cover and toc

Edited by Cary Krosinskywith Nick Robins & Stephen Viederman

Evolutions inSustainable InvestingStrategies, Funds, and Thought Leadership

P1: TIX/XYZ P2: ABCJWBT558-fm JWBT558-Krosinsky August 6, 2011 9:42 Printer: Yet to Come

Contents

Acknowledgments xix

About the Editor xxi

About the Contributors xxiii

Introduction xxxv

CHAPTER 1The Sustainability Imperative 1David A. Lubin and Daniel C. Esty

Sustainability: A Business Megatrend 1Getting the Vision Right 3Getting the Execution Right 4Building a Sustainability Performance System 6Summary 8Note 9

CHAPTER 2Jupiter Ecology 11Mark L. Trevitt

Roots of the Fund 11Jupiter Ecology’s Investment Process 12Good Governance 16Building a Following 17Building on Firm Foundations 18Assessing Companies for the Long Term 19Voting and Engagement: Participating in the Process of Change 20Finding Great Green Companies 21Fund Performance 24Notes 25

vii


viii CONTENTS

CHAPTER 3A Predictor of Performance 27Paul Hawken

Investment in Natural Capitalism 27Discovering Opportunities 28Identifying the Companies of the Future 30Summary 32

CHAPTER 4Highwater Global 35Alexis van Gelder, Dean Martucci, and Erika Kimball

Hawken Takes on Domini 36Fund Drivers Based on Global Sustainable Themes 38Finding Investment Opportunities 38Sustainable Investing Is Responsible Investing 44Summary 45Notes 46

CHAPTER 5Further Context 47Cary Krosinsky

Starting Point for Measuring Sustainability 48Sustainability 2.0’s Five Factors 49Summary 51Notes 51

CHAPTER 6Sustainable Asset Management 53Thomas O. Murtha and Ashley Hamilton

SAM’s Origins and Evolution 54Building a Sustainable Investing Practice: Basic Business

Segments 56Measuring Intangibles: Sustainability Research Methodology 57Sustainability Lens: Active Portfolio Management 62SAM and Performance 63SAM’s Extended Family: Dow Jones Sustainability Indexes 66Sustainability Advocacy and Company Engagement 74Summary 76Notes 77


Contents ix

CHAPTER 7Domini and BP 81Colm Fay

Domini Social Investments 83Safety, Environmental, and Ethical Concerns 84Domini Investment Philosophy 84Business Model Analysis: Key Performance Indicator

Alignment Model 85Integrating Business Model Alignment and Stakeholder

Relationship Strength 87Notes 90

CHAPTER 8The Story of Calvert 91Sam Brownell and Sara Herald

Unconventional History 91Calvert’s People 93Calvert’s Methodologies: Signature, Solution, and SAGE 96Calvert’s Performance 102Summary 105Notes 106

CHAPTER 9Winslow 107Amrita Vijay Kumar

Blazing a Trail 107Investment Process 108Performance Considerations 112Summary 112Notes 113

CHAPTER 10Portfolio 21 115Ashley Hamilton

Portfolio 21: A History 116Theory of Sustainability and Change 117In Search of Forward-Looking Companies 119Results 120Summary 121Notes 122


x CONTENTS

CHAPTER 11Northwest and Ethical Investments 123Dana Krechowicz

Humble Beginnings 124New Direction 124Evolving Investment Approach 126Corporate Engagement Program 128Key Products and Performance over Time 130Looking Forward: NEI’s Merger with Northwest Funds 131Note 132

CHAPTER 12Looking for a Green Century: Passive-Indexed versus Active PortfolioManagement 133Fernando Viana

Background 134Green Century Funds 134Green Century Equity Fund 135Trillium Asset Management and the Balanced Fund 136Trillium Asset Management Corporation 137Carbon Footprint of the Balanced Fund 140Seeking Safer Packaging: The Bisphenol-A

Report 140Shareholder Advocacy 141Summary 144Notes 144

CHAPTER 13Pictet Water 145Jenna Manheimer and Nancy Degnan

Evolution of Investment Strategy over Time: Original versusCurrent Mission 147

Founders and Key Decision Makers 148Methodology 149Metrics: What Is Important and Why 150Pictet’s Investments 151Companies Pictet Has Not Invested in, and Why 153Performance Review 154Summary 155Notes 155


Contents xi

CHAPTER 14Inflection Point Capital Management and Strategically Aware Investing 159Matthew J. Kiernan

Strategically Aware Investing 161Beyond Environmental, Social, and Governance toward a New

Model of Corporate Sustainability 162Portfolio Construction 163Investment Process 164Summary 167Note 167

CHAPTER 15Environmental Metrics 169James Salo

Theoretical and Practical Needs for Sustainable Investment 170Available Data and Metrics 172Challenges and Opportunities Moving Forward 175Summary 178Notes 179

CHAPTER 16Crawford Chemicals 181Thomas J. Nist, Pavel Yakovlev, and Becky Weisberg

Crawford’s Environmental Dilemma 182Markets for Carbon Permits and Cap and Trade 185European Union Emissions Trading Scheme 188Pros and Cons of the Market for Carbon Permits 190Predicament of Sustainability in the Chemical Industry 193Summary 199Notes 199

CHAPTER 17Using Statistical Tools 203Sam Brownell

Understanding the Trend 205Summary 206Notes 209

CHAPTER 18Barriers to Sustainable Investing 211Stephen Viederman

Missing Planet Problem 212


xii CONTENTS

Overcoming the Barriers 213Strategy and Tactics 214Notes 215

CHAPTER 19The Silent “S” in ESG 217Dan Viederman

Assessing Social Metrics to Increase Business Performance 218Risk Management 218Summary 220

