Forests are an important biological resource with a critical role to play in carbon sequestration. In this webinar replay, Cornerstone CEO Erika Karp talks with Bettina von Hagen, CEO of EFM, which specializes in implementing ecological forestry principles within an investment context. They discuss the role of forestry investing in limiting global warming, potential risks from timber harvesting and how to mitigate them, and the potential for investments to foster rural and tribal economic development in the Pacific Northwest. Erika and Bettina are joined by Cornerstone’s Jennifer Leonard, Executive Director of Market Strategy & Manager Research.

During the webinar we received several questions that our speakers couldn’t get to during the session. The team at EFM have kindly provided answers below.

How can we incentive our communities to plant more trees and how can we reinforce ‘greening’ of our urban areas?

Supporting carbon policies and markets that finance and reward reforestation and forest protection is one of the most powerful mechanisms to incentivize tree planting  The California regulatory carbon market has spurred significant reforestation projects, especially in the Mississippi Delta.  There are also emerging carbon protocols for urban forests.  In addition to carbon markets, land use and development codes that include trees and other natural infrastructure are also significant catalysts for increasing urban tree cover.

In terms of urban forestry, there are local non-profits that advocate and take action on urban greening and advocate for sound urban policies to preserve trees and pay for ecosystem services generated by our urban tree canopy. For example, in EFM’s Portland location, Friend of the Trees is one option.

How does this intersect with the 1 Trillion Trees project?

EFM’s actions to create greater value in native forests, increase standing volume,  and to keep forests as forests, support the goals of the Trillion Trees project.  While our goals are similar, we differ in that The Trillion Trees is a non-profit project that focuses on the important work of forest landscape restoration globally, while EFM is a for-profit business that demonstrates the commercial viability of natural climate solutions to generate returns for investors and focuses on the carbon-rich forests of the western U.S. In the context of our investments, we restore and protect forested landscapes for the benefit of local communities and generate positive biodiversity, water and climate outcomes.

Do any of the panel members have high level product development/product approval contacts at governmental agencies?

At EFM our team is dedicated to developing relationships with the USFS and other governmental agencies that are focused on land acquisition and restoration in the Western US. We work closely with both federal and state forest agencies, as well as the forest products industry and nonprofits, on products that contribute to healthy and intact forests and restoration.  There are a number of products – existing and new – derived from wood fiber and other forest resources that support forest restoration and forest health, from biofuel to cross-laminated timber to biochar, and we are engaged with a number of partners on further developing and building supply networks for these products.

What is the experience of EFM in implementing forestry management strategies in national/state/local open space or urban forested lands?

While EFM focuses on the acquisition and management of private lands, many of our forests are designated to be acquired by public owners – State, Federal and Local. We are currently working on enabling several community forests, and are engaged in a few federal land sales. After decades of efforts through multiple administrations, the Great American Outdoors Act was passed by Congress and signed into law on August 4, 2020.  This bill has two components – funding $9.5 billion of delayed maintenance for national parks and other federal lands and, very significantly for EFM’s strategy – fully funding the Land and Water Conservation Fund (LWCF) at $900 million per year in perpetuity.  The LWCF is the source used by the US Forest Service, national parks, and other federal land agencies to acquire land for recreation and conservation.  It is relevant to our Funds’ strategy as there are properties in the portfolio that we want to sell to federal agencies as part of the long-term ecological uplift plan for the property.  In addition, many of our forests are located adjacent to federal, state and other public forests.  We work collaboratively with these public landowners on forest health, fire risk reduction, and improving public access to forestlands.

Is there an intention to invest in forests in Brazil?

EFM’s current funds are focused on restoring the natural forests of the western United States.  EFM does offer natural climate solutions advisory services across North and South America and Brazil presents an interesting opportunity for climate-smart forestry investments. We are able to discuss specific opportunities on a one-on-one basis based on desired investor outcomes.

What is Bettina’s view on how to handle invasive species such as the ash borer in the context of sustainable forestry?

