When it comes to climate investment funds, diverse management is imperative

April 13, 2021 by  
Filed under Business, Eco, Green

When it comes to climate investment funds, diverse management is imperative Marilyn Waite Tue, 04/13/2021 – 02:00 The engine behind green business is the same as any business: capital. And while social, human and natural capital are all critical, financial capital is the one form that systemically fails the companies and leaders working on the most impactful solutions for the Sustainable Development Goals. Venture capitalists decide who gets to be a billionaire and what solutions reach billions in market penetration. Real asset investors choose what critical infrastructure is built, where it’s built and who benefits from it. Fixed-income investors are able to drive how much of the bond market is green, or better yet, which bonds adhere to the 17 Principles of Environmental Justice . Public equity asset managers drive what kinds of companies are valuable and thus have the capital to grow, to what industries retirement savings flow by default and what companies can achieve a scale that affords them outsized political and policy influence. Needless to say, investment managers and financial advisers are powerful. And as is the case with many axes of power, financial professionals across asset classes are disproportionately male and white. In a 2019 study , the U.S. National Academy of Sciences found evidence of racial bias in the investment decisions of asset allocators, including rating white-led funds more favorably than Black-led funds at similar strong performance levels. Granular, industry-wide data is hard to come by — even after the national awakening brought by the Me Too and Black Lives Matter movements. In 2020, when the Diverse Asset Managers Initiative (DAMI) surveyed the 30 largest U.S. investment consulting firms to gain insights into gender and racial representation, only 16 responded . Here’s what we do know: in the United States, partners in venture capital firms are only 4.1 percent female , with those women being 67 percent white, 16 percent East Asian, 7.7 percent South Asian, 4.8 percent Black and 3.5 percent Latinx. Mutual fund, hedge fund, private equity and real estate fund managers are collectively 98.7 percent white male-led. ESG funds, including those focused on climate change mitigation, do not fare better. According to a 2019 survey , white staff represents 79 percent of the employees of U.S. SRI/ESG mutual funds. It’s important to increase the asset allocation in women- and BIPOC-led climate funds because they are acutely concerned and engaged in climate-related financial risks and impacts, they are the ones disproportionately affected by and thus uniquely positioned to make wise investment decisions in solving climate change, and they are key sources for driving innovation. A recent survey by PRI illustrated that globally, women are more engaged on climate-related issues than men, especially for people 35 and older. Another recent study by the George Mason University Center for Climate Change Communication and the Yale Program on Climate Change Communication found that Black and Hispanic communities in the U.S. are also more concerned and willing to engage on climate issues than white communities. Using six categories, ranging from “Alarmed” (most concerned about climate change and most supportive of climate policies) to “Dismissive” (reject the reality and threat of climate change and oppose taking action), they found that Hispanics/Latinos (69 percent) and African Americans (57 percent) are more likely to be “Alarmed” or “Concerned” about global warming than white Americans (49 percent), as well as more willing to join a campaign to convince elected officials to take action to reduce climate change. This heightened concern logically would lead women and BIPOC fund managers to perform climate-related diligence on investment deals and have a climate-forward approach to their portfolio. Climate change makes virtually all aspects of the economy and society, especially existing inequalities, worse. Climate impacts, including heatwaves, droughts, rising sea levels and extreme flooding, disproportionately affect women and people of color. Yet, due to their local knowledge and leadership in climate change solutions, such as sustainable resource management , and their responsiveness to community and consumer needs, women and people of color are uniquely essential in solving climate change. [ Marilyn Waite is a featured mainstage speaker this week during GreenFin 21 . ] In the United States, race is the No. 1 indicator for the placement of toxic facilities, including climate-polluting ones. This reality also means that Black and brown financial leaders have on-the-ground knowledge of transitioning from dirty to clean and the types and structures of investments that will bring retail and institutional investors risk-adjusted returns. Knowledge and information, including local knowledge, are core to what investors use to outperform peers, indices and allocator expectations. For example, HSBC’s investment policy states, “We look to deliver quality and value through a robust risk management framework that leverages our global capabilities and local knowledge to drive better investment decisions across a wide range of investment strategies.” Lastly, diversity drives innovation. Study after study shows diversity, including gender and racial diversity, leads to a better return on investment, return on equity and revenues. As Katherine Phillips put it , “Diversity jolts us into cognitive action in ways that homogeneity simply does not.” In investment, why pay for an asset management firm if you can just buy every stock in the market and fare the same? Why pay venture capital fees if you can just, as the industry says, “spray and pray” in a suite of startups as an angel investor? Part of the value proposition of fund managers is that their investment teams have specialized knowledge and perform the diligence that the asset owner or allocator does not have or cannot otherwise implement. Climate investing is no exception. Given climate change is such a pervasive and entrenched problem, it will take novel thinking and new investment approaches, which will be missing without such gender and racial diversity. One hypothesis that VC Include (VCI) will start to test this year is if and how diverse-led climate funds lead to diverse green business ownership, leadership and workforce opportunities in climate-impacted communities. To that end, VCI is launching a Diverse Climate Fund Manager initiative to engage and financially support women and BIPOC emerging managers that are addressing climate change in their strategy. Why aren’t asset owners allocating capital to women- and BIPOC-led climate funds? As Rachel Robasciotti of Adasina Social Capital states , “The problem lies in how the asset manager evaluation process exacerbates existing inequities in financial services, while also failing to account for real impact and diversity outcomes.” These barriers include needing to have at least $200 million in assets under management, or AUM (which starts with personal wealth that women and BIPOC leaders seldom hold), a three-year track record and laborious questionnaires (some with over 1,000 questions). Although it’s important to not conflate emerging managers with diverse managers (not all diverse managers are new and vice versa), women- and BIPOC-led funds are disproportionately newer and may not meet the three-year track record threshold. For example, 73 percent of women-led asset management firms were founded in the last five years. The Due Diligence 2.0 Commitment outlines nine ways forward for a more equitable asset allocation and investment sector, as follows: consider track record alternatives; expand what it means to work together; reassess AUM as a risk metric; respect BIPOC time; contextualize fees, including historically unrecognized risks; be willing to go first; offer transparency about remaining hurdles; and provide detailed feedback. There is a generic diverse asset manager directory run by Emerging Manager Monthly , providing information on minority, women, veteran and disabled-owned firms where you can filter by asset class/investment strategy. Hannah Davis of Techstars and I put together this list of women and BIPOC climate fund investment advisers and asset managers. This list is primarily intended to help retail and institutional asset owners allocate capital to diverse-led climate-friendly funds. Other uses include syndicating with women- and BIPOC-led funds and finding diverse investors for a company’s growth. To add to the list, please fill out this form. Topics Finance & Investing Social Justice Diversity and Inclusion GreenFin 21 Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Shutterstock Fizkes Close Authorship

