Cornerstone CEO Erika Karp and CIO Craig Metrick, CAIA, take questions in a dialogue moderated by Managing Director Alison Smith. They talk about the near-term outlook and longer-term possibilities under the new administration and as the pandemic shows promise of subsiding later in the year.
Cornerstone’s Chief Investment Officer, Craig Metrick, CAIA, recently joined a panel discussion hosted by the CFA Society of New York. He was joined by Louie Nguyen of Mission Driven Finance, Gerry Pambo-Awich of the Ford Foundation, and Ruby Bolaria-Shifrim of the Chan Zuckerberg Initiative.
Cornerstone CEO Erika Karp has joined the Board of Directors of Conscious Capitalism. Here she addresses a Conscious Capitalism forum in late 2020.
Forests are an important biological resource with a critical role to play in carbon sequestration. In this webinar replay, Cornerstone CEO Erika Karp talks with Bettina von Hagen, CEO of EFM, which specializes in implementing ecological forestry principles within an investment context. They discuss the role of forestry investing in limiting global warming, potential risks from timber harvesting and how to mitigate them, and the potential for investments to foster rural and tribal economic development in the Pacific Northwest. Erika and Bettina are joined by Cornerstone’s Jennifer Leonard, Executive Director of Market Strategy & Manager Research.
During the webinar we received several questions that our speakers couldn’t get to during the session. The team at EFM have kindly provided answers below.
How can we incentive our communities to plant more trees and how can we reinforce ‘greening’ of our urban areas?
Supporting carbon policies and markets that finance and reward reforestation and forest protection is one of the most powerful mechanisms to incentivize tree planting The California regulatory carbon market has spurred significant reforestation projects, especially in the Mississippi Delta. There are also emerging carbon protocols for urban forests. In addition to carbon markets, land use and development codes that include trees and other natural infrastructure are also significant catalysts for increasing urban tree cover.
In terms of urban forestry, there are local non-profits that advocate and take action on urban greening and advocate for sound urban policies to preserve trees and pay for ecosystem services generated by our urban tree canopy. For example, in EFM’s Portland location, Friend of the Trees https://friendsoftrees.org/ is one option.
How does this intersect with the 1 Trillion Trees project?
EFM’s actions to create greater value in native forests, increase standing volume, and to keep forests as forests, support the goals of the Trillion Trees project. While our goals are similar, we differ in that The Trillion Trees is a non-profit project that focuses on the important work of forest landscape restoration globally, while EFM is a for-profit business that demonstrates the commercial viability of natural climate solutions to generate returns for investors and focuses on the carbon-rich forests of the western U.S. In the context of our investments, we restore and protect forested landscapes for the benefit of local communities and generate positive biodiversity, water and climate outcomes.
Do any of the panel members have high level product development/product approval contacts at governmental agencies?
At EFM our team is dedicated to developing relationships with the USFS and other governmental agencies that are focused on land acquisition and restoration in the Western US. We work closely with both federal and state forest agencies, as well as the forest products industry and nonprofits, on products that contribute to healthy and intact forests and restoration. There are a number of products – existing and new – derived from wood fiber and other forest resources that support forest restoration and forest health, from biofuel to cross-laminated timber to biochar, and we are engaged with a number of partners on further developing and building supply networks for these products.
What is the experience of EFM in implementing forestry management strategies in national/state/local open space or urban forested lands?
While EFM focuses on the acquisition and management of private lands, many of our forests are designated to be acquired by public owners – State, Federal and Local. We are currently working on enabling several community forests, and are engaged in a few federal land sales. After decades of efforts through multiple administrations, the Great American Outdoors Act was passed by Congress and signed into law on August 4, 2020. This bill has two components – funding $9.5 billion of delayed maintenance for national parks and other federal lands and, very significantly for EFM’s strategy – fully funding the Land and Water Conservation Fund (LWCF) at $900 million per year in perpetuity. The LWCF is the source used by the US Forest Service, national parks, and other federal land agencies to acquire land for recreation and conservation. It is relevant to our Funds’ strategy as there are properties in the portfolio that we want to sell to federal agencies as part of the long-term ecological uplift plan for the property. In addition, many of our forests are located adjacent to federal, state and other public forests. We work collaboratively with these public landowners on forest health, fire risk reduction, and improving public access to forestlands.