There are a host of both introduced and native pest species that pose a risk to forests, from introduced species like the ash borer to native pests like bark beetles and Swiss needle cast (caused by a fungal pathogen, which, despite its name, is native to the western US).  While introduced pests are uniquely troublesome as there are (at least initially) no established predators or controls, native pests can also become invasive in the right conditions. The best defense against pests, whether introduced or native, is to foster a healthy, structurally complex, species-diverse forest.  Pests thrive on same-age plantations and on trees weakened by excessive density and competition.  Active management also plays a role, by immediately removing pest-affected trees and taking appropriate control measures.  In all cases,  a holistic perspective is helpful, including tolerance for a background level of pests that may be an important part of the food chain and creation of habitat such as standing dead trees that are so critical for nesting and foraging habitat for hundreds of species.

This is not to minimize the seriousness of introduced aggressive invasive species, where a public-private mobilization of active prevention and control measures is called for.

In terms of introduced tree species, forest health is seriously compromised when non-native species become established and aggressively expand into native forests. Invasive species can persist for decades and may drive out native species, reduce wildlife habitat, and alter soil moisture regimes. Our policies generally include:

How do you engage with those who have had a long history of resisting forest management?

We believe that timberland investing has changed and in today’s market requires a differentiated approach to investing, one that includes the kind of climate-smart forestry that creates value for investors, stores carbon and helps mitigate the impact of climate change. Since 2004 EFM has been developing climate-smart approaches to natural forest management that are the keys to unlocking value in a carbon-constrained future. Our approach allows us to create value beyond producing logs and wood fiber, including improved carbon storage, habitat, soil formation, climate regulation, and water storage and purification. Additional benefits include community enhancement by creating locally based employment opportunities alongside the economic contributions of timber harvests and forest management and restoration activities.

How do you factor the risk of value destruction from wildfires that might start elsewhere then encroach on your properties?

Fire and weather events (such as high winds) are risks inherent to forestland investment and management and can be part of the natural cycle of renewal and regeneration for natural forests. Fire incidence can be infrequent to frequent depending on the forest type but is generally increasing as a result of climate change.  EFM moderates fire risk through the development of a detailed fire plan for each property, coordination with agencies and neighboring land owners on early detection and fire suppression, joining land-owner collaboratives that detect and suppress fire and through silvicultural treatments such as thinning and introducing physical fire breaks, all of which substantially reduce fire risk.  We primarily self-insure through geographic diversification which is weighted (by value) towards the coastal, temperate region. This region is very wet, and the incidence of historical fires is so low that commercial insurance is not efficient given the cost of insurance and the potential incidence of loss from fire.  However, we do seek insurance (although it is not consistently available) for properties that lie in drier regions where the incidence of fire is higher.   Finally, should a fire occur in a merchantable stand of timber, generally 70-80% of the timber value of the merchantable stands can be captured through salvage harvesting in the first two years after a fire.  With regard to fire risk from neighboring properties, one of our strategies is to create a shaded fuel break along our property borders.  These fuel breaks provide a place to stop or slow down a fire that starts on an adjoining property, and is usually built next to a road that provides access for fire suppression.



The climate crisis is fueling a human health emergency. Numerous climate-sensitive health risks are scientifically established:

The human and economic costs of these increased risks to health are potentially enormous. The current coronavirus pandemic is just one stark reminder of the toll a disaster can take on society. Climate change has become a determining factor in the likely health outcomes for populations in a variety of locations and socioeconomic groups.

From an investment perspective, assessing portfolio risk from climate change has become critical. How are sectors, regions and companies responding to current threats? What preparations are they making for future extreme weather events or infectious disease outbreaks in terms of supporting their employees, customers and other stakeholders (and, of course, protecting their bottom line)? Institutional investors are increasingly considering such analysis as part of their fiduciary duty to clients and beneficiaries – and those who are not, we would argue, are not doing their jobs properly.

In this report, we discuss the relationship between climate change, socioeconomic status and health. We highlight the primary categories of climate impact, the populations most affected, and how investors may play a role in funding solutions.