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When it comes to climate investment funds, diverse management is imperative

When it comes to climate investment funds, diverse management is imperative

April 13, 2021 by  
Filed under Business, Eco, Green

When it comes to climate investment funds, diverse management is imperative Marilyn Waite Tue, 04/13/2021 – 02:00 The engine behind green business is the same as any business: capital. And while social, human and natural capital are all critical, financial capital is the one form that systemically fails the companies and leaders working on the most impactful solutions for the Sustainable Development Goals. Venture capitalists decide who gets to be a billionaire and what solutions reach billions in market penetration. Real asset investors choose what critical infrastructure is built, where it’s built and who benefits from it. Fixed-income investors are able to drive how much of the bond market is green, or better yet, which bonds adhere to the 17 Principles of Environmental Justice . Public equity asset managers drive what kinds of companies are valuable and thus have the capital to grow, to what industries retirement savings flow by default and what companies can achieve a scale that affords them outsized political and policy influence. Needless to say, investment managers and financial advisers are powerful. And as is the case with many axes of power, financial professionals across asset classes are disproportionately male and white. In a 2019 study , the U.S. National Academy of Sciences found evidence of racial bias in the investment decisions of asset allocators, including rating white-led funds more favorably than Black-led funds at similar strong performance levels. Granular, industry-wide data is hard to come by — even after the national awakening brought by the Me Too and Black Lives Matter movements. In 2020, when the Diverse Asset Managers Initiative (DAMI) surveyed the 30 largest U.S. investment consulting firms to gain insights into gender and racial representation, only 16 responded . Here’s what we do know: in the United States, partners in venture capital firms are only 4.1 percent female , with those women being 67 percent white, 16 percent East Asian, 7.7 percent South Asian, 4.8 percent Black and 3.5 percent Latinx. Mutual fund, hedge fund, private equity and real estate fund managers are collectively 98.7 percent white male-led. ESG funds, including those focused on climate change mitigation, do not fare better. According to a 2019 survey , white staff represents 79 percent of the employees of U.S. SRI/ESG mutual funds. It’s important to increase the asset allocation in women- and BIPOC-led climate funds because they are acutely concerned and engaged in climate-related financial risks and impacts, they are the ones disproportionately affected by and thus uniquely positioned to make wise investment decisions in solving climate change, and they are key sources for driving innovation. A recent survey by PRI illustrated that globally, women are more engaged on climate-related issues than men, especially for people 35 and older. Another recent study by the George Mason University Center for Climate Change Communication and the Yale Program on Climate Change Communication found that Black and Hispanic communities in the U.S. are also more concerned and willing to engage on climate issues than white communities. Using six categories, ranging from “Alarmed” (most concerned about climate change and most supportive of climate policies) to “Dismissive” (reject the reality and threat of climate change and oppose taking action), they found that Hispanics/Latinos (69 percent) and African Americans (57 percent) are more likely to be “Alarmed” or “Concerned” about global warming than white Americans (49 percent), as well as more willing to join a campaign to convince elected officials to take action to reduce climate change. This heightened concern logically would lead women and BIPOC fund managers to perform climate-related diligence on investment deals and have a climate-forward approach to their portfolio. Climate change makes virtually all aspects of the economy and society, especially existing inequalities, worse. Climate impacts, including heatwaves, droughts, rising sea levels and extreme flooding, disproportionately affect women and people of color. Yet, due to their local knowledge and leadership in climate change solutions, such as sustainable resource management , and their