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.
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.
As new members of the World Benchmarking Alliance, we have been delving into their work to understand how WBA benchmarks corporate performance in terms of their contribution to the UN Sustainable Development Goals.
WBA’s approach aligns closely with Cornerstone’s thinking: they recognize that transformational, systems-based change across key sectors and issues is critical to achieve a regenerative and inclusive global economy. Recognizing that the private sector has a tremendous role to play in bringing about such change, and that clear and consistent measurements of progress are essential to the effort, WBA is creating benchmarks or indices for key focus areas:
- gender equality and women’s empowerment;
- food and agriculture;
- climate and energy;
- seafood stewardship;
- and digital inclusion.
Below we offer highlights from WBA’s recently released assessment of the automotive industry, part of its climate and energy benchmark.
Measuring the world’s 25 most influential auto manufacturers
Given the transport industry is responsible for 15% of the world’s greenhouse gas emissions, automotive companies play a vital role in decarbonizing our economy. To measure their progress toward reaching the Paris Agreement goal of limiting global warming to well below 2°C, WBA analyzed the world’s leading automotive companies to determine if they can meet that target. We have summarized their key findings below.
Destination Decarbonization: Stuck in the Slow Lane
Companies are stalling in the low-carbon transition. Of the 25 companies, only Groupe PSA, Ford, Renault, and Mazda have established fleet targets that are fully aligned with the pathway required for the low-carbon transition, with only Mazda and Nissan setting long-term targets that reach as far as 2050. In addition to beefing up target emissions reductions, companies need to map out a clear strategic plan to achieve those targets. Groupe PSA is the only one of the 25 companies assessed that has embedded reduction targets into a publicly available low-carbon transition plan.
Driving with the Brakes On
A company’s investment in new battery technologies and electrification is a strong indication of its commitment to decarbonization. Some companies are making progress in boosting their low-carbon vehicle sales. BAIC, for example, boosted its share of low-carbon vehicle sales from less than 1% of total annual sales in 2013 to 7% in 2017. Likewise, BMW grew its low-carbon vehicle sales from less than 1% in 2012 to nearly 6% in 2018.
However, for 16 of the companies assessed, low-carbon vehicles accounted for less than 1% of sales. Several of these laggards have, encouragingly, made quantifiable commitments to rapidly increase their sales to transition to a low-carbon economy.
Sales: Customers Taking the Road Most Travelled
Though the auto sector is renowned for its high-profile marketing campaigns, less than half of the companies benchmarked show noticeable efforts to market low-carbon vehicles as a more favorable option. According to the WBA, there remains significant room for improvement from automotive companies to shift consumers towards low-carbon vehicles to help decarbonize the automotive industry.
Of the 25 companies, Tesla plays a strong role in shifting the passenger vehicle market toward electric vehicles by actively engaging consumers, increasing the number of showrooms, and creating unique customer experiences. BMW and Groupe PSA also actively promote their electric vehicles and encourageconsumer uptake. Efforts to shift the consumer mindset would require automotive companies to actively promote low-carbon models across multiple sales regions through a variety of methods.
Revving up Public Commitments to Climate Policy
There is an industry-wide reluctance for automotive companies to publicly commit to a positive, transparent and proactive approach to climate policy. None of the companies assessed show leadership in engaging with trade associations or regulatory bodies to help mitigate climate change. Nor does the industry as whole systematically safeguard against influencing climate-related regulations in a negative way, directly or indirectly, in consultations with regulators.
Though all of the companies – with the exception of Tesla – show a level of engagement with a trade association or regulatory body, none have a publicly available engagement plan, which is widely considered a best practice. That said, Ford, Groupe PSA, General Motors and Renault have established more defined positions relating to “climate-friendly” policies and what actions to take if an affiliated trade association has climate-negative positions.
Driving Change: The Future of Mobility
To better prepare for a low-carbon economy and remain profitable, auto manufacturers need to identify new business opportunities that move away from traditional passenger vehicle ownership. While automotive companies like Tata Motors, Tesla, BAIC, Honda, Nissan, and Toyota are exploring alternative business activities, they are far from scaling up operations: most companies do not offer a scope of operation, a sense of market share or profitability, and lack expansion plans with a defined timeline. This suggests that these activities may not have been given sufficient consideration in terms of the broader business strategy. To facilitate the transition to a low-carbon economy and help achieve the goals of the Paris Agreement, auto manufacturers could further demonstrate action towards diversifying their business models.
Car companies have a responsibility to current and future generations to change the high-emission mobility culture. Change can only occur if manufacturers proactively increase investments in and marketing of low-carbon vehicles, engage with policymakers on low-carbon solutions, and seek out new business opportunities.
Most companies have a low-carbon vehicle, but there is insufficient investment in this market. There also needs to be a more positive and proactive approach for companies to market low-carbon vehicles to consumers. As a whole, the industry needs to work with trade associations and react to climate policy. In sum, the WBA’s report illustrates that the 25 auto manufacturers are not on track to meet the goal set by the Paris Agreement.