In outlining potential investment solutions, we take a holistic approach given the interconnectedness of contributing factors.  We focus on investment strategies that address specific climate-related interventions. Ultimately, however, solving the root causes of climate change and the subsequent effects on human health will require a comprehensive approach, one that considers the interplay of relevant issues: health, climate, transportation, education, financial stability, among others.

Download Climate Determinants – Human Health

Please see our report Climate Determinants — Financial Services: Transformative risks for the financial sector, governments and consumers

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.

Agriculture sits at the nexus of some of the world’s most pressing challenges: climate change, food security and nutrition, water and soil quality, biodiversity and sustainable livelihoods. It is clear that business as usual is no longer an option.
Recently we hosted a discussion with Dr. Sally Uren, OBE, Chief Executive Officer of Forum for the Future. (We are pleased to note that Sally is also a member of Cornerstone’s Global Advisory Council.) Forum for the Future is a leading international non-profit working with business, government and civil society to solve complex sustainability challenges. The organization recently released a compelling report, Growing Our Future: Scaling Regenerative Agriculture in the United States of America. The report’s central premise is, “While progress towards regenerative agriculture in the U.S. has accelerated over the last five years, there are significant barriers holding us back. What are they? And how can we overcome them?”
Sally was joined by Cornerstone’s Chief Impact Strategist, Katherine Pease, who addressed ways in which investors can fuel growth in regenerative ag practices, and Cornerstone Founder & CEO, Erika Karp, who moderated the session.

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

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 15 aims to ensure and enhance the health of earth’s terrestrial ecosystems by encouraging sustainable land use and land protection. The past decades have seen a rise in challenges to this goal in the form of global deforestation and the loss of biodiversity. A deteriorating environment undermines the livelihoods of millions of people who no longer benefit from reliable sources of food, water and countless other services provided by healthy ecosystems. Fortunately, progress can be made through smarter development planning and reducing practices that pollute air and water.

SDG 15 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 that address SDG 15 also support SDG 6 (Clean Water and Sanitation) and SDG 7 (Affordable and Clean Energy).

Below are a series of synergies that can come from providing access to products, services and systems that address Life on Land.

Invest in Access to Clean Water, Sanitation and Hygiene

Freshwater ecosystems are undergoing some of the highest rates of biodiversity loss of all biomes, and are home to the highest number of species threatened by extinction.1 The chief threat is growing water contamination by humans in the form of excessive nutrients, sediments, chemicals,2 and more recently, microplastics.3 This is especially a problem in Africa, Asia, and Latin America, where water pollution has been getting worse over the past three decades.4 All of these pollutants have the ability to harm or kill the organisms that ingest them.5 To preserve the incredible biodiversity that freshwater supports, access to clean water for terrestrial life must be ensured, and these trends must be reversed.

Learn More About Investing in Solutions for Life on Land

Invest in Access to Clean Air

Land ecosystems suffer a range of impacts from poor air quality. Sulphur, nitrogen, and ozone emissions are the main culprits, damaging plant leaves and contributing to the acidification of surface water and soils when it falls to the ground as acid rain.6, 7 Air pollution also cause eutrophication- the process by which too many nutrients, such as nitrogen, accumulate in water bodies, leading to unnatural algae growth and a depletion of oxygen and light for other species.8 Humans are the main contributors to the excessive levels of these pollutants, so rich opportunities exist to encourage practices that translate to cleaner air for life on land to thrive.

Invest in Access to Adequate Housing & Living Conditions

As the global population grows, so will the need for new housing. This is especially true for cities, which are expanding in area at twice the rate of urban population growth.9 This trend threatens to degrade habitats and accelerate the loss of biomass as more land is developed.10 Beyond cities, rural residential development has been linked to decreases in wildlife, landscape health, and water quality as forests are fragmented and as runoff from contaminants such as fertilizer and pesticides increases.11 Poor-quality housing conditions may also lead to habitat degradation when there are no systems in place to handle refuse responsibly.12 The worst of these consequences can be avoided, however, with access to sustainable, adequate, ecologically conscious housing, with a focus on density to reduce space requirements.13