responsiveness to community and consumer needs, women and people of color are uniquely essential in solving climate change. [ Marilyn Waite is a featured mainstage speaker this week during GreenFin 21 . ] In the United States, race is the No. 1 indicator for the placement of toxic facilities, including climate-polluting ones. This reality also means that Black and brown financial leaders have on-the-ground knowledge of transitioning from dirty to clean and the types and structures of investments that will bring retail and institutional investors risk-adjusted returns. Knowledge and information, including local knowledge, are core to what investors use to outperform peers, indices and allocator expectations. For example, HSBC’s investment policy states, “We look to deliver quality and value through a robust risk management framework that leverages our global capabilities and local knowledge to drive better investment decisions across a wide range of investment strategies.” Lastly, diversity drives innovation. Study after study shows diversity, including gender and racial diversity, leads to a better return on investment, return on equity and revenues. As Katherine Phillips put it , “Diversity jolts us into cognitive action in ways that homogeneity simply does not.” In investment, why pay for an asset management firm if you can just buy every stock in the market and fare the same? Why pay venture capital fees if you can just, as the industry says, “spray and pray” in a suite of startups as an angel investor? Part of the value proposition of fund managers is that their investment teams have specialized knowledge and perform the diligence that the asset owner or allocator does not have or cannot otherwise implement. Climate investing is no exception. Given climate change is such a pervasive and entrenched problem, it will take novel thinking and new investment approaches, which will be missing without such gender and racial diversity. One hypothesis that VC Include (VCI) will start to test this year is if and how diverse-led climate funds lead to diverse green business ownership, leadership and workforce opportunities in climate-impacted communities. To that end, VCI is launching a Diverse Climate Fund Manager initiative to engage and financially support women and BIPOC emerging managers that are addressing climate change in their strategy. Why aren’t asset owners allocating capital to women- and BIPOC-led climate funds? As Rachel Robasciotti of Adasina Social Capital states , “The problem lies in how the asset manager evaluation process exacerbates existing inequities in financial services, while also failing to account for real impact and diversity outcomes.” These barriers include needing to have at least $200 million in assets under management, or AUM (which starts with personal wealth that women and BIPOC leaders seldom hold), a three-year track record and laborious questionnaires (some with over 1,000 questions). Although it’s important to not conflate emerging managers with diverse managers (not all diverse managers are new and vice versa), women- and BIPOC-led funds are disproportionately newer and may not meet the three-year track record threshold. For example, 73 percent of women-led asset management firms were founded in the last five years. The Due Diligence 2.0 Commitment outlines nine ways forward for a more equitable asset allocation and investment sector, as follows: consider track record alternatives; expand what it means to work together; reassess AUM as a risk metric; respect BIPOC time; contextualize fees, including historically unrecognized risks; be willing to go first; offer transparency about remaining hurdles; and provide detailed feedback. There is a generic diverse asset manager directory run by Emerging Manager Monthly , providing information on minority, women, veteran and disabled-owned firms where you can filter by asset class/investment strategy. Hannah Davis of Techstars and I put together this list of women and BIPOC climate fund investment advisers and asset managers. This list is primarily intended to help retail and institutional asset owners allocate capital to diverse-led climate-friendly funds. Other uses include syndicating with women- and BIPOC-led funds and finding diverse investors for a company’s growth. To add to the list, please fill out this form. Topics Finance & Investing Social Justice Diversity and Inclusion GreenFin 21 Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Shutterstock Fizkes Close Authorship

