 8-17, 2019, Austin – Next year marks the 26th Anniversary of SXSW, the world renowned gathering that unites more than 420,000 people from across the globe. Each year SXSW dedicates itself to helping creative people expand their knowledge and have the opportunity to meet fellow innovators on a mission to change the world. Conference goers take a deep dive into innovative ideas that contribute to a better and more equitable world. Browse past social impact sessions HERE.
Confluence Philanthropy’s 9th Annual Practitioners Gathering, March 4-7, 2019, Brooklyn – Confluence Philanthropy’s Annual Practitioners Gathering is a four-day conference where asset owners and their advisors meet at the cutting edge of mission-related investing. This Gathering represents the most advanced foundations, investment managers, and advisors in Impact Investing today. They are distinguished by a commitment to building the field through collaboration, innovation, and their investments. Join us for deep strategic thinking, critical discussion, sharing and most importantly, fun.
Skoll World Forum, April 2019, Oxford – Launched by the Skoll Foundation, the Skoll World Forum accelerates entrepreneurial approaches and solutions to the world’s most pressing problems by uniting social entrepreneurs in a pursuit of learning, leverage and large-scale social change. Past speakers have included president of the World Bank Group, Dr. Jim Yong Kim, Winnie Byanyima of Oxfam International and Hamdi Ulukaya of the yogurt empire Chobani.
Yale Impact Investing Conference, April 2019, New Haven – Impact On Record hosts the Yale’s Impact Investing Conference that includes a day of engaging conversation, presentations and interviews about impact investing. Topics include women and wealth, technology and impact, government and policy, impact funds, emerging markets and faith-based investing.
Milken Global Conference, April 2019, Los Angeles – Each year the Milken Global Conference brings together the strongest minds in business, government, technology, philanthropy, academia and media to examine global challenges and find actionable and collaborative solutions to some of the most important questions of our time. Watch videos from past conference speakers HERE.
Impact Capitalism, April 2019, location TBD – At Impact Capitalism, you will hear from prominent family offices, institutional investors and influential foundations about what is driving their impact investment decision-making and experience an exciting lineup of discussions, debates, and performances across asset classes and impact themes. Over 300 family offices, asset managers and fund managers representing over $150 billion in investable assets take part.
US SIF Annual Conference, May 2019, location TBD – US SIF Annual Conference gives you the opportunity to network with leaders of sustainable, responsible and impactful investing. Hear from leading investors, CEOs and policymakers, and to learn about new approaches, trends and policy developments in the field.
Engage For Good, May 2019, location TBD – If you work at the intersection of cause and commerce, there’s no other event that focuses exclusively on this work and how to engage consumers and employees with social good efforts. Nearly every global brand for good attends include executives from eBay, Fidelity, J.P. Morgan Chase, Omaze, PayPal, REI, Scholastic, The Home Depot Foundation, Univision Communications Inc. and more.
Social Innovation Summit, June 4-6, 2018, San Fransisco – The Social Innovation Summit is an annual event taking place in Silicon Valley which represents a global convening of black swans and wayward thinkers. Where most bring together luminaries to explore the next big idea, they bring together those hungry not just to talk about the next big thing, but to build it.
Conclusion: How Your Family Office Can Accelerate Sustainable Investing
As discussed above, there are $12 trillion, or one quarter, of U.S. assets under professional management now considering sustainability principles, according to the new 2019 Trends report issued by US SIF. Yet, despite these impressive inflows, global family offices have been engaged in sustainable investing as a strategic business imperative long before the terms Sustainable Investing, Impact Investing, Socially Responsible Investing (SRI), Environmental, Social & Governance (ESG) and the 17 SDGs were adopted by the financial services industry. Simply put, family offices have known for centuries that sustainable investments are good investments.
Today, asset managers, private equity firms, and even hedge funds, together with the entire world-wide wealth management industry, are experience exploding demand for Sustainable Investing. Pension funds, sovereign wealth funds, university endowments, foundations, together with their consultants, vendors, and advisors, are increasing capital flows into sustainable investment strategies. That’s the good news. However, as a global multi-family office, we can tell you that it feels like practically every asset management firm, wealth management firm, and global bank, are coming out with a “sustainable surveys” every week as if they all hired the same McKinsey consulting firm for advice on how to bring in sustainable AUM. All these surveys if you didn’t notice, they all basically say the same things; however, we believe that the one study that rises above the fray and ESG noise is a recent Morgan Stanley and Bloomberg joint sustainable survey that we respect.
Consider the following data:
According to the joint Morgan Stanley and Bloomberg survey results, sustainable investing is no longer practiced in a silo by boutique investors and specialist firms. Rather, the industry has matured to the point where environmental, social and governance (ESG) factors are being widely incorporated into investment processes across the spectrum of investors. Further, 75% of asset managers say their firms have adopted sustainable investing, up 10% from 2016 while 62% believe it’s possible to maximize financial returns while investing sustainably; 89% say their firms will devote additional resources to sustainable investing in the next 1-2 years. As sustainable investing strategies evolve, the voice of shareholders on ESG issues cannot be ignored. Forty-three percent of asset managers surveyed say their firms now practice shareholder engagement as an approach to sustainable investing. In a separate recent survey of global asset owners by Morgan Stanley, 39% reported that they practice shareholder engagement wherever possible across their portfolios and 22% said doing so is required by their investment policy statements.