Is there an intention to invest in forests in Brazil?
EFM’s current funds are focused on restoring the natural forests of the western United States. EFM does offer natural climate solutions advisory services across North and South America and Brazil presents an interesting opportunity for climate-smart forestry investments. We are able to discuss specific opportunities on a one-on-one basis based on desired investor outcomes.
What is Bettina’s view on how to handle invasive species such as the ash borer in the context of sustainable forestry?
There are a host of both introduced and native pest species that pose a risk to forests, from introduced species like the ash borer to native pests like bark beetles and Swiss needle cast (caused by a fungal pathogen, which, despite its name, is native to the western US). While introduced pests are uniquely troublesome as there are (at least initially) no established predators or controls, native pests can also become invasive in the right conditions. The best defense against pests, whether introduced or native, is to foster a healthy, structurally complex, species-diverse forest. Pests thrive on same-age plantations and on trees weakened by excessive density and competition. Active management also plays a role, by immediately removing pest-affected trees and taking appropriate control measures. In all cases, a holistic perspective is helpful, including tolerance for a background level of pests that may be an important part of the food chain and creation of habitat such as standing dead trees that are so critical for nesting and foraging habitat for hundreds of species.
This is not to minimize the seriousness of introduced aggressive invasive species, where a public-private mobilization of active prevention and control measures is called for.
In terms of introduced tree species, forest health is seriously compromised when non-native species become established and aggressively expand into native forests. Invasive species can persist for decades and may drive out native species, reduce wildlife habitat, and alter soil moisture regimes. Our policies generally include:
- maintaining invasive species populations at a controllable level across EFM’s ownership
- focusing control efforts as soon as new populations are detected and attempt control before populations become well established.
- leaving an undisturbed soil buffer around populations of exotics to slow their rate of spread.
- focusing primarily on mechanical control methods
How do you engage with those who have had a long history of resisting forest management?
We believe that timberland investing has changed and in today’s market requires a differentiated approach to investing, one that includes the kind of climate-smart forestry that creates value for investors, stores carbon and helps mitigate the impact of climate change. Since 2004 EFM has been developing climate-smart approaches to natural forest management that are the keys to unlocking value in a carbon-constrained future. Our approach allows us to create value beyond producing logs and wood fiber, including improved carbon storage, habitat, soil formation, climate regulation, and water storage and purification. Additional benefits include community enhancement by creating locally based employment opportunities alongside the economic contributions of timber harvests and forest management and restoration activities.
How do you factor the risk of value destruction from wildfires that might start elsewhere then encroach on your properties?
Fire and weather events (such as high winds) are risks inherent to forestland investment and management and can be part of the natural cycle of renewal and regeneration for natural forests. Fire incidence can be infrequent to frequent depending on the forest type but is generally increasing as a result of climate change. EFM moderates fire risk through the development of a detailed fire plan for each property, coordination with agencies and neighboring land owners on early detection and fire suppression, joining land-owner collaboratives that detect and suppress fire and through silvicultural treatments such as thinning and introducing physical fire breaks, all of which substantially reduce fire risk. We primarily self-insure through geographic diversification which is weighted (by value) towards the coastal, temperate region. This region is very wet, and the incidence of historical fires is so low that commercial insurance is not efficient given the cost of insurance and the potential incidence of loss from fire. However, we do seek insurance (although it is not consistently available) for properties that lie in drier regions where the incidence of fire is higher. Finally, should a fire occur in a merchantable stand of timber, generally 70-80% of the timber value of the merchantable stands can be captured through salvage harvesting in the first two years after a fire. With regard to fire risk from neighboring properties, one of our strategies is to create a shaded fuel break along our property borders. These fuel breaks provide a place to stop or slow down a fire that starts on an adjoining property, and is usually built next to a road that provides access for fire suppression.