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When it comes to climate investment funds, diverse management is imperative

Is your company a good company?

February 16, 2021 by  
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Is your company a good company? Suzanne Shelton Tue, 02/16/2021 – 00:05 Last year at this time, I wrote a piece with the exact same headline as this one. This time, I have some interesting new data and the beginnings of a framework to fill in the gaps. I’ve also got a sneak peek for you, from my presentation last week at GreenBiz 21. We’ll be publishing a full report with even more insights and ideas in April, but this deck will get you started. In our annual Eco Pulse study, we ask a battery of questions that get at how Americans perceive companies’ actions for people and the planet — what do people expect of the companies they buy from, and how do those expectations drive brand preferences and product purchases? This year, we fielded an additional study to ask some new, deeper questions and to create some forced-choice exercises so we could better understand what Americans really believe a Good Company is and why. Not at all surprising to the seasoned brand marketers reading this, great products and great customer service top the list of what makes a company good. Perhaps also not surprising, then, Amazon.com far and away tops the list of companies Americans name — unaided — when asked to identify a good company. ESG-related mentions round out the top three on the “what makes” list, so those are open-ended responses such as, “they treat their employees well… they give to the community… they care about the environment… they have good values.” But we should never confuse what makes someone like a company with what makes someone dislike a company. What do people expect of the companies they buy from, and how do those expectations drive brand preferences and product purchases? Facebook tops the list of examples of Bad Companies, followed by Walmart (which is also No. 2 on the Good Company list) and Wells Fargo. So, what gets a business on the Bad Company list? A bucket of ESG-related answers is most important — treating employees poorly, fraud/scandal/corruption, disagreement with their values or social stances, and generally being harmful to the environment. The blanket takeaway here is that your ESG actions are a fantastic tool for preventing disfavor and deselection. Secondarily, they are a solid tool to drive favorability — provided that you have great products and great customer service. There’s more to it than that, though, and while my GreenBiz deck and the report we’ll release in April get into a lot more detail, here are three key takeaways you should know: 1. Treating employees well earns you some Good Points (8 percent); treating employees poorly chalks up a lot more Bad Points (14 percent). We’ve seen this theme for years, but it intensified as a result of COVID-19. If the word gets around that you don’t treat your people well, it will taint everything else you’re doing right. So to all the sustainability professionals reading this: yes, measure and manage your GHG emissions diligently but also measure and manage employee sentiment and work across your organization to ensure they’re being taken care of. As we all know all too well, intangibles make up 90 percent of a company’s value — and good will is one of the main intangibles. Walmart is the best example of this scenario. Most of us know the amazing leadership role it has taken in moving sustainability forward. Some may argue with me, but I wholeheartedly believe the consumer packaged goods industry wouldn’t be as far along on reducing its environmental impacts if not for Walmart insisting that it happen. Walmart was more often listed as a good company (235 mentions) than a bad company (162 mentions), but it was No. 2 on both lists. The top reasons for Walmart being named as a Good Company were price, variety and customer service, while the top reasons for Walmart being named as a Bad Company were treating employees poorly, followed distantly by bad service and poor quality/cheap. Very few people chose Walmart for its social/environmental record (less than 10). Walmart has made great strides in the last few years regarding its employees, but the stigma from the past sticks to this day. So, bottom line, if you get labeled as a company that doesn’t treat its employees well, it’s really hard to shake. 2. Taking a societal stand/displaying your values buys you a few Good Points (4 percent); taking a stand/displaying values that Americans don’t agree with gets you far more Bad Points (9 percent). This one is interesting, and Nike is a really good example. They came in at No. 5 on both the Good Company list and the Bad Company list for exactly the reasons you would expect, based on another question we ask: Name a company whose products you’ve chosen — or not chosen — because of the manufacturer’s environmental or social record. Nike came in No. 2 on the list of companies chosen because of its eco/social record and No. 1 on the list of brands not chosen because of its eco/social record. A lot has been written about Nike’s bold decision to back Colin Kaepernick, but my favorite — and the most relevant point to what we’re discussing here — comes from Jerry Davis, a University of Michigan Business School professor: “It turns out Democrats buy a lot more sneakers than Republicans. The demo that is willing to spend $200 on Nike sneakers is not the demo that’s going to boycott them because of Kaepernick.” Although the Kaepernick decision happened in 2018, in 2020, Nike was still reaping the benefits of the campaign in both brand reputation and sales numbers, despite continued criticism from some camps. A Harris poll pegged Nike’s overall reputation at a 54 percent positive ranking, up six points from 2018. The company’s value was reportedly up $26.2 billion as well. 3. Giving to communities and charities earns you a lot of Good Points (12 percent total); not giving to communities and charities doesn’t actually cost you any points. When we asked Americans what makes a company good, we heard community/charitable-giving kinds of answers from 12 percent of Americans. When we asked what makes a company bad, nobody said, “They don’t give to charity or the community.” Target is a really good example on this front. The company comes in as the fourth-most popular unaided answer on two questions: Name a Good Company; and tell us the brand or product you’ve chosen because of the manufacturer’s social or environmental record. Reasons why Target is named as a Good Company are price, products, customer service and variety. Being community-focused came in as the sixth-most cited reason it’s a good company. And while it wasn’t a top answer for the second question — a brand chosen for its social or environmental record 6 percent — everyone who chose it cited community involvement/giving as a reason. There’s a lot more here, including a framework for how companies should think about all of this and apply it to their commitment-setting and storytelling. So download the GreenBiz deck and stay tuned for the full report coming out in April. Pull Quote What do people expect of the companies they buy from, and how do those expectations drive brand preferences and product purchases? Topics Consumer Trends Collective Insight Speaking Sustainably Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Shutterstock