The 2018 US SIF Report on Sustainable, Responsible and Impact Investing Trends found that asset owners and managers with more than $10.1 trillion in assets reported active engagement with portfolio companies on ESG issues between 2016 and 2018. In addition, institutional investors and money managers controlling $1.76 trillion in assets filed shareholder resolutions on ESG topics. In 2018, the Harvard Law School identified 430 ESG proposals filed across the Russell 3000. Notably, social and environmental topics comprised more than two thirds of them, led by political contributions (16%) and climate change (15%). While enhanced data availability and client demand are driving growth in ESG integration, thematic investing and impact investing, shareholder engagement remains an important resource in the investor’s toolkit, giving investors a seat at the table, to quote the above Morgan Stanley and Bloomberg survey.
The MS / Bloomberg survey also teaches us that as more firms embrace sustainable investing strategies, they are expanding ESG-tailored investment vehicles and investor choice. The asset managers surveyed by Morgan Stanley and Bloomberg offer sustainable investing opportunities for investors across product types and asset classes. Sixty-two percent of respondents’ firms offer mutual funds that integrate sustainability or ESG considerations, followed by alternatives (55%), exchange traded funds (ETFs) (51%) and separately managed accounts (SMAs) (45%). Specialist firms are significantly more likely to offer sustainable investing products in alternatives and ETFs than others.
Morgan Stanley reveals that asset management firms also offer investors a wide range of approaches to sustainable investing, with no single strategy dominating the field. Sixty-three percent report that their firms employ more than one sustainable investing strategy. Thematic investing products, ESG integration and impact investing products are the most popular options, followed by active engagement with portfolio companies and restriction screening tailored to clients’ values. Our interviews revealed some crossover between categories. In particular, thematic and impact investing products driven by a specific lens such as Catholic values or gender diversity often include screens to exclude certain industries or types of companies. Compared with mainstream adopters, specialist firms were significantly more likely to utilize ESG integration, shareholder engagement and restriction screening strategies, perhaps reflecting a general application of ESG principles across all practices. A few interviewees described investor activism, with links to social or environmental movements, as a potential area for specialists to develop capacity as the field grows.
The joint Morgan Stanley Institute of Sustainability and Bloomberg survey further concludes that (1) 89% believe that Sustainable Investing is here to stay; (2) 82% think strong ESG practices can lead to higher profitability; (3) 63% employ more than firms one sustainable investing strategy; and (4) 68% expect to see high growth in customized solutions. Survey respondents overwhelmingly agree that sustainable investing is no longer a fad, with 89% saying it is here to stay and 63% saying they expect adoption to grow in the next five years. Three in four U.S. asset management say their firms now offer sustainable investing strategies, up from 65% in 2016. However, 70% of respondents felt that the industry lacks standard metrics to measure non-financial performance of sustainable investments, hindering their ability to quantify impact. Yet more firms will need to measure and report the ESG impact of their portfolios amid rising family office demand for such information.
Yet as global family offices sit back and watch the financial industry embrace Sustainable Investing, one question on our collective minds as a leading multi-family office is the following: does an army of wealth advisors and fund managers selling overpriced, often sub-performing, expensive ESG products that gooses an advisor’s book of business, or increases a fund managers AUM, actually translate to making the world a better place? Will snow that is disappearing from the Artic actually come back as bank and asset management sales people push ESG products on their rich clients. Will the oceans become less polluted by buying “sustainable” stocks like Amazon, Unilever, or the darlings of the sustainability data providers. Will the ozone level repair itself every time a financial advisor sells this or that Greenwashed fund. The sustainable wealth and asset management industry drinks their own Cool-Aid; they like to argue that putting more rich clients into MSCI blessed companies will move capital into companies that do good.
While this sounds good putting Amazon in a ESG portfolio to the confusion of many, does anything think it will undo the cataclysmic climate change disaster that is coming at us like a rabid pit-bull. Yet while asset managers are running around pushing family offices into the hottest ESG fund, the world’s leading climate scientists have warned there is only a dozen years for global warming to be kept to a maximum of 1.5C, beyond which even half a degree will significantly worsen the risks of drought, floods, extreme heat, and poverty for hundreds of millions of people. The authors of the landmark report by the UN Intergovernmental Panel on Climate Change (IPCC) recently released argue that urgent and unprecedented changes are needed to reach the target, which they say is affordable and feasible although it lies at the most ambitious end of the Paris agreement pledge to keep temperatures between 1.5C and 2C. The half-degree difference could also prevent corals from being completely eradicated and ease pressure on the Arctic, according to the 1.5C study, which was launched after approval at a final plenary of all 195 countries in Incheon in South Korea that saw delegates hugging one another, with some in tears.
“Our house is on fire…At Davos, people like to talk about success, but financial success has come with a price tag, and on the climate we have failed. And unless we recognize the failures of our system, there will be unspoken suffering… Either we prevent temperatures from rising above 1.5 degrees (Celsius), or we don’t. Either we avoid chain reaction of unravelling ecosystems, or we don’t. That’s as black or white as it gets. Now we all have a choice: we can either create transformational action or continue with business as usual and fail…I often hear adults say: ‘We need to give the next generation hope.’ But I don’t want your hope. I want you to panic. I want you to feel the fear I do. Every day. And want you to act. I want you to behave like our house is on fire. Because it is.”
Greta Thunberg, a 16 year old Swedish student, speaking at 2019 Davos World Economic Forum (WEF) to a room full of stunned global leaders.