Cornerstone’s Chief Impact Strategist, Katherine Pease, moderated a panel at The Exchange 2020, the annual conference organized by Social Impact Exchange (SIE). For the past ten years SIE has hosted the nation’s only annual conference exclusively focused on scaling social impact. At this year’s event the focus was “Unifying Leadership.”
The session “Financing Change and Financial Inclusion explored innovative and promising financing strategies that support systems change efforts over the long haul and at the appropriate levels. The panel discussed how to increase effective capital flow into low income communities and what it takes to build the field infrastructure to do this well and at scale, such as the necessary structural adaptations and firms that are driving different investment models to shift the system.
— Ben Bynum, M.D., Portfolio Director, Program Related Investments, Colorado Health Foundation
— Eleni Delimpaltadaki Janis, Chief Capital Markets Officer, National Community Reinvestment Coalition
— Jake Segal, Vice President of Advisory Services, Social Finance
— Ebony Thomas, Racial Equality and Economic Opportunity Initiative Program Executive, Bank of America
On October 5, Cornerstone CEO Erika Karp joined Mark Van Ness, Founder of Real Leaders, and Margret Trilli, CEO & CIO of ImpactAssets, for a discussion on the challenges and opportunities of leadership at a time of crisis. The Ethical Finance 2020 conference is hosted by Global Ethical Finance.
Over the past 10 years, Social Impact Exchange (SIE) has hosted the nation’s only annual conference exclusively focused on scaling social impact. The Exchange 2020: Unifying Leadership was held virtually on September 23-24. Cornerstone CEO Erika Karp delivered a “lightning” keynote addressing the need for a “just transition” from the current dysfunction in our systems to a form of capitalism that focuses on long-term sustainability of all forms of capital, including human and natural capital.
During Climate Week NYC 2020, Cornerstone Capital Group hosted eminent climate scientist Sir David King, Founder of the Centre for Climate Repair at Cambridge University. The Centre is a cross-disciplinary research institution, aiming to develop and understand the solutions that will safeguard our planet from the disastrous consequences of global warming. Climate Week NYC, the annual climate summit held in association with the United Nations and New York City, brings together business and government leaders to share developments in climate action and find areas of future collaboration.
Sir David possesses a wealth of experience in climate science, having served as the UK’s Special Envoy on Climate Change, and as the UK Government’s Chief Scientific Adviser. He has published over 500 scientific papers, covering policy, climate change, and physical chemistry.
Cornerstone CEO Erika Karp hosted this opportunity to hear from one of the most distinguished leaders in the field. Chief Impact Strategist Katherine Pease shared perspectives on how to embed climate action as a component of one’s investments.
Bloomberg TV, August 21: Cornerstone Capital founder and Chief Executive Officer Erika Karp says more fiscal support will be needed to boost the economy. She speaks with Bloomberg’s Sonali Basak and Alix Steel on “Bloomberg Markets.”
We recently hosted a video call to share our latest thinking about the markets globally and to take questions from our audience. Moderated by Chief Investment Officer Craig Metrick, the team shared our outlook for equities (Michael Geraghty), fixed income (Shahnawaz Malik) and alternatives (Jennifer Leonard).
We also had the pleasure of welcoming Larry Hatheway for this call. Larry is co-founder of Jackson Hole Economics, an ‘action tank’ designed to “provide context for the world we inhabit.” Prior to this new initiative, Larry was Group Chief Economist and Global Head of Investment Solutions at GAM Investments from 2015-19. This position followed more than 20 years at UBS Investment Bank serving in roles such as Chief Economist, Head of Global Asset Allocation, and Global Head of Fixed Income and Currency Strategy.
Larry’s macro backdrop set the scene for our dialogue, focusing on the impact of the pandemic-driven economic downturn on GDP both domestically and abroad, the hurdles to overcome in a recovery, and the longer-term risk posed by mounting debt.
Read our Quarterly Update and Outlook here.