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Is your company a good company?

10 Things in Your Kitchen You Didn’t Know You Could Reuse or Recycle

August 8, 2017 by  
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You’re most likely familiar with how to recycle lots of basics in your kitchen: plastic bottles, glass jars, aluminum cans and the like. Go beyond the norm, take a look and find out how to make your kitchen greener with this list of recyclables…

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10 Things in Your Kitchen You Didn’t Know You Could Reuse or Recycle

Why You Should Ditch Balloons if You Love the Environment

April 4, 2017 by  
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After writing an article on traditions that are terrible for the environment, I received overwhelming feedback that balloon releases should have been included on the list. Never one to disappoint, I decided to do some research on the topic and what…

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Why You Should Ditch Balloons if You Love the Environment

Top 10 Companies Using the Sun for Power

November 24, 2016 by  
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Target already has a reputation for having everything (seriously, who among us hasn’t walked in for one item and walked out an hour later with 20?), and now it can add one more thing to the list: the top capacity for solar power of all the…

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Top 10 Companies Using the Sun for Power

TrailRider Proves Access To Nature Is Attainable

June 4, 2016 by  
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More and more research is accumulating to support the therapeutic benefits of immersing yourself in the natural world. Decreased stress, increased focus, the list of physical and psychological benefits keeps growing. However, for one segment of the…

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TrailRider Proves Access To Nature Is Attainable

5 green technologies to watch in 2016

January 8, 2016 by  
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Why 3D printers, artificial intelligence, connected sensors, drones and self-driving cars should be on your list.

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5 green technologies to watch in 2016

Why it’s (finally) time to hit the brakes on fossil fuels

January 8, 2016 by  
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A narrow escape from a catastrophic car accident sheds new light on an even bigger threat.

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Why it’s (finally) time to hit the brakes on fossil fuels

Top 12 clean energy developments of 2015

January 8, 2016 by  
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A global climate pact, clean energy pledges by cities and islands, greener trucks and cars — there was no shortage of good news last year leading to a brighter energy future.

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Top 12 clean energy developments of 2015

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