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 email@example.com 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.
Shortly following trips to Davos during the World Economic Forum in late January, Erika Karp sat down with Juliet Scott-Croxford of Worth Media to compare notes on their experiences and most meaningful takeaways from the week. Below is a transcript of that conversation, which we captured via video.
JSC: Hi everyone. I’m Juliet Scott-Croxford, CEO of Worth Media. And I’m excited to be joined by Erika Karp, CEO of Cornerstone Capital, to talk about our shared experience at Davos in the end of January.
EK: I’m Erika Karp, the Founder and CEO of the Cornerstone Capital Group. As we think about investing for impact we’re here to talk about Davos, what happened at the World Economic Forum last week and some of the most interesting takeaways.
JSC: What was your biggest takeaway from the event on based on what you attended and some of the conversations that you heard?
EK: For me, the biggest takeaway is the extent to which we need more systems thinking if we’re going to meet these huge challenges. Because it seemed like there were a lot of events going on — whether it was about climate, whether it was about health or whether it was about technology and blockchain or women or LGBTQ events — each of these events touches on way more than it might seem.
JSC: And, and how do we take action on creating big systems thinking around those types of challenges?
EK: Well, it’s really hard. I think that that kind of thinking can’t just happen at the top. That is not just a high-level conversation. That conversation needs to go down to the grassroots level. And so I wonder … if everyone who needs to be in the room sometimes is in the room.
JSC: Hmm. So just playing on that point a bit, I think there was 24% female attendance at Davos this year. Last year it was 23%. What were your takeaways around the sort of notion around diversity and inclusion?
EK: By the way, that’s a big jump for Davos, because I know in many past years it’s been stuck at kind of 20% or even below. And that’s challenging. So the idea of women not just having more power but more influence is hugely important. And I think women’s voices, diverse voices are not being heard to the extent to which they need to be.
JSC: I attended a lot of the sessions that were done at the Equality Lounge [hosted] by the Female Quotient and a big part of their focus was on UN Sustainable Development Goal 5, around closing the gender gap. What conversations did you hear around gender and diversity outside of perhaps one of those areas?
EK: Unfortunately, very little. And here’s what I think we have to get to… people might talk about SDG 5 and women’s economic empowerment. But when you think of how you actually get there, you have to talk about all the other SDGs. So we think at Cornerstone in terms of the idea of access. Women will not be really empowered until we have access to water, to healthcare, to education, to broadband, to capital. And so that intersectionality, that systems thinking around diversity, I don’t think we’re there yet.
Capitalism and Sustainability
JSC: The main sort of focal point for the event or the big theme was around better capitalism and sustainability. How encouraged or not were you by that kind of conversation and thinking?
EK: There was a lot of talk about stakeholder capitalism, what we’ve seen the Business Roundtable talking about. And I think that’s great, but it’s so much more than talk that we need to get it done. When we go back to those Sustainable Development Goals, that systems thinking, that’s what you really need to see. So we need data, we need accountability, we need measurability, we need intentionality — all the things that we talk about with impact investing. And if you think about it, any board of directors, you know, yes, they need to serve their shareholders. They need to serve their employees. They need to serve their customers. You can’t optimize profitability without doing all three. But the issue is, it has to be about long-term profitability. We have to stop [the impact of] externalities from not being accepted by the users of capital. We have to think about financial capital, but also human capital, natural capital. We have a long way to go, I think.
JSC: Well, one of the key takeaways for me was that the business community is awake to the climate crisis. That was encouraging for me, whilst it’s possibly a little too late. I did feel like the conversation around that was baked into every conversation or session that I had. And perhaps more so outside of North America as well. I think there’s an interesting conversation coming out of a lot of the European businesses. I think that the key challenge is how do we take it beyond conversation and into real action. Seeing the letter that Larry Fink put out and, and some of the conversations around the Business Roundtable, what do you think the next steps are? How do we take that and. to your point, build that sort of systems thinking into —
EK: Action? Well, one of the big next steps is to facilitate tangible information, data, decision-useful information. I think that kind of push for real information, real data accountability is the starting point. And so that’s one of the things that I take away from it. Because when you have real information, real data that data providers and index providers and ETFs and fund managers and ultimately investors can have, not flawed information all through that system, then I think we have a better start.
JSC: And what about the sense of having a common language around how we’re describing this? So a common way to describe it, a common way to measure it, a common way to hold each other accountable to it. How important do you see that?