We are pleased to present this replay of our recent panel discussion with leaders in the LGBTQ movement for equality — access the event replay above. Our panel addressed:
- The history of organizing in the LGBTQ movement and what kind of action has led to change, bringing us up to the current moment.
- The recent Supreme Court decision barring employment discrimination on the basis of sexual orientation and gender identity, and how companies will have to implement changes to policies and corporate cultures.
- The role of politics, education and advocacy in creating accountability.
- The role of impact investors in helping to ensure that LGBTQ equality is actualized in a corporate environment, including the role of investors.
Here are some links you may find useful in further exploring the issues raised in our discussion:
Relevant Cornerstone Research in chronological order (we are pleased to announce the imminent publication of an update to Investing to Advance Racial Equity.)
Systemic risks to financial institutions can lead to serious negative consequences for the economy. Climate change, like the COVID-19 crisis, is indisputably a systemic risk.
Cornerstone’s CEO, Erika Karp, recently hosted a panel discussion on Ceres‘ new report titled Addressing Climate as a Systemic Risk: A Call to Action for U.S. Financial Regulators. Erika was joined by Steven Rothstein, Managing Director of Ceres’ Accelerator for Sustainable Capital Markets, which issued the report, and Ibrahim al-Husseini, Founder and Managing Partner of FullCycle, an investment firm focused on climate solutions. (Ibrahim is also a member of Cornerstone’s Board of Directors.)
In the report authors’ words:
While policymakers at the federal, state and global levels need to take the lead in tackling the climate crisis, U.S. financial regulators themselves have critical roles to play in keeping a now-weakened economy resilient in the face of ongoing and future climate shocks. Rather than standing back, they should seize the opportunity in this moment of potential economic transformation to join global peers and develop a playbook for climate action. With global emissions and average temperatures still rising, watching and waiting are no longer responsible options, and will in fact guarantee the worst. And, unlike in the possible resolution to the COVID-19 pandemic, there will never be vaccines developed to protect against climate risk. But the good news is: we already have all the tools and knowledge in the financial markets to take sound preventative action.
Climate change presents risks to both the future and today — unless regulators act boldly, now.
We recently held a video panel discussion with experts in the field of education and educational technology, to further explore the topic we first raised in our report Investing in the Future of Work. The Cornerstone team was joined by:
- Susan Cates: Susan is a partner at Leeds Equity Partners. Susan has over 25 years of experience in investment banking, private equity and education leadership. Prior to joining Leeds Equity, Susan was Chief Operating Officer at 2U, Inc., an educational technology company that contracts with universities to offer online degree programs, where she oversaw all product and service delivery operations.
- Sam Caucci: Sam is the CEO and Founder of 1HUDDLE, a workforce training platform using game technology to help organizations better prepare their people for work. 1HUDDLE has impacted people across organizations in a wide array of sectors. Applying an innovative approach to preparing people for the workforce, Sam oversaw the creation of the training game platform, the first game-based platform that transforms the way organizations onboard, train and develop their team members.
- Josh Cohen: Josh is the Founder of City Light, an early-stage investment firm committed to tackling education for underserved communities, the global climate crises, and keeping families safe. Before founding City Light, Josh led direct investments for a family office, worked in venture capital, was a partner in a private debt fund, and was the Director of Business Development for Mobility Electronics. Josh co-founded (and is a Board member of) The ImPact, a member network whose mission is to inspire families to make impact investments more effectively.
The discussion centered on the need for ongoing, lifelong learning, and the different forms that may need to take in order to better enable the workforce of tomorrow (and today, in fact) to better adapt as technology changes and new skills become key to success.
Cornerstone recently held the third in our series of calls to discuss the effect of the coronavirus pandemic on the markets, the economy and impact investing. CEO Erika Karp and CIO Craig Metrick answered questions posed by Alison Smith, Managing Director, Relationship Management, on behalf of the audience. The discussion focused on the need for innovation in business models as we seek to restart economic activity.