For the full assessment please visit https://climate.worldbenchmarkingalliance.org/
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.
The International Renewable Energy Agency (IRENA) published a report earlier this year highlighting the potential for renewable energy to alleviate some of the world’s most pressing social and environmental challenges. Their work aligns with Cornerstone’s thinking about the intersectional nature of these issues, as expressed by our Access Impact FrameworkTM. Below is an excerpt from IRENA’s report, republished with permission and lightly edited for length.
The ongoing energy transformation, driven by renewables, is bringing far-reaching, systemic change to our societies. This offers important opportunities for greater inclusion and equality.
Accelerating the deployment of renewables can alleviate poverty, create jobs, improve welfare and strengthen gender equality. Still, to fully realise this potential, the renewables industry has to tap a wider pool of talent – notably that of women, who have been largely underrepresented, depriving the energy transition of critical capacities.
Renewable Energy: A Gender Perspective provides new insights on women’s role in renewable energy employment and decision-making globally. This key report aims to help fill the knowledge gap in this field. Based on a ground-breaking, first-of-its-kind online survey combined with in-depth research, the study highlights the importance of women’s contributions in the energy transformation, the barriers and challenges they face, and measures that governments and companies can take to address these.
Adopting a gender perspective to renewable energy development is critically important to ensure that women’s contributions – their skills and views – represent an integral part of the growing industry. Increased women’s engagement expands the talent pool for the renewables sector. In the context of energy access, engaging women as active agents in deploying off-grid renewable energy solutions is known to improve sustainability and gender outcomes.
In recognition of these opportunities, the 2030 Agenda for Sustainable Development adopted in 2015 introduced a dedicated goal on gender equality (SDG 5), noting that the “systematic mainstreaming of a gender perspective in the implementation of the Agenda is crucial”.
Women in Renewable Energy: Access Context
Energy access and gender are deeply entwined components of the global development agenda. The transformative effect on women of gaining access to affordable, reliable and sustainable modern energy is well-known. Energy access frees up time for women who otherwise may spend an average of 100 hours a year collecting fuel wood and gives them more flexibility in sequencing tasks, since lighting allows them to do more at night. It also improves access to public services and opens new opportunities for part-time work and income-generating activities.
The distributed nature of off-grid renewable energy solutions offers tremendous opportunities for women’s engagement along multiple segments of the value chain. Many of the skills needed to take advantage of those opportunities can be developed locally and women are ideally placed to lead and support the delivery of energy solutions, especially in view of their role as primary energy users and their social networks.
Organisations have found it difficult to ignore the value of involving women in the renewable energy supply chain. SELCO India, for instance, trained female solar technicians in the early 2000s simply (at least initially) as a means to accomplish its business goals: technicians were needed to enter the homes of customers to repair solar lanterns and cookstoves. As women become engaged in delivering energy solutions, they take on more active roles in their communities and consequently facilitate a gradual shift in the social and cultural norms that previously acted as barriers to their agency.
Barriers to engagement
Over two-thirds of survey respondents noted that women face barriers to participation in the renewables-based energy access sector. Cultural and social norms were cited by respondents as the most common barrier, followed by lack of gender-sensitive policies and training opportunities and inequality in ownership of assets. Security and the remoteness of field locations were also mentioned as other barriers to participation.
Policies and solutions
Training is often an integral part of energy access programmes, but greater efforts are needed to make them more accessible to women. Training sessions must be tailored and scheduled around women’s childcare responsibilities and be sensitive to mobility constraints, security concerns and social restrictions that may prohibit women from participating.
Dedicated financing schemes are particularly important if women are to play an active role in the off-grid renewables value chain (e.g., as technology distributors) and tap into the entire spectrum of opportunities created by modern energy access (e.g., investments in productive appliances). The Self-Employed Women’s Association in India, for instance, connects women to financing options through the Thrift and Credit Cooperative, providing affordable payment options so that women can invest in livelihood options, family education and household safety. SEWA also provides a special energy loan product and has set up a company that employs women to market, sell, install and service solar home lighting solutions that benefit over 20 000 people.
Opportunities and gaps will become evident if gender is mainstreamed at the level of energy access policies, programmes and projects. In 2013, the Economic Community of West African States established a programme to mainstream gender in the formulation of energy access policy and in the design and implementation of energy projects and programmes. A dedicated policy for mainstreaming gender in energy access, endorsed in 2015, aims to ensure that women are part of the solution and leverage their role as energy users, community members, business owners and policy makers.