EK: Hugely important and that leads on from what I talked about with regard to data. We don’t have a common language when it comes to the whole idea of sustainable investing. Cornerstone uses a very clear definition. We think sustainable investing is the systematic integration of material, environmental, social and governance factors into the investment process. That is sustainable investing. It’s not ideological, it’s not political, it’s not divisive. It is about pragmatism and enhanced analytics. It is a discipline. And that discipline in finance, I mean ultimately it’s just going to be called investing and investment research, but we’re not there yet. Sometimes you’ll hear people say ESG investing. There is no such thing as ESG investing. There’s ESG analysis. We have to bring this into the realm of finance, not ideology.
JSC: And how important is partnerships and this notion of stakeholding when it comes to taking this to the next step?
EK: It’s, it’s just critical. This goes exactly to what we’re talking about, with systems thinking and going from not just the top down but from the bottom up to have this interdisciplinary discussion about getting things done. Partnerships are a must-have if we go back to talking about achieving the Sustainable Development Goals, which, by the way, in and of themselves are not investible. So again, when we frame things at Cornerstone, we think about the idea of access, giving the world access to each of those SDGs, giving investors access to each of those SDGs. And that implies you’ve got to have partnerships. SDG 17, right?
JSC: Yeah, absolutely. And people like Greta [Thunberg], who I personally think is so essential to helping hold businesses and key influences accountable to make progress. What what were your thoughts on her speech?
EK: Oh my God. The idea of, you know, this young person talking about what is blindingly obvious to almost the whole world, except certain administrations. I think it’s tremendous. I think she represents, you know, basically the whole world that’s not at Davos.
JSC: Playing that forward to the point around inclusivity … she has such a loud voice, a voice that is so important to people that aren’t able to be at something like [Davos]. I just think her presence is so poignant.
The Davos Experience
JSC: So this was your first and my first Davos. I’m still processing it a bit ’cause there’s so many different layers and elements to it. It’s a place of many contradictions, and it has been and is under scrutiny. Having been there and come away, what are your sort of overall thoughts on the importance of it? The challenges with it?
EK: You know, the biggest challenge is clearly the perception of eliteism, the few, the very few making decisions for everyone else. And so that’s a huge challenge now with regard to how Davos comes together.
For a number of years I worked on the Global Agenda Council which leads up to Davos — what should be included, what are the pivotal questions that we’re going to address at Davos? The question I have is whether the hard work done on the agenda councils and the work that becomes you know, very specific, [does that] get right into the Davos conversations? I’m not sure of that. So that’s something I think we have to be very thoughtful about, because I think that innovation and ideas come from everywhere. Are those [ideas] making their way into any decisions or actions that might be taken over that one week? I’m not sure.
JSC: What were some of the most interesting sessions you attended?
EK: Obviously the ones that I worked on! The Green Debate was about action. What I felt that was so interesting was the extent of the earnestness of that group, which really wants to get something done. The other [event] that I was involved with, which I’m really excited about is called the World Benchmarking Alliance, the WBA. And the reason I love this initiative is because it is really about a systems-based approach: Let’s look at the keystone companies in the global economy, those that potentially can have more impact than other companies by virtue of where they’re situated in the system. And let’s keep raising the bar for the industries.
JSC: Fantastic. So you thought the WBA offers a solution to integrate this systems-based analysis?
EK: From what I can see. It’s relatively new initiative. But yes, it is showing us which companies can be most powerful in driving everything forward. And I should say there is no perfect company. You know, every company has challenges, whether it’s upstream or downstream, whether it’s a technology company, consumer company — every company has challenges. But if the WBA can really identify what exactly those keystone companies are doing, what do they touch and how can they be most powerful, I think that’s terrific.
JSC: What do you think the best way of integrating that into future Davos events, to your point and taking it to the grassroots? So it can’t just sit with this sort of small group of incredibly influential people. How much does the World Economic Forum take a lead in ensuring that happens?
EK: I think the WEF really could take the lead. I’ll give you an example as it relates to these keystone companies, or companies that are not keystone companies but sit in industries that have an outsized impact on what’s going on. One of the things that I observed — or didn’t observe — was the extent to which there’s real entrepreneurship, real disruption inside the companies that are part of the WEF. I think a lot of companies have forgotten how to take risk. They have forgotten how to innovate. And I think that’s unfortunate, especially, I would argue, since some of the agenda councils, which over the past decade have come up with interesting solutions, innovative, entrepreneurial solutions. I don’t know that we’re seeing [such solutions] to the extent that we should.