Learn More About Investing in Solutions for Life on Land

SDG 15: References

2 Freshwater biodiversity conservation: recent progress and future challenges. By: Strayer, David L.; Dudgeon, David. JOURNAL OF THE NORTH AMERICAN BENTHOLOGICAL SOCIETY Volume: 29 Issue: 1 Pages: 344-358 MAR 2010
3 Microplastics in freshwater systems: A review of the emerging threats, identification of knowledge gaps and prioritisation of research needs. 2015. Water Research. 75: 63-82. By:Eerkes-Medrano, D (Eerkes-Medrano, Dafne)[ 1 ] ; Thompson, RC (Thompson, Richard C.)[ 2 ] ; Aldridge, DC (Aldridge, David C.)[ 1 ]
4 World Water Development Report 2018. UN Water
5 Freshwater biodiversity conservation: recent progress and future challenges. By: Strayer, David L.; Dudgeon, David. JOURNAL OF THE NORTH AMERICAN BENTHOLOGICAL SOCIETY Volume: 29 Issue: 1 Pages: 344-358 MAR 2010.
7 Effects of Air Pollution on Ecosystems and Biological Diversity in the Eastern United States Gary M. Lovett, Timothy H. Tear, David C. Evers, Stuart E.G. Findlay, B. Jack Cosby, Judy K. Dunscomb, Charles T. Driscoll,and Kathleen C. Weathers. 2009. The Year in Ecology and Conservation Biology.
9 Angel, S., J. Parent, D.L. Civco, A. Blei and D. Potere (2011). The dimensions of global urban expansion: Estimates and projections for all countries, 2000-2050. Progress in Planning Vol. 75, pp. 53-107
10 Seto, K., B. Guneralp and L.R. Hutyra (2012). Global forecasts of urban expansion to 2030 and direct impacts on biodiversity and carbon pools. PNAS Vol. 109, no. 40, pp. 16083-16088.
11 Private Forests, Public Benefits: Increased Housing Density and Other Pressures on Private Forest Contributions. 2009.
Susan M. Stein, Ronald E. McRoberts, Lisa G. Mahal, Mary A. Carr, Ralph J. Alig, Sara J. Comas, David M. Theobald, and Amanda Cundiff
12 The Challenge of Slums: Global Report on Human Settlements. Revised 2010. UN Habitat
13 Angel, S., J. Parent, D.L. Civco, A. Blei and D. Potere (2011). The dimensions of global urban expansion: Estimates and projections for all countries, 2000-2050. Progress in Planning Vol. 75, pp. 53-107.

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[1] 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[2] 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.

[1] Kraft Heinz Falls Near Record Low on $15.4 Billion Writedown, 2019-02-22

[2] 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.

Download Sustainable Protein: Investing for Impact at the Nexus of Environment, Human Health and Animal Welfare

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:

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.

As part of Cornerstone’s ongoing research on antibiotics and livestock production, we attended the FAIRR Initiative’s event on antibiotic resistance and investment risk in New York City on Monday, March 20, at BlackRock’s office. (FAIRR, or Farm Animal Investment Risk and Return, is an investor initiative that aims to put factory farming on the ESG agenda.)

The event was well attended by a mix of investors, industry participants, and NGOs. Dr. Lance Price of the Milken Institute School of Global Health gave the keynote presentation. Erik Olson, Director of the Health Program at the Natural Resources Defense Council (NRDC), provided a policy and market trends update. The event closed with a session with panelists from Aviva Investors, Green Century Capital Management, Chipotle, and Perdue. Attendees who were new to the topic received a useful overview, while those that have been following the issue were presented with valuable perspective.

With increasing global demand for animal protein, traditional farming methods are being replaced by a new industrial model – the factory farm. While this new method has increased food production and lowered prices for consumers, antibiotics are being utilized more in the process. One speaker said Pew Charitable Trust data shows that approximately 80% of all antibiotics used in the US are fed to farm animals. We note that the Animal Health Institute refutes this figure, saying it was deduced by comparing two data sets that are not comparable. While the number may be debatable, our research indicates that the proliferation of antibiotic resistance is primarily attributed to the misuse and overuse of the drugs in human medicine and animal agriculture. (See our October 2015 report Antibiotics and Animal Health: Value-Chain Implications in the US, as well as subsequent updates.)