Gender audits, as tools, can ensure due consideration of the known gender differences in household decision-making, preferences and priorities. These have been used in Botswana, India and Senegal, among other countries, to support the integration of gender into energy access projects. The socio-economic dividends of gender mainstreaming are immense; several examples covered in the report suggest improvements in women’s self-perception and empowerment within the community. In Indonesia, for instance, over 500 “wonder women” have been trained as social entrepreneurs, selling clean energy technologies that have reached over 250 000 people. It is estimated that around 20% of women became more empowered within their families – taking on a greater role in household decision making – and almost half of them perceived an improvement in their status.
Advancing equality and diversity in the energy sector is a compelling proposition rather than a zero-sum game. Establishing gender as a pillar of energy strategies at the national and global levels will produce a swifter and more-inclusive transition to renewable energy while accelerating the attainment of multiple Sustainable Development Goals.
 For the purposes of this report, gender refers to men and women.
SDG 7 aims to ensure universal access to affordable, reliable and modern energy services, with an emphasis on renewable energy. 1 Central to this goal is expanding the infrastructure and enhancing the technology for supplying energy in developing countries. Affordable and clean energy are crucial to the achievement of almost all of the Sustainable Development Goals. While progress towards SDG 7 has been made in recent years, it falls short of what will be needed to meet the targets for 2030. SDG 7 is further refined by targets that can be more readily translated into actions. These targets highlight the interconnected nature of the goals: For example, strategies to achieve the goal of Affordable and Clean Energy are intertwined with strategies that support SDG 3 (Good Health and Well-Being) and SDG 10 (Reduced Inequalities). Below are a series of synergies that can come from providing access to products, services and systems that address Affordable & Clean Energy.
Access to Safe, Affordable and Sustainable Transportation
According to the World Bank, transportation accounts for 23% of global energy related greenhouse gas emissions.2 High-carbon transport generates health, environmental, and economic losses associated with pollution as 70% of fuel energy is lost in engine and driveline inefficiencies.3 By 2030, there will be more than 1 billion additional people on earth, and aspirations for mobility will continue to rise. 4 Passenger traffic is expected to increase by about 50% while freight volume is expected to grow by more than 70% during that timeframe.5,6 If these increases rely on use of fossil fuels, the negative impacts on health, the environment and economies will be exacerbated. 7 Further, millions of people globally live in rural areas where there they often lack access to affordable (or any) transportation services,8 and in 2018 roughly 55.3% of the world’s population lived in urban areas. An additional two billion people are expected to move to cities by 2045, which will strain public transportation systems. Meeting the growing need for mobility in both rural and urban areas has the potential to improve people’s quality of life, as well as to reduce pollution via energy-efficient, affordable transportation. Urban mass transit systems and services need to be upgraded while rural transportation systems should be developed or improved.9, 10, 11, 12 Making transportation efficient, affordable and green will be essential in the fight to combat climate change. 13
Access to Adequate Housing and Living Conditions
Residential buildings account for 24% of energy consumption and 18% of CO2 emissions globally. Housing systems that are energy efficient and that use affordable, clean energy save costs and reduce air pollution.14 Current projections place the global housing deficit, especially for quality housing, at over 2 billion people by 2030. If new housing stock fails to be sustainable and energy efficient, cities and countries will be confronted with ever more dangerous energy consumption patterns. Well-designed and environmentally conscious housing development presents an opportunity to mitigate climate change. Planning of residential areas and thoughtful urban renewal, particularly focused on upgrading housing in heavily populated urban areas with substandard housing and informal settlements, can help reduce the carbon footprint of cities and the greenhouse gas emissions of the building sector.15
Access to Affordable, Sustainable and Modern Energy
Access to modern energy is fundamental for development and poverty reduction, yet many people, particularly in developing countries, struggle to obtain affordable, reliable, sustainable and modern energy resources to meet their increasing energy demand. Individuals who live in poverty and, consequently, poor housing disproportionately lack access to affordable clean energy services and clean cooking fuels.16, 17, 18, 19 Affordable and clean energy services are a crucial input to supporting the provision of basic needs such as food, lighting, use of appliances and water.20 Energy access policies and new technologies are steadily leading to progress, as the number of people without access to electricity fell below 1 billion in 2017.21 Despite these success stories, progress on providing electricity access remains uneven. The outlook for electrification shows that the world is not yet on track to achieve universal access by 2030.22 In 2016, 3 billion people, or over 40% of the world’s population, were still cooking with polluting fuels (e.g., coal or wood) and stoves, leading to high levels of household air pollution. The health and well-being of this population is adversely affected by the lack of clean cooking fuels. This is especially true for women and children, who are typically the main users of household energy. The solution is in transitioning to cleaner fuels and technologies, and improvements in stove efficiency.23, 24
SDG 7: References
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.
In our recent report Sustainable Protein: Investing for Impact at the Nexus of Environment, Human Health and Animal Welfare, we pointed out that in developed countries, diet-related health concerns and less- or no-meat lifestyles have sharply reduced consumption of red meat. Flexitarian, vegetarian and vegan preferences have been driven, in part, by animal welfare and climate change concerns.
