Swiss group responsAbility disburses $10bn in impact projects
Another notable number has emerged from the impact investing world: Swiss impact investor responsAbility has disbursed more than $10bn worth of private debt and equity into projects ranging from renewable energy programmes to microfinance deals with coffee farmers.
This highlights the fact that investors are demanding sustainable investments like never before, responsAbility chief executive Rochus Mommartz told Moral Money.
Co-founded by Credit Suisse in 2003, responsAbility offers investment products to retail investors, private banking clients and big institutional investors. Earlier this year, a responsAbility fund received a $20m investment from Starbucks for debt financing to small coffee producers. With the investment from the Seattle-based coffee chain, responsAbility added $1.6m in financing for Great Lakes, a coffee processor and trader for thousands of farmers in Uganda.
One of the biggest developments in impact investing is the emergence of the giant private equity groups such as KKR and TPG, Mr Mommartz said. With those groups hunting to buy sustainable businesses, new potential for equity exits have emerged, he said.
“Could I imagine in two to three years down the road a company picked up by one of those players? Yes, that could happen,” Mr Mommartz said.
His group’s work has drawn international attention. Earlier this year, Australian retirement fund Christian Super took an equity stake in responsAbility, marking the asset manager’s first international shareholder. (Patrick Temple-West)
A Mars launch for ‘mutuality’
The capitalist reformers who would replace shareholder primacy with something that pays more heed to employees, customers, suppliers and the planet have clearly gained ground this year. However, they lack a crucial feature: a snappy name for the model.
So can a company with a century of branding experience help? Perhaps. The (very) private company behind M&Ms and Maltesers has been working for a decade on turning a principle called “mutuality” into a formal business model. Five years ago it engaged the University of Oxford’s Saïd Business School to quantify how financial growth and creating value for society could go hand in hand, and now it is going a step further.
In an interview with the FT, fourth-generation chairman Stephen Badger (pictured) revealed that it planned to turn its in-house think-tank into an institute in Switzerland to push the economics of mutuality as a new economic school of thought, opening up its findings to any company looking “to solve the problems of people and planet profitably”.
Mr Badger said his family company was not trying to make this “the Mars version of capitalism 2.0” but to “unlock the secret sauce to this issue so we can spread it throughout businesses around the world”.
Mars is not known for giving away secret sauces. If nothing else, that looks likely to attract interest in its mutual model. (Andrew Edgecliffe-Johnson)
Tech tops list of ESG stalwarts
Paul Tudor Jones’ JUST Capital released its new ESG rankings this week and it makes striking reading — not least because the tech sector once again has dominated the list, accounting for eight of the top 10 companies. The ranking looks at how companies perform on five different “stakeholder dimensions” — including how they treat their workers, shareholders and customers, as well as how they impact their communities and the environment.
Tech companies tend to score especially high on the company’s worker focused metrics, which make up 35 per cent of the analysis, said Martin Whittaker, chief executive of JUST Capital.
That might surprise observers given that some the companies on the list have less-than-stellar records about labour issues. Amazon, for example, ranked 75th overall out of more than 900 companies, despite facing backlash over working conditions in its warehouses.
However, these are offset by other issues such as good disclosure on working patterns, diversity and parental leave, Mr Whittaker said. “We look at lots of things and the overall ranking blends all those things. You can be good at some and bad at others [and still make the list], if the things you are good at are weighted highly,” said Mr Whittaker, noting that Amazon had dropped from 30th overall last year.
Outside the tech sector GM similarly made the list (at #18) despite facing a massive work strike over its pay policies. Mr Whittaker explained that was only one issue that went into the JUST calculus. “They have great benefits. They score highly on equal opportunity,” he said. “[GM is] really strong on fair treatment and equality. They also do well on displacement services for laid-off workers. Lay-offs happen, but it’s about how workers are treated when that happens.”
Nearly one out of every three companies on the list are signatories to the Business Roundtable’s statement of corporate purpose, according to Fortune — an encouraging sign that the backers of the accord are taking it seriously. Yet there are a few laggards. BRT signatories Aramark, Lennar and FOX all ranked in the bottom 10 per cent of JUST’s list. (Billy Nauman)
Grit in the oyster
Many companies and investors say they try to “do well by doing good”. As a reminder that many still fall short, here’s a little grit in the ESG oyster.