JSC: I think that’s an interesting point. I was surprised that there were quite a lot of young people at the event, more so than I expected, but also more representation from tech companies and data companies and software companies. And I’m surprised that they haven’t taken more of a lead on [creating] more of a systems-based universal way of an analyzing and assessing progress in some of these areas.
EK: Did you feel, ’cause I did a little bit, did you feel that there was more a sense of fear of new technologies, the negative impact of new technologies by one generation than there was by the other? It felt to me like there was a little bit of a focus on the scary stuff.
JSC: Yeah. I think you’re right. And I think, you know, Facebook’s been in the headlines a lot, so I think that there definitely is this sense of, yeah, how much do we embrace these platforms for good? I think that is a challenge both for those companies and for people, but there is this wealth of knowledge and expertise. Let’s apply it in these areas that we need to apply it.
JSC: Are there other conversations or interesting people that you met that have kind of stuck with you a few days later?
EK: There was one particularly interesting woman I spoke to from a health research organization. One of the things she said that just really struck me is that, you know, we can talk about systemic change as much as we want. But when it comes to healthcare and the intersection of healthcare and the technologies we need, she said the funding picture is so off, you know, without government funding of basic research. She says we can talk all we want, but it’s not enough.
JSC: Why do you think that is? Why, what is driving that lack of investment or capital in the area?
EK: I think it does have to do with the short-termism, broadly, whether it’s in the private sector or the public sector. Some in the foundation world are doing wonderful work, but it’s a drop in the bucket compared to what we need. If the foundations are giving a kind of first loss capital [to attract the] private sector that’s great. But again, when it comes to basic research, it’s a drop in the bucket. And then our conversation went on to infrastructure spending and education spending and you know, the things that so need to come first. But it was that healthcare discussion that reminded me this is going to take everyone.
The Role of the Sustainable Development Goals
JSC: Yeah. And, and how integral do you think the Sustainable Development Goals [SDGs] were to the entire conversation? Cause that, that was the other thing I noticed. They were very prominent in certain places, but in other places actually weren’t the lead focus. What can we do to use them as a way to align all of these stakeholders and companies around a way forward?
EK: I was actually surprised that they were included in lots of places because I was expecting nothing. So I was pleased to see the SDGs around and in their own little building that was [colorful]. You know, the fact that the SDGs have branded themselves as eye candy is beautiful — whatever it takes. I wouldn’t call it prominence, but it was clearly there.
I think one of the problems we have, actually, is if companies kind of hang their hats on achieving SDG 5 or whatever. I think that’s really problematic because if you really try to go after one (and we talked about this before), you’re not going to get really much done. Yeah. So I think this was the WEF kind of tiptoeing into the SDGs.
JSC: Yeah, I agree. I’d really love this sense of having a shared set of goals and I do think that’s a really powerful way of bringing different stakeholders together around a common issue and some of the biggest issues that we’re faced with. I think you just, you kind of want to see more of it. And I sense there have been quite a lot of laggards when it comes to adopting these or taking them seriously or thinking actually this is a good way to do it.
EK: I mean with all due respect to the WEF, it’s astonishing that this is the first time that they’ve really tackled climate.
JSC: Yes. And it is sort of slightly contradictory in the fact that the backdrop is the, you know, the mountains and the temperature was quite warm. Yes, there’s snow on the ground, but it, I sort of felt like it was almost quite stark in that the conversation was around climate crisis finally, and we were in the backdrop that we were in.
EK: I put that aside to some degree because had it been snowing and freezing, then somebody would say, ‘Oh look, no climate change.’ I mean, you know this is about volatility, not about any particular day. So it didn’t bother me that much. It was convenient. Walking around was a little easier than it would have been. But you know, getting between all those black cars…
JSC: I was going to say, it takes 20 minutes to walk end to end on the promenade and I would far rather walk. I was surprised at how much traffic there was and they weren’t, I don’t think they were electric.
EK: Well, actually I have a picture of Prince Charles arriving in a fully electric vehicle. Yes. I think, I don’t know where that was published, but we’ve got that right.
JSC: There’s definitely more that they could do there, I think.
EK: I think there’s a little more they can do. Yeah.
JSC: So you saw Prince Charles, who else did he see that kind of made you [perk up].
EK: You know, no one, not really. Maybe I was looking down or doing my work. But I did see some of my favorite people. Nigel Topping, you know, I don’t know if everyone knows Nigel, but he’s amazing. A few other people that I’ve known for a long time that in my view are really the leaders, like Steve Waygood from Aviva. I don’t know if people know Steve, but yeah, he’s one of the leaders. So it was really nice to see those serious people.