Today, a flexitarian diet – one that doesn’t adhere to a specific eating style and may combine plant-based and meat-based dishes – is now practiced by 31% of Americans, with another 13% subscribing to a specific eating lifestyle such as veganism or vegetarianism. In the U.K., almost 13% of the population is now vegetarian or vegan, with a further 21% identifying as flexitarian, according to a 2018 survey of British consumers. Our report also highlighted a preference by consumers for fresh and organic products.
On February 21, Kraft Heinz announced that it was writing down the value of some of its best-known brands by $15.4 billion which, according to a Bloomberg article was “an acknowledgment that changing consumer tastes have destroyed the value of some of the company’s most iconic products.” Subsequently, the stock price of Kraft Heinz plunged 21%.
Another Bloomberg article observed that “all the old guards of the supermarket aisles are struggling as consumers opt for fresher, less-processed and more on-the-go food items from upstart businesses.” In our report, we pointed to rapid growth in the organic yogurt, almond milk and protein bar categories in recent years, with many of the leading companies being relatively young start-ups. While Kraft Heinz attempted to respond to these trends, its efforts haven’t been enough. As Bloomberg observed, the company “has tried to spruce up a tired suite of brands — from organic Capri Sun to natural Oscar Mayer hot dogs.”
Our report concluded that, reflecting the shift to sustainable protein, opportunities exist in alternative proteins, organic foods, new agricultural technologies, sustainably managed farmland, and sustainable fisheries and aquaculture.
 Kraft Heinz Falls Near Record Low on $15.4 Billion Writedown, 2019-02-22
 Kraft Heinz’s Financial Recipe Turns Sour, 2019-02-22
Advances in agricultural technology, changes in human diet, and rising awareness of the environmental destruction caused by factory farming are accelerating the rise of sustainable protein.
Investors can target a number of outcomes — access to a sustainable food supply, lower greenhouse gas emissions, more plentiful and cleaner water, and a reduction in animal cruelty — through sustainable protein related investments. Opportunities exist in alternative proteins, organic foods, new agricultural technologies, sustainably managed farmland, and sustainable fisheries and aquaculture.
In this report we outline how a confluence of behavioral, technological, and regulatory changes have fueled the trend toward sustainable protein; identify emerging developments in the “alternative protein” space; and highlight ways to consider sustainable protein investment across asset classes.
This article originally appeared in Investment News on December 13, 2018.
Sustainable and impact investors are set to intensify their decades-long support for action on climate change on the heels of a recent report from the Intergovernmental Panel on Climate Change and the Fourth National Climate Assessment, issued by the U.S. government.
The U.S. government notes that unless urgent action is taken, climate change could shrink the U.S. economy by hundreds of billions of dollars every year in direct costs. Consistent with these findings, the IPCC’s alarming (and unsurprising) conclusions are that urgent global economic transformation is needed to head off catastrophic damage to ecosystems, communities and economies beginning within a quarter century.
Many investors now understand that climate change is not merely an environmental issue but a material economic risk for long-term portfolios. However, investors should avoid a single-minded focus on climate change that ignores the relationship between ecosystems and human development.
The IPCC report stresses that an effective fight against climate change must include efforts to achieve sustainable development goals such as gender equality, the eradication of poverty, and food security.
In other words, how we fight climate change matters. Even the most optimistic scenarios will require substantial human adaptation to changed ecosystems, which will be especially challenging for poor or marginalized communities. Achieving sustainable development goals will strengthen the ability of poor communities to adapt to inevitable change and complement more direct efforts to mitigate climate change. However, these climate mitigation efforts by themselves may either help or hinder progress towards the sustainable development goals.
For example, mitigation strategies such as reforestation or biofuel development may reduce the land available for agriculture at a time when crop yields are already declining because of rising temperatures and water stress. The resulting increases in food prices have the effect of reducing buying power and possibly destabilizing civic and political cultures in developing countries.
Conversely, sustainable agricultural strategies, conducted with attention to social equity, can increase food security and counteract some of the negative effects of climate change on drinking water, biodiversity and income inequality, while reducing greenhouse gases associated with intensive farming practices.
The empowerment of women can also support and reinforce both climate change mitigation and adaptation. Improving the quality of cookstoves available to poor women has the direct effect of reducing fuel use and deforestation. It also reduces asthma rates, which improves educational outcomes, and empowers women by freeing them from the labor-intensive “drudgery” of traditional cooking methods.
Numerous studies have also shown that as women gain education and empowerment, they earn more income and often choose to have fewer children, which is associated with reduced poverty and lower greenhouse gas emissions.
The introduction of modern technologies such as cookstoves into poor households would have an undeniably positive effect on quality of life for the poor and the resilience of their communities. However, the resulting increase in the demand for energy could undermine the intended climate benefits unless these strategies are accompanied by investments in renewable energy and energy efficiency — both of which come with additional benefits for income and energy access.