Despite rapidly growing support for green initiatives such as the Taskforce on Climate-Related Financial Disclosures and a massive uptick in green bond issuance, banks have not cut the funding available to the fossil fuel industry.
The FT’s Jennifer Thompson looked this week at a new study from Boston Common Asset Management, which recently polled 58 banks and found that 40 of them had signed up to the TCFD, up from 32 last year. Additionally about 80 per cent carry out climate risk assessments, compared with less than half in 2018.
Yet data from the Rainforest Action Network shows there has been no decrease in the amount of funding for the fossil fuel industry. “These actions have not accelerated the rate of decarbonising lending and investment portfolios, nor broadened the strategic adoption of low carbon and green products and services,” Boston Common wrote in its report. “Risk assessment is not necessarily leading banks to restrict or end financing or investing.” Ouch. (FT)
Chart of the week
US carbon credits for transport fuel are hitting record highs. The monthly average price of the California Low Carbon Fuel Standard credit tied a record high of $195 in October, matching the price in September, the state said on Tuesday. Oregon’s LCFS credit hit a record high in September.
The surging credit prices are fuelling investment in biofuel production. As the states tighten their emissions regulations, businesses that refine or import oil need to buy more and more of the credits. (Patrick Temple-West)
Formula One is going green, pledging carbon neutrality by 2030. However, the world’s premier racing series is not going so far as to ditch the internal combustion engine. This will no doubt delight racing fans who love hearing the scream of a turbocharged V6, but environmental activists are less enthusiastic about the decision. (FT)
Good governance advocates bristle at the concept of dual-class shares, but the FT Editorial Board this week argued that the world was changing and the UK government’s step to consider moving away from the one-vote-one-share structure merits consideration. (FT)
Tips from Tamami
Many of the wildfires in California have reportedly been contained, but new blazes have begun on the other side of the earth. Two Australian states declared a state of emergency over the weekend as bushfires threatened heavily populated areas, including parts of Sydney.
Scientists think it’s a great reminder of how climate change affects the country, but the government has refused to discuss it. Dodging a question about climate change, Prime Minister Scott Morrison said: “My only thoughts today are with those who have lost their lives and their families.” Deputy Prime Minister Michael McCormack went further, calling climate change a concern of “raving inner city lunatics”. “We've had fires in Australia since time began,” he observed.
Mr Morrison once stood in parliament with a hunk of shiny black coal in his hand and said “don’t be scared”, so his centre-right coalition government’s silence on climate change is no surprise. Last year, the UN reported that Australia was unlikely to meet its target to the Paris Agreement — the global pact to tackle rising global temperatures. The newly published Brown to Green Report, partially funded by the World Bank, concluded that the country’s response to climate change is one of the worst among the G20 countries.
Yet, while the government has turned its back on climate change, the country’s green economy is growing. Annual green bond issuance almost doubled over a year, according to Climate Bonds Initiative. The cumulative domestic green bond issuance reached US$11.6bn by June this year, making Australia the third largest green bond market in the Asia-Pacific region behind China and Japan. Business leaders, such as power giant Origin Energy’s chief executive Frank Calabria, are against the government’s attempt to extend the life of coal plants and demand the introduction of carbon pricing in the energy sector to encourage more investment in the renewable future.
Scores of fires are still burning and the real scope of the damages remains to be seen, but one thing is for sure: discussion about climate change will intensify in Australia.
ESG Funds Enjoy Record Inflows, Still Back Big Oil and Gas (WSJ)
How scientists got climate change so wrong (NY Times opinion)
ESG Stocks Are Graded on a Curve (Bloomberg opinion)
Britain set to miss 2020 environmental goals (FT)
Fund firms focus on green hiring plans (Ignites)
Shipping industry seeks response to calls for cuts in emissions (FT)
Lyft's head of sustainability reveals how the company plans to make hundreds of millions of car rides completely carbon free (Business Insider)