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.
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.
Human activities are causing a climate crisis, which is increasingly responsible for pushing various species of animals and plants closer to the edge of global extinction. These include “keystone species” that have disproportionately large impacts on their natural environment.
To understand the complexities, we conducted extensive readings of scientific journals and spoke with a wide range of experts, including apiarists (bees), botanists (plant science), herpetologists (amphibians and reptiles), and ornithologists (birds).
Modern extinction has been occurring at an accelerating rate. It’s estimated that, compared to pre human levels, modern extinction rates for all species have been 100 to 1,000 times greater. We highlight ten keystone species, two of which are plants, that are being pushed closer to the edge of global extinction by climate change.
Some investment management firms understand the need to focus on conservation and animal welfare, which, in turn, will contribute to the preservation of various keystone species. We highlight targeted thematic funds as well as ways to promote animal welfare indirectly through a focus on aligning investments to the UN Sustainable Development Goals.
Download the full report Fighting the Sixth Mass Extinction.
SDG 14: Life Below Water focuses on the critical role played by oceans, along with coastal and marine resources, in contributing to human well-being as well as economic opportunity. The oceans provide food for the world’s growing population, and our rainwater and drinking water are ultimately provided and regulated by the sea. However, ocean health and marine life are threatened by overfishing, pollution and acidification. SDG 14 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 support Life Below Water are intertwined with strategies that support SDG 3 (Good Health and Well Being), SDG 10 (Reduced Inequalities), and SDG 8 (Decent Work and Economic Growth) – all while tackling climate change and working to preserve our oceans and forests. Below are a series of synergies that can come from providing access to products, services and systems that address Life Below Water.
Invest in Access to Sustainable Sources of Food and Nutrition
More than 3 billion people depend on the oceans as their primary source of protein1 making oceans the world’s largest protein source. Fish accounts for 17% of the global population’s intake of animal protein.2 Sustainable fishing practices, including responsible fisheries and aquaculture, offer opportunities to reduce hunger and improve nutrition. 3 According to the Food and Agriculture Organization (FAO) of the United Nations, aquaculture is the fastest-growing food sector and has the potential to produce the fish needed to help meet the demands of a growing population.4 The FAO forecasts that almost three-quarters of the growth in demand for fish between 2017 and 2026 will come from Asian countries with rapidly growing populations. 5 The global share of marine fish stocks that are within biologically sustainable levels declined from 90% in 1974 to 69% in 2013.6 Marine protected areas need to be effectively managed and well-resourced, and regulations need to be put in place to reduce overfishing.7 As of January 2018, just 16% (or approximately 22 million square kilometers) of the marine waters under national jurisdiction—i.e., 0 to 200 nautical miles from shore—were protected.8
Invest in Access to CleanWater, Sanitation and Hygiene
Our rainwater and drinking water are ultimately provided and regulated by the sea.9 Approximately 70% of Earth’s surface is covered in ocean water. When water at the ocean’s surface is heated by the sun it gains energy. With enough energy, the molecules of liquid water change into water vapor and move into the air. This process is called evaporation. 10 Rising temperatures will intensify the earth’s water cycle, increasing evaporation. Increased evaporation will result in more storms, but also contribute to drying over some land areas. As a result, storm-affected areas are likely to experience increases in precipitation and increased risk of flooding, while areas located far away from storm tracks are likely to experience less precipitation and increased risk of drought. 11
SDG 14: 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.
“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.
We recently had the pleasure of hosting the webinar “Oceans in Peril: What Can Investors Do?”
Craig Metrick, Managing Director, Institutional Consulting & Research for Cornerstone, was joined by ocean health expert Karen Sack of Ocean Unite; Rolando Morillo of Rockefeller & Co, who is responsible for identifying and supporting the management of public equity investments for the Rockefeller Ocean Strategy; and Jason Scott, Co-Managing Partner of Encourage Capital, which specializes in investments to “solve critical environmental and social problems.”
The panelists engaged in a wide-ranging discussion of major ocean health challenges and ways in which investors can deploy their capital toward solutions.