These and many other examples demonstrate the need for a holistic understanding of the connection between issues of climate and human development. Yet much of the financial capital flowing into climate mitigation today is motivated solely by opportunities for financial return arising from new public policies and the dramatic improvement in renewable energy technology.
These flows are important for achieving global scale for environmental solutions. However, a lack of attention to the social dimension of investment decisions may create a blind spot for unintended consequences that counteract environmental benefits.
The insights of sustainable and impact investment offer an essential complement to mainstream financial analysis. Integrating environmental, social and economic concerns into investment analyses can yield a more nuanced understanding of the complex interactions between climate and society. As part of this analysis, a commitment to stakeholder engagement will help investors incorporate the perspectives of local communities who will be impacted by investment decisions — because, as the IPCC report notes, climate change will impact people differently depending on geography, income and culture.
So what can investors who are concerned about climate change do? First, their investment policy statements should explicitly incorporate both climate change and key related social issues, such as gender equity, poverty, food security, and health. Second, the evaluation of investments or investment strategies intended to address climate change should integrate an analysis of their impact on broader sustainable development goals. Third, investors should use their voice to ask companies, governments and financial markets how climate change and sustainable development is incorporated into policy, planning and performance measurement.
An effective response to climate change will require the mobilization of every resource available to society, including governments, business, and civil society. Given the unique power of financial markets, investors can contribute to a long-term solution or exacerbate existing problems. Sustainable and impact investors have an opportunity to influence the outcome, if they choose to take it.
One of the most significant legacies of the housing collapse, which triggered the Great Recession of 2008-11, was the undermining of confidence Americans had in the venerable single-family home. For generations, owning a single-family suburban home was a linchpin of most Americans’ retirement and savings strategies. The fracturing of that doctrine coincided with the demographic rise of the millennials into the housing market. These factors combined to shift capital flows to center-city rental housing at a pace city planners could only fantasize about for decades.
While this newfound prosperity in our urban centers is exciting news for policymakers long frustrated by the post-World War II decline of these downtowns, it has brought some unintended consequences. The pace of investment in these neighborhoods has driven up the cost of space for all property types at extraordinary rates. This has been good news for those of us in real estate with significant exposure to the affected markets; however, there is another side to that coin. For many residents and institutions that have historically been located in or near center-city neighborhoods, the market is now pushing them aside at alarming rates.
Continuum was formed in 1997 around the belief that the failed urban development policies of post-war America had caused intolerable long-term stresses on our center cities, their citizens and the broader regional environments. By the early 1990s, the complex set of regulations, tax subsidies and design doctrine that accumulated to drive the great American suburb had resulted in a systemic shift of investment capital away from center cities and their historic infrastructures to the green fields of these new suburban regional centers. Since 2010, however, center-city neighborhoods in all 30 of the largest U.S. metropolitan areas gained significant market share over their suburban counterparts. Gentrification is now the new crisis city leaders are urgently mobilizing resources around. Metro areas from Los Angeles to Denver are rushing to raise new tax dollars to provide more housing assistance to low- and median-income residents.
This abrupt shift in prosperity is having a broad range of unintended consequences. One particularly unexpected effect has been the backlash against artists and cultural enterprise spaces (such as art studios and galleries), which are now seen by some vulnerable communities as the tip of the spear for fresh waves of gentrification.
It is an ironic consequence given that during the decades of decline in American urban centers, employers moved out, retailers abandoned their downtown flagships, and even the churches relocated to new mega facilities on the urban edge, but artists and the institutions that support them steadfastly remained committed to the urban cores. In many situations the leadership of the signature art museums and performing arts organizations became essential drivers of the booster network for these center cities. Their employees also found reasonably priced housing in city neighborhoods and were engaged in neighborhood activism. Over the years Continuum has been a significant supporter of these institutions—and we are now confronting the realization that our business success is severely hampering their ability to continue to prosper.
Supporting the Link Between Culture and Neighborhood Stability
From our early days as a mission-focused development firm, we saw an essential link between a robust cultural economy, neighborhood stability, and real estate value. One of our earliest projects included a new Museum of Contemporary Art for the City of Denver. My wife and I donated a piece of land to the Museum in an up-and-coming neighborhood, around which Continuum went on to develop multiple projects. In the early 2000s we funded a new contemporary art space called the Lab at Belmar, embedded in the center of a 100-acre neighborhood we transformed from a broken regional shopping mall to a new 30-block precinct in Lakewood, Colorado.
As an organization we continue to find ways to support our local arts communities; for example, we recently opened the new Hotel Born at Union Station in Denver and commissioned more than 700 original works of art from Denver artists for the building.