Recently, CEO Erika Karp moderated a panel discussion on behalf of the Jewish Federation of North America (JFNA), an organization that brings together Jewish foundations and non-profit organizations in support of shared goals and values. The panel focused on how foundations can incorporate mission-aligned investing in the endowment portfolios as well as through Program Related Investments. Suzanne Barton Grant from JFNA framed the discussion with an audience poll that revealed that a lack of knowledge among investment committees is a key barrier to adopting mission-aligned practices.
Erika spoke with Joel Wittenberg of the W.K. Kellogg Foundation and Ned Rosenman of Blackrock. They explore the variety of forms mission-aligned investments can take, the intersectionality of issues that can multiply impact, and the challenges of measuring impact.
On May 5th, Cornerstone Capital hosted a webinar about Covid-19 and its disproportionate impact on some communities. Race, income, ZIP Code – all are factors that influence one’s chances of making it through the crisis personally and financially. In New York City, black and Hispanic/Latinx residents are twice as likely as white residents to die from the disease caused by the novel coronavirus. This fact is directly related to the lack of economic opportunity in some communities, especially communities of color anywhere in the US, as well as other structural issues including who has access to investment capital.
How can investors address the inequitable impact of COVID-19?
Katherine Pease, Managing Director, Head of Impact Investing at Cornerstone moderated our call with three investors and entrepreneurs with expertise in venture capital and investing for impact for women, communities of color and social justice:
NATHALIE MOLINA NIÑO is an entrepreneur, an investor (at O cubed) and tech globalization veteran focused on high-growth businesses that benefit women and the planet. She is the author of LEAPFROG, The New Revolution for Women Entrepreneurs (Penguin Random House, Tarcher Perigee) and serves as a Venture Partner at Connectivity Capital Partners. Molina Niño launched her first tech startup at the age of twenty and is the co-founder of Entrepreneurs@Athena at the Athena Center for Leadership Studies of Barnard College at Columbia University.
PRIYA PARRISH is the Managing Partner of Private Equity at Impact Engine. Prior to joining Impact Engine, she served as Chief Investment Officer at Schwartz Capital Group, a single-family office investing across global markets. Priya currently serves as Adjunct Assistant Professor of Strategy and Impact Investor in Residence at the University of Chicago Booth School of Business.
MORGAN SIMON is co-founder of Candide Group. She has close to two decades of experience making finance a tool for social justice. Morgan has influenced over $150B in investments and is a regularly sought out expert on impact investing. Her first book, Real Impact: The New Economics of Social Change, has been featured widely. Prior to Candide Group, Morgan was the founding CEO of Toniic, a global impact investment network.
The link between health and the economy
Nathalie began the webinar by noting that the existential danger facing black and brown businesses is directly correlated to their communities’ economy and health. She noted that banks have a long history of rejecting people of color for loans. They are often asked for more qualifying material compared to white borrowers. If loans are received, they are typically issued at higher interest rates that whites obtain. As a result, Nathalie was not surprised that $559 billion in PPP (paycheck protection program) loan money which was deployed through banks went to borrowers with whom the banks already had existing relationships vs. black and brown business owners. As a further barrier, the program excluded people with prison records, which disproportionately impacts entrepreneurs of color.
Morgan noted that $30 billion of the PPP has been designated to be disseminated through Community Development Financial Institutions (CDFIs) and smaller community banks (under $10 billion in asset size). She is angry that this relatively small amount is dwarfed by the $500 billion-plus being targeted at large companies, including $17 billion to Boeing. She believes that this policy failure should be addressed by investors and noted that her organization, Candide, publicly makes political contributions to advocate for broader access to capital for all. Candide has 75 women-owned companies in its portfolio, of which 18 successfully applied and were approved for PPP, in part because they had investors that advocated for them. Candide leveraged its financial connections to help business owners, including some who are not in their portfolio, to gain access to funds.
Priya voiced a somewhat optimistic outlook on the economy. She noted that PPP is not an economic stimulus plan per se but rather a relief package. She sees a long road ahead with actual fiscal stimulus and investor tax incentives. She expects a larger amount of capital to be deployed going forward.