Next Year at Davos?
JSC: What would you, a year from now, thinking about Davos next year, what change would you like to see?
EK: I would love for Davos to just take up the issue of entrepreneurship. You know, we know that in a global economy, impact comes from entrepreneurship, new companies revitalizing economic growth. You know, the fact that we have the world’s monetary authorities driving the stock market is not okay, right? Real economic growth comes from entrepreneurship. And I don’t know that there’s been a Davos that’s really taken that up.
JSC: And so how would you, how would you do that?
EK: I’d like to see the conversation truly be a catalyst for growth. Focus on the idea of entrepreneurship, in fact, impact entrepreneurship. That’s where growth comes. That’s where new companies come from. Why don’t we have, you know, a discussion about great companies that know how to disrupt themselves and innovate from inside. And then of course, the outside companies, the innovators, the disruptors that are outside. I think it has to be about entrepreneurship because ultimately that’s how we’re going to face the big challenges of the world.
JSC: So watch this space and we’ll work on impact entrepreneurship as a topic between now and next year. Thank you.
EK: Thank you.
Bloomberg TV, January 17: Erika Karp, Cornerstone Capital Group CEO, identifies the myths that are typically associated with ESG investment. She speaks with Afsaneh Beschloss, RockCreek Group Chief Executive Officer and Sam Palmisano, Former IBM Chief Executive Officer, and David Westin on “Bloomberg Wall Street Week.”
Cornerstone Capital Group Founder and CEO Erika Karp addresses the state of impact investing, offering a clear distinction between impact investing, ESG analysis, and sustainability. No matter what labels are used, someday this will all simply be called “investing.” Note: This video originally appeared on cornerstonecapitalfunds.com.
Cornerstone Capital Group recently had the honor of hosting a special evening at Congregation Beit Simchat Torah synagogue. CEO Erika Karp was joined by Robert Bank of the American Jewish World Service, who spoke of the close relationship between impact investing and Jewish values. We are pleased to share this replay for those who could not join us for the event.
It seems clear that the “circular economy” is the only way forward for humanity. In my view, adopting circular economy principles will combat our current crisis of waste – wasteful manufacturing, wasteful packaging, food systems, technology, extractive materials. We can begin to repair the planet. The concept resonates deeply with me and the team at Cornerstone, which was founded with the vision for a regenerative and inclusive global economy.
For those who don’t know, a circular economy “aims to redefine growth, focusing on positive society-wide benefits. It entails gradually decoupling economic activity from the consumption of finite resources, and designing waste out of the system.” 
I recently attended the Circularity 2019 conference, hosted by Greenbiz. It was a fascinating and thought-provoking few days, with sessions ranging from Digitizing Circularity to Catalytic Capital. I participated in a fascinating panel with Ron Gonen, Co-Founder and CEO of Closed Loop Funds, and Emily Landsburg, Director at private equity firm Ultra Capital, on the role of investors in financing companies engaged in the circular economy. I’m pleased to share Greenbiz’s recording of that conversation.
As investors continue to make the case for LGBTQI equity, there is a practical and ethical mandate to fuse LGBTQI interests with those of gender lens investors who recognize the many benefits of establishing corporate cultures and practices that embrace all stakeholders. Cornerstone explored investing for the issue of LGBTQI equity in our recent report, Two Lenses, One Vision: Investing for LGBTQI and Gender Equity
Following on from the report, Cornerstone Capital CEO Erika Karp and Head of Impact Strategy Katherine Pease hosted a live video session with Dr. Vivienne Ming, Founder of Socos Labs. Socos is an independent think tank that explores the future of human potential to guide private and public policy toward a more effective, human-centered world. The conversation focused on the interplay of gender identity and sexual orientation and offered practical insights into how investors can advance LGBTQI equity by aligning with gender lens investing strategies.
On May 20, we hosted a video webinar with Cornerstone’s Katherine Pease and Craig Metrick, who provided an overview of our new impact measurement framework, the Access Impact Framework. Katherine and Craig provided background on why Cornerstone created the framework, our rationale for basing our framework on the UN Sustainable Development Goals, and described our methodology.
On May 16, Erika Karp sat down with Laurie Lane-Zucker, founder of Impact Entrepreneur for a wide-ranging discussion of “transformation and impact investing” in an episode of Impact Entrepreneur’s Luminarias webinar series.