None of these efforts is enough, however, to stem the generation-long effects which will result if we as a society allow the diasporization of these important creative thinkers and enterprises within our communities. We at Continuum think of ourselves as human ecologists and understand the value that diverse and politically courageous voices bring to the governance of our center cities. We are committed as an enterprise to working towards more equitable housing solutions for all constituencies in our society, but we see the challenge for artists as becoming particularly complex. Over the last couple of years, this issue hit a flash point in the Boyle Heights neighborhood in Los Angeles, where artists and gallerists were aggressively harassed when they entered that neighborhood in pursuit of more affordable spaces. Some members of this historically Latino working-class neighborhood decided they needed to send a clear message to the artists, some of whom ultimately closed their studios and galleries.
The link between neighborhoods rich in cultural enterprise and rising real estate values has become a foundational principle of real estate investing. New arts districts spring up in rural towns from Oregon to Georgia; suburban communities in Kansas City are onto the trend as well. The strategy has become a key economic revitalization tool for any aspirational community in search of a marketing message. The challenge for center cities is that the romantic notion of the bohemian creative seeking out a cheap space in an overlooked ghetto is a trite memory of an era gone by. Maintaining a healthy population of creatives is something no big city mayor or civic booster can take for granted. And now, instead of the artists living peacefully amongst an underserved population linked in common neighborhood advocacy, they are viewed by those same communities as the leading edge of the bourgeoisie who will follow.
Finding New Solutions for Coexistence
Over the past 18 months, Continuum has been doing research on new ownership vehicles for real estate projects that are designed to create long-term rent security for their occupants. We are interested in establishing a new capital platform that can bring a more holistic solution to these complex societal challenges. We believe the existing capital and ownership vehicles driving this current transformation of our communities need to be reconsidered in a manner which allows more of the wealth created by the escalating values of these neighborhoods to remain in the local communities. It is our hope that through these new vehicles we can offer long-term neighborhood stability both to the artists and to the historical residents.
We expect to launch our first projects under this model in early 2019. Inherent in this model is a mechanism which would slow the rate of rent growth in high-value areas in perpetuity. The enterprises will be funded with tax-exempt debt instruments and include investments by a network of social impact investors. While our initial focus will be for members of our creative communities, over time we expect this vehicle can be extended to address other key populations such as teachers and other essential service providers in our cities.
Cities are dynamic ecologies. Stresses and opportunities shift constantly. The physical framework of our cities has deep impact, not only on the environmental footprint of our habitat but also on the social cohesion of our populations. We believe it is essential that our settlements are conceived and regulated in ways that ensure all its residents have reasonable access to jobs, education and cultural enrichment in order to maintain a healthy and durable community. It is our belief that the private sector should lead the path to these outcomes–after all, our investments depend on healthy and resilient neighborhoods to grow in value.
Photo: ©Shifting Narrative/Shutterstock
 Foot Traffic Ahead 2016 – The Center for Real Estate and Urban Analysis at George Washington University.
This is an excerpt from Cornerstone Capital’s report Creativity & The Arts: An Emerging Impact Investing Theme.
Note: Certain contributors to this report may represent asset managers or specific investment opportunities. Their inclusion is not intended to be, nor should it be construed, as a recommendation or endorsement of their products or services by Cornerstone Capital Inc. The views expressed by external contributors do not necessarily reflect those of Cornerstone Capital Inc.
“Creativity & The Arts” is a relatively new theme for impact investors to consider, despite being embedded in every cultural and technological advancement that has occurred since the dawn of civilization. As illustrated in this report, many impact-focused development initiatives integrate arts and creative endeavors, even when not defined as such. This highlights the importance of establishing common frameworks of understanding when considering impact investing.
The UN Sustainable Development Goals (SDGs), though not originally designed for investment or philanthropic applications, have become an important frame of reference for sustainable and impact investors. We at Cornerstone Capital Group have been developing our own framework for supporting investors to incorporate SDGs into their investment process. Our efforts have focused on:
- identifying key SDG areas of interest for investors to target for their investment policy statements;
- developing an investment strategy due diligence process that assesses how proposed asset managers address various SDGs in their analyses and security selection; and, ultimately,
- creating a framework to measure and report on progress towards achieving the SDGs.
One challenge we face in considering the SDGs in an investment context is their interrelated nature. Performance or improvement in any one SDG will likely be highly correlated with performance across a range of SDGs. Similarly, one can make a case that “arts and creativity” are intertwined with almost every SDG.
Of particular relevance to this report are SDG 5: Gender Equality and SDG 10: Reduced Inequalities. Several of our contributors specifically reference the ways in which artists and creatives who are women and/or people of color and/or LGBTQ can be nourished and supported through affordable live/work art spaces. These are tangible examples of how art and creativity can be considered in the context of the SDGs – and specific investment opportunities.
As an example of the interrelated nature of the SDGs, affordable housing in a broader sense is responsive to SDG 11: Sustainable Cities and Communities. One can target SDG 11 as a matter of personal interest, while simultaneously considering SDG 5 and SDG 10, using art and creativity to connect the three.