CHAPTER 20Sustainable Investing 221Nancy Degnan

The New Normal 222Climate Change Mitigation, Adaptation and Sustainability

Research 222Adaptation as Key to Investment and Practice 224Ecosystem Services 226Making Use of Data and Findings 227Summary 230Notes 230

CHAPTER 21Bloomberg 235Curtis Ravenel

Providing Investor Insight and Increasing Transparency 236Summary 238Notes 239

CHAPTER 22Aviva 241Malte Griess-Nega and Nick Robins

Aviva’s History and Investment Philosophy 242Aviva’s SRI Investment Process 242SRI Portfolio Construction 246Case Study 1: Green Tires 246Case Study 2: The Responsible Supply Chain 248Engagement Across All Asset Classes 249Conclusion 251Notes 251


Contents xiii

CHAPTER 23Generation Investment Management 253Malte Griess-Nega and Nick Robins

A New Model for Global Equities 254Summary 258Notes 259

CHAPTER 24Insight Investment: Reflections and Lessons Learned fromIntegrating Sustainability 261Rory Sullivan

About Insight 262Investment Research on ESG Issues 263Case Study: Climate Change 266Case Study: European Electricity Utilities 267Case Study: Biofuels 268Reflections/Takeaways from the Case Studies 269Summary 274Notes 274

CHAPTER 25China 277J. Jason Mitchell

China’s Resource Scarcity and Its Empirical Needfor Efficiency 280

Shaping Chinese Energy-Efficiency Norms 288Chinese Policy Setting 290Translating China’s Environmental Policies into Industrial

Opportunities 292Summary 296Notes 297

CHAPTER 26Ethical Asia 301Simon Powell

Reporting Is on the Rise 302CSR Works when Companies and Society Are Aligned 305Focuses in Asia: Labor and Environment 306Summary 310


xiv CONTENTS

CHAPTER 27Mitigating ESG Risk in Asian Portfolios 313Lucy Carmody and Laura Dodge

The Challenge: Lack of Disclosure 314ESG Integration in Asian Portfolios 315Funding ESG Research 317Building Institutional Capacity 318Use of Indices, Benchmarking, and Screening 319Summary 320Notes 320

CHAPTER 28Sustainable Investing and Canada 323Dana Krechowicz and Alex Wood

The Basics 324Growth of Canada’s Sustainable Investment Industry 325Context and Trends 325Summary 327Notes 327

CHAPTER 29High-Risk Areas, Resources and Sustainability 329N.A.J. Taylor

Blacklisted 330Background 331Enter Rio Tinto 336Ordinary Business Activities 339Summary 342Notes 342

CHAPTER 30Sustainable Investing in Africa’s Frontier Markets 345Graham Sinclair and Roselyne Yao

Stronger Economics: The Case for Investing in Africa 346Sustainability Issues in Africa 348Role of Indexes 350International Exposure 350Future Trends: ESG, Media Coverage, and Networks 352Summary 353Notes 354


Contents xv

CHAPTER 31Evolution of ESG in India 359Sumantra Sen

Sustainability Issues in India 359Opportunities in India’s Sustainable Investing Market 361Considering the Integration of ESG Factors 362Summary 363References 364

CHAPTER 32Indexes 365Graham Sinclair

The “What” and “Why” of Indexes 366Index Architecture 369Research Quality and Independence 372Lessons from the Leading Sustainability Indexes 373Company Reactions to Indexes and Their Impacts 378Summary 380Notes 381

CHAPTER 33How Asset Owners Can Achieve a Sustainable Investing Framework 383Roger Urwin

Importance of Values and Beliefs 384Integrated Allocations and Targeted Allocations 385Risk Factors and ESG Beta 386Quantitative Methods of Risk and Return 388Monitoring Framework 389Summary 391Notes 392

CHAPTER 34On Performance 393Bud Sturmak and Cary Krosinsky

SRI Techniques 394ESG Affects Investment Performance 395Trends from Performance Reports 396Summary 398Notes 398


xvi CONTENTS

CHAPTER 35Private Equity 401Graham Sinclair

Private Equity as a Niche of General Asset Management 402PE’s Fit within Sustainable Investing 404Development Finance Institutions Leverage of Emerging

Markets Private Equity 405PE-Specific ESG Methods 406PE Best Practices and ESG Case Studies 408Contrasting PE and Listed Equity Investors 409New SI Activity in the PE Asset Class 410PE Allocations Increase 410Increased PE Funds Focused on Emerging Markets 411Future Sustainability Themes in PE 412Summary 413Notes 414

CHAPTER 36Blue Wolf: Implications for Private Equity 417Adam Blumenthal and Michael Musuraca

Challenges and Opportunities 419Generating Results 420Labor Relations Coda 421Summary 422

CHAPTER 37New Business Models, Measurement, and Methodologies 423Howard Brown

Resources and Products versus Wealth 425Trend of Doing More with Less 426Improving Overall Performance 426Summary 427

CHAPTER 38Terminology and Intention 429Lloyd Kurtz

Values 430Financial Performance 432Fiduciary Duty: Universal Ownership 433Impact 435


Contents xvii

Mapping Techniques to Motivation 436Summary 437Notes 438

CONCLUSION441Cary Krosinsky

Notes 446

APPENDIX ASample Curriculum 447

Syllabus 447

APPENDIX BInvestors 453

Index 455

cover and toc

Documents