Access to capital a challenge to black and brown communities
But with regards to access to capital, networks or key. Those who have access to a managing director at a venture capital (VC) firm are typically people from privilege, not just a particular race or gender. Priya noted that VC is a high risk/reward asset class and most who invest in venture can afford to take those risks. If you do not come from money, you’re an outsider. The VC firms tend to look for larger, high tech firms that can have big returns. Those firms’ founders/owners tend to be white and male (as are most VC partners).
Priya also noted that venture firms with female and diverse partners may be open to a variety of investments, not just the high-risk, high-reward kind. As an example, the firm invests in a telemedicine company that provides mental health services to 50% of the counties in the U.S. that do not have access to a mental facility. That is impact, in Priya’s estimation.
Nathalie said it’s likely that half of businesses owned by people of color will be gone soon. She believes there must be policy solutions at the municipal and state level. She hopes some policies will be initiated quickly by both the public and private sectors to try to save some of these businesses. Nathalie notes that the needs of both black and brown main street and high-growth companies should be addressed. With people of color a growing US demographic, the needs of main street companies need to be addressed to support near term and future economic health of the US. High growth companies with Black and Brown founders also need access to capital. The challenge is that there are few asset managers of color running funds. Nathalie proposed that governments, corporations and limited partnerships should allocate 30% of money to managers who are people of color to address the growing need for capital by companies run by people of color. Priya agreed but went further by suggesting that managers and investors need to look at who the company is serving and to invest in companies whose products and services support underserved communities.
Finally, during the discussion, both panelists and attendees shared a variety of articles and links to additional resources regarding small business relief, impacts on communities of color, and philanthropic opportunities:
On April 22, Earth Day, Cornerstone hosted a webinar titled “Every Day Must Be Earth Day: Climate, Coronavirus and Complexity. CEO Erika Karp was joined by Karl Burkart, Managing Director of One Earth, a project of Rockefeller Philanthropy, and former Director of Science & Technology at the Leonardo DiCaprio Foundation. One Earth is dedicated to advancing cutting-edge science to address the climate crisis. The organization funded a breakthrough climate model (published as Achieving the Paris Climate Agreement Goals by Springer Nature) which shows how the world can achieve the ambitious 1.5°C goal through currently available technologies at a lower cost than our current energy system.
In a wide-ranging discussion, Erika and Karl tackled these questions:
- Is the COVID-19 pandemic related to climate change?
- Will the pandemic-related drop in carbon emissions lead to lasting changes?
- Will the oil market collapse slow the pace of transition to alternative energies?
- What is the impact of the current crisis on social and economic justice?
- What can people do to move the needle on climate justice?
In preparation for our call, Karl provided a written assessment of the questions we used to shape our discussion. Below are his responses.
Is the COVID-19 pandemic related to climate change?
There is a large and growing body of scientific literature linking climate change to the spread of vector-borne disease. Studies have focused mostly on insect carriers such as mosquitos (malaria) and ticks (Lyme). There is a general consensus that increased warming will drive increased vector-borne diseases, but no one knows exactly where and by how much.
It’s also possible that vertebrate animals are being exposed to more vector-borne diseases, making them carriers of novel diseases to humans. These ‘zoonotic’ diseases — pathogens that jump between species — include the COVID-19 outbreak, but it’s very hard to make a direct link to climate change. What we do know is that deforestation and encroachment of human activity on wildlands is creating greater risks for both humans and animals, as edge effects increase. We need to retain our current footprint of wildlands (approximately 50% of the terrestrial surface) in order to save biodiversity, preserve priceless carbon sinks, and reduce the risk of future zoonotic diseases.
Climate change will certainly increase risks to public health, and we’re only just starting to learn about the ways this could happen. An emerging body of science is looking at “zombie pathogens” that have been frozen, sometimes for centuries, but are thawing due to climate change. One anecdotal example of this, an outbreak of anthrax in Siberia in 2016, was caused by increased temperatures thawing permafrost and an anthrax-infected reindeer carcass from 1941. Whether this will happen at larger scale is a very controversial topic and the science is new, but it’s clear there are strong linkages.