In addition to creative culture serving to connect various impact investment goals—and more important—it is a bridge-builder between and among cultures. The arts can help communicate shared human experience in ways that transcend language and other societal structures and social norms. The arts offer amazing ingenuity, fresh and unique perspectives, and uses of media and tools from across every corner of the globe and every culture.
With this report, we hope to convey the numerous ways in which a focus on the arts and creativity can reveal meaningful and impactful investment opportunities. We can readily identify opportunities not only to support artists and creatives themselves, but also the spaces in which they live and work, the positive effects that they can bring to the communities in which their work is made and shown, shared experiences and bridging of cultures and communities, and improvements in the overall human condition.
At Cornerstone, we think of impact investment in a total portfolio context. This report shares perspectives from asset owners who are interested to find a fiduciary-level investment perspective on this issue. We hear from entrepreneurs using art and creativity as a driver of value in their business models. We also feature several managers currently offering diversified managed investment strategies in the private equity and fixed income asset classes, as examples of the creative thinking occurring in the finance arena. As the landscape of such opportunities continues to develop, Cornerstone will thoughtfully review the investment and impact goals of all such strategies.
Creativity and the arts are critical elements to finding the solutions to the systemic challenges that we face today. For those ready to participate in creating a better world through impact investing, we welcome the inclusion of arts and creativity as guideposts to our investment process, and an important new tool to creating the more sustainable world we want to build.
Can investors be confident that International Oil Companies (IOCs) are sustainable for the long term? Technological, policy and market trends intended to mitigate climate change threaten permanent displacement of oil demand. The long-term investments of oil companies may prove to be liabilities if future demand falls short of expectations. The potential implications for investors are significant, but uncertain since the likelihood and impact of these trends are difficult to forecast.
In uncertain circumstances, business strategies and practices that historically have served shareholders well may become a hindrance to adapting to new operating environments. The primary risk for oil companies is an inability to adapt to scenarios that fall outside of historical norms.
Given the difficulty of making accurate forecasts in an uncertain environment, the most useful current signal of how well a company is positioned for the long term is its corporate governance. While there is no doubt that oil companies are preparing for the future, the question for shareholders is whether the companies are envisioning a future that looks much like the present or preparing to adapt to societal change that could result in an entirely new operating environment.
As we discussed in our June 2017 piece, “Making Their Voices Heard: Shareholders Vote for Greater Transparency on Climate Change,” a majority of shareholders at two IOCs and more than 40% at a few others supported proposals asking companies to disclose an analysis of the impact on their businesses of a global shift to a “low carbon” economy – one in which greenhouse gas emissions are sharply curtailed in order to limit global warming to 2 degrees Celsius. Some companies, such as Shell, Statoil and Total, have done so. Within the past few days, Exxon Mobil has promised to produce a report as well.
While these analyses are important, we believe oil company shareholders should be primarily concerned with whether the company has adopted practices for governance, disclosure and engagement that indicate flexibility and resilience in the face of secular decline for its primary product.
We explore six key questions to guide investors as they engage with oil companies and review upcoming climate risk reports:
- Does the company’s reporting include a scenario that envisions disruption to its own production?
- How transparent is the company regarding resilience of its resource base to secular price changes, both in aggregate and by asset type?
- Does the company’s strategy provide a realistic path to meeting investor expectations in a low carbon scenario?
- Is the company’s board composition and process sufficient to execute its strategy in the case of disruption?
- Would executive compensation plans align shareholders and managers in a disruption scenario?
- What effect does the low carbon strategy have on the company’s stakeholder relationships?
Download the full report here.
John K.S. Wilson is the Head of Corporate Governance, Engagement & Research at Cornerstone Capital Group. He leads a multidisciplinary team that publishes investment research integrating Environmental, Social and Governance (ESG) issues into thematic equity research and manager due diligence. He also writes and presents widely about the relevance of corporate governance and sustainability to investment performance for academic, foundations, corporate and investor audiences. John has nearly two decades of experience in sustainable investing and corporate governance.
Editor’s Note: The post was originally published on BSR’s website on November 7, and is republished with permission. See original post here. We continue to track issues of transparency and governance in the extractives sector following our flagship report Extractive Company Values in late 2016.
The U.S. government’s decision to withdraw from the Extractives Industry Transparency Initiative (EITI) landed with the thud of inevitability in early November. The stated explanation for the decision—which affirms a commitment to EITI principles and focuses on unique aspects of the U.S. tax system—has little credibility, given the current state of play in the anti-corruption field.
While the U.S. policy environment may be shifting, extractives companies would nevertheless be well advised to continue to pursue holistic, innovative approaches to stakeholder engagement, strategy, and values in order to restore and maintain the public trust, which is increasingly essential to protecting their reputations and licenses to operate.