Will the pandemic-related drop in carbon emissions lead to lasting changes?
It’s hard to talk about the silver lining to such a horrible pandemic, but it is true that emissions will likely drop 5-10% or more as a result of COVID-19. This is essentially exactly what was needed to get us on track to 1.5°C — a net reduction of 56% of global emissions by 2030 (or roughly 6.5% per year).
I myself had a pretty bad carbon footprint due to my travel and speaking engagements, and I’m seeing many of these venues events now going online, including Climate Week, which is normally held in New York concurrent with the UN General Assembly in September. The irony of Climate Week is that you have the whole world gathered in one place talking about solving the climate crisis while emitting enormous amounts of CO2. We’re now being forced to learn how to do many things virtually, with a much-reduced carbon footprint.
This could be a tipping point when virtual working becomes the standard, rather than the exception. A study in 2018 showed that 70% of people were able to work remotely on occasion. What if that were reversed – with physical officing being the exception rather than the rule? The permanent reduction of carbon emissions implicit in such a transformation of our work lives would be a game-changer. But I think many are rightfully skeptical that this will turn into permanent behavior change. And behavior change is only a piece of the climate change puzzle…
There’s only so much we can do as individuals to help. We need permanent policy shifts. We need to stop subsidizing fossil fuels (at a whopping $4.7 trillion per year according to the IMF) and start subsidizing clean, renewable energy. To make that shift happen, we will need a different kind of behavior change… VOTING. People need to start voting for candidates in much larger numbers at all levels of government of they care about clean air, clean water, and a balanced climate. Perhaps if we get nationwide mail-in voting, this could be the beginning of more civic engagement, which will drive the policy changes needed to solve the climate crisis.
Will the oil market collapse slow the pace of transition to alternative energies?
This is an excellent question and a very complicated subject. In my opinion, COVID-19 is “sinking all boats” — fossil fuel energy and renewable energy. I was in Riyadh for G20 meetings in late February, and prior to COVID-19 breaking out there was already a brewing conflict with OPEC+ nations balancing whether or not to cut production to stimulate falling prices. The fact of the matter is, the oil industry was already heading for a rough year. We supported research by Carbon Tracker, a think tank in the UK that has been analyzing data from many of the Oil & Gas majors, and they predicted a major decline in the sector in the early 2020s, as more and more people switch to electric and hydrogen modes of transport.
Then COVID-19 hit. The oil markets are now in a freefall, with negative trades for the first time in history. This will put a lot of oil and gas companies out of business, including the oil services industry (companies that manage, build, and maintain the production pipeline). Massive layoffs are happening right now, and when the economy comes back to life, hopefully in a year or two, it will be a huge and difficult ramp-up for the fossil fuel industry. There will be many, many losers and only a few winners. And some of the losers need to lose, like the tar sands in Alberta, which produce 25% more supply chain emissions per barrel of oil than the global average. Then there is increased demand for electric vehicles. Just last month, Tesla had record sales in China.
I’m almost brave enough to predict that COVID-19 will be the beginning of the end of the fossil fuel era as we’ve come to know it. We will have to rebuild our economy, and I think clean economy will win out, with solar and wind power now heading to 4 cents per kilowatt hour (c/kWh) on average and one solar hybrid project last summer bidding below 2c/kWh. Renewables also make the most sense as a stimulus for economic recovery, creating jobs at a ratio of 3 to 1 per dollar invested versus fossil fuels. This is not to say the renewable energy industry isn’t also being pummeled. This was set to be the biggest year in history for solar deployment, and now there are massive layoffs. We’ll just have to see how bad it will be on both sides and hope for a realignment of subsidies to promote a clean future.
What is the impact of the current crisis on social and economic justice?
First let’s consider health. Before COVID-19 hit, there were an estimated 4.2 million deaths per year due to ambient air pollution, according to the World Health Organization. Low-income communities constitute by far the majority of those deaths. And this isn’t the case just in the developing world. A recent study in California shows that black and brown people are exposed to 40% more emissions than white people. This is often due to the location of low-income communities in proximity to fossil fuel plants — land that wealthier (and historically whiter) people didn’t want to build on.
So we need to acknowledge that low-income communities were already struggling with lung disease and other diseases at a higher rate. Now, according to a new study, those same communities are experiencing many more COVID-related deaths than the national average. In Michigan and Illinois, for example, black people make up 41% of Covid-19 deaths, despite being less than 15% of the population. And in Louisiana, nearly 60% of the people who died of coronavirus in the state are black, while the demographic is just a third of the state’s population. Top all that off with the lack of socialized healthcare in the US, and you have a recipe for disaster.
There’s blame to share in many directions, but first let’s point a finger at the fossil fuel industry, and the lack of regulations to protect communities from pollution. Second, let’s look at our healthcare system in the US. Many European countries last month called citizens home who were on visas in the US because they deemed our country as lacking sufficient medical infrastructure. Post-COVID, these two problems have to be addressed to even begin a conversation about social justice. In the global context, I shudder to think about the impacts of so many people losing their jobs and livelihoods. But one thing that does appear to be emerging is a growing movement to tackle climate injustice head-on. I think COVID-19 is going to add fuel to that fire as these great inequalities in our economic system are revealed.
What can people do to move the needle on climate justice?
It shouldn’t take a global pandemic for us to see clear blue skies and breathe in clean fresh air. We deserve better. If anything good can be said of COVID-19, it is this momentary glimpse of what the sky should look like and some space to think about the future we want to create.
So what is the future we want to live in post-COVID? I think that’s the question we all need to be asking. Are we going to let the fossil fuel industry come roaring back to life? Or are we going to finally start to build the clean energy future we all need? We could have an opportunity to start righting the wrongs, provide low-income communities with access to clean energy while providing job training and income opportunities for a clean energy future. This is what a Green New Deal should focus on – pivoting subsidies away from the ailing fossil fuel sector and towards investments in renewable energy, along with a major jobs program to transition coal, oil and gas workers to good, long-term jobs in solar, wind, and energy efficiency.
Internationally, we know developing countries are going to be hard hit by the pandemic and one initiative, Sunfunder, is working to bring energy access to rural areas of Africa where it’s needed most. There is a risk of default for many community solar projects across Africa due to the pandemic, which would be a horrible loss to the people there, derailing more than a decade of progress to bring clean, affordable energy in the region. So these are the types of efforts that need to be supported now more than ever.
One thing we do at One Earth is to identify key initiatives that are strategically important in creating a green future and achieving the 1.5°C goal of the Paris Climate Agreement. If you’re interested, please feel free to visit our website OneEarth.org and sign up for a monthly briefing of projects around the globe that are working towards a green, and sustainable future.
Editor’s Note: From an investment perspective, there are numerous ways to deploy capital in support of climate justice. Cornerstone Capital Group works with to clients to identify their financial goals and impact interests, and recommends appropriate investment solutions. Our recommendations reflect rigorous research into investment opportunities to understand their risk and return profile, their environmental, social and governance characteristics, and the degree to which an investment facilitates access to the products, services and systems needed to achieve the United Nations Sustainable Development Goals. If you would like to explore how Cornerstone may be able to serve you, click here.
We recently hosted a second discussion on the near-term impact and longer-term implications of the current coronavirus pandemic. Cornerstone Managing Director Alison Smith moderated a Q&A session with CEO Erika Karp and CIO Craig Metrick, based on questions submitted by attendees. The dialogue focused on asset allocation, implications for various sectors and asset classes, and the role of environmental, social and governance analysis in crafting resilient portfolios. We hope you find this replay helpful, and welcome your feedback at firstname.lastname@example.org or via our website Contact Form.
GreenBiz, March 3: Cornerstone Capital CEO Erika Karp discusses the role business can and should play in advancing and achieving these goals, while driving business excellence at the same time.