The EITI was created in 2002 as a joint effort by government, business, and civil society to help citizens of resource-rich countries hold their governments accountable. EITI aims to provide the public with knowledge of exactly how much money oil, gas, and mining companies pay to governments in taxes, royalties, and other fees.
Its essential goal, however, is the protection and support of fundamental human and civic rights. The premise? With access to this information, citizens can try to ensure that these vital financial resources are used for public health, education, and infrastructure, rather than to enrich powerful figures linked to national governance.
Corruption used to be viewed as a problem afflicting developing countries, but this is no longer the case. The release of the Paradise Papers by the International Consortium of Investigative Journalists has picked up and amplified Lux Leaks, the Panama Papers, and other whistleblowing efforts. Just as money launderers can easily buy property in New York and San Francisco, offshore tax havens are used by politicians, the children of dictators, and some of our most prestigious multinationals.
Transparency activists immediately slammed the U.S. decision on EITI, emphasizing that traditionally recalcitrant Russian and Chinese energy companies now adhere to higher disclosure standards than the U.S. demands of American enterprises. America has already stepped away from its goal of being a role model on human rights, climate justice, transparency, and international cooperation under the current administration. The turn away from EITI is more of the same.
Of greater interest than Washington’s isolationist agenda is what energy and extractives companies might gain from the U.S. decision to stall on transparency regulations. The short answer is: not much. But responses to the EITI debate provide fresh evidence of a widening split over how oil and gas majors regard the sector’s long-term future, as well as their relationship with investors and the public.
Those companies that have made corporate commitments to meet the EITI’s standards of payment transparency include BP, Repsol, Shell, and Statoil. It is no coincidence that these are the very companies that have also chosen openly to embrace the Paris climate agreement while touting their investments in gas and renewables. Exxon Mobil, too, publicly supported the Paris Agreement in the wake of Donald Trump’s election.
The big strategic distinction in the oil industry is no longer over whether to acknowledge and plan for the existential challenges facing the sector; it is about how transparent companies ought to be while the energy transition proceeds. To this end, two strategies have emerged.
The first has been to acknowledge the science of climate change and the problematic history of the sector’s relationship with the government, and then to model best practice on disclosure to regain trust. Some companies, mainly based in Europe, are making headway in this direction—with the understanding that, when it comes to transparency, the horse long ago bolted from the stable. Because companies today must act as if everything they say or do might become public, disclosure has become the optimal approach to issues like payments to governments and political candidates, plans for stranded assets, or strategies to meet a low-carbon future.
The second option has been to invest in the carbon transition and support transparency aspirations publicly while privately obstructing and stalling specific regulations and disclosure efforts for as long as possible. This approach may seem foolish to observers, but it buys some time for big investors and incumbents of the C-suite, who seem to think they might squeak through to retirement before the deluge strikes.
Oil and gas companies are perfectly aware of the deep deficit of trust. Some corporations seem to have concluded that efforts to move beyond a defensive public relations stance are destined to fail; indeed, the reputational benefits accruing from a more progressive approach have been mixed. So, with much of the debate polarized and entrenched and no clear path to public approval, some companies are retreating to the practices of habit as they wait to be dragged into the present after all other options have been exhausted.
With traditional approaches to managing corporate reputation no longer fit for purpose, companies need to devise strategies that extend far beyond reactive communication and public relations. Those corporations that hope to be considered innovative will need to embrace a holistic approach to stakeholder engagement, strategy, and values that prioritizes the importance of restoring trust, regardless of whether public policy requires them to do so.
Alison Taylor is Director, Sustainability Management, at BSR, a global nonprofit business network and consultancy dedicated to sustainability. Alison leads BSR’s sustainability management practice and also works closely with energy and extractives member companies. She focuses on approaches to sustainability through risk management, strategy, stakeholder engagement, transparency, ethics and governance, and organizational change.
On March 1 Cornerstone hosted the first of in a new series of Access & Insight events, a webinar titled “Climate Investing in 2017: What Can Investors Do Now?” Our Sebastian Vanderzeil and Craig Metrick were joined by William Page, portfolio manager at Essex Investment Management, for a discussion centering on:
- Climate realities and responses
- The transition to clean power
- Infrastructure and environmental investing
- Different approaches and asset classes available for tacking the issues
Cornerstone Capital Investment Advisory (CCIA) Chief Investment Officer Phil Kirshman lent his insights into investment performance, and CCIA Managing Director Jan Morgan fielded questions from attendees.
The genesis of the webinar was a recent Cornerstone research report, “Climate Investing in 2017,” also authored by Sebastian and Craig. The report addresses the imperative for an effective response to climate change following the hottest year on record. The team writes, “Climate investing faces risks in 2017, particularly from the incoming US administration, but nuanced opportunities exist for positive environmental and social impact coupled with attractive potential returns.”