One of the most concerning developments is the discovery of the mcr-1 gene on Chinese pig farms and on meat in supermarkets. This single, easily spreadable gene makes the bacteria that carry it resistant to colistin, our “antibiotic of last resort”. The scientific report that originally reported this issue also presented evidence that the mcr-1 gene has already been transferred from pigs to humans.

From a regulatory standpoint, Maryland and Oregon are considering legislation like California’s SB 27, a bill limiting the use of medically important antibiotics (MIAs) in animal agriculture. In addition to prohibiting antibiotics for growth promotion, SB 27 prohibits the use of MIAs in a “regular pattern” (i.e., for growth promotion and disease prevention), thus going beyond federal policy outlined in the FDA’s Guidance for Industry (GFI) 213. This addresses concerns that animal producers may use antibiotics for growth promotion under the guise of disease prevention. As we have discussed in prior research, the potential for more restrictive regulation (as seen with SB 27) and shifting consumer demand poses a risk to antibiotics sales for animal health companies.

A discussion of company policies on antibiotic use at various points in the value chain provided valuable insight. One speaker said that in 2012 less than 10% of chicken was raised with no routine antibiotics. In 2015, that number had grown to 45%, illustrating the speed at which industry is reacting to changing consumer preferences. Perdue began the process of removing antibiotics from production in 2002 and by 2006 had completely removed antibiotics used for growth promotion. The company finished removing antibiotics in hatcheries in 2014 and in 2016 pulled animal-only antibiotics (ionophores). Currently, Perdue only uses antibiotics when chickens are getting sick, which occurs in about 5 percent of its flocks. This means that 95% of the company’s production eligible to be sold under the label “no antibiotics ever.”

Our prior research assessed poultry producers’ antibiotics use policies and we highlighted Perdue as a leading performer and Sanderson Farms as lagging. Sanderson does not believe the antibiotic-free (ABF) movement is grounded in proper science and ethics, and believes competitors’ efforts are a marketing gimmick aimed at charging higher prices. While Sanderson’s view about strict ABF policies compromising animal welfare is worthy of examination, we question the company’s strategy to combat shifting consumer demand. In February 2017, a non-binding shareholder proposal requesting that Sanderson phase out the use of MIAs for growth promotion and disease prevention failed, though it received support from 30% of votes cast.

In the restaurant space, KFC stands out as a major laggard in the NRDC’s 2016 Antibiotics Scorecard, which grades the US’s top 25 restaurant chains on their policies and practices regarding antibiotics use and transparency in their meat and poultry supply chains.

While most companies have been focused on reducing antibiotics in poultry, pork and beef are beginning to attract attention. One speaker said pork is where chicken was a few years ago and noted that the pork industry is more vertically integrated than commonly believed (he believes it is about 80% integrated). Vertical integration should, in theory, make the process of reducing antibiotics more achievable. The beef industry is “significantly” more diffuse. Companies’ recent actions also suggest movement on phasing out antibiotics from pork and beef. Subway committed to serve antibiotic free beef and pork by 2025, Tyson and Smithfield now have “no antibiotics ever” pork product lines, and Perdue purchased Niman Ranch, which adds an array of antibiotic free beef and pork to its product portfolio.

Rounding out the conversation, speakers discussed alternatives to antibiotics. Probiotics, vaccines, and biosecurity are being viewed as promising areas for growth. This supports our prior research highlighting investment opportunities in companies producing probiotics (e.g., Novozymes) and biosecurity products (e.g., Neogen). We also believe vaccines can help offset the pressure on animal health companies (e.g., Zoetis and Phibro Animal Health) due to falling sales in medicated feed additives.

Michael Shavel is a Global Thematic Analyst at Cornerstone Capital Group.  He is responsible for researching industries, companies and trends in the field of sustainable finance.  Prior to joining the firm, Michael was a Research Analyst on the Global Growth and Thematic team at AllianceBernstein where he covered the energy, industrials, and materials sectors. He holds a B.S. in Finance from Rutgers University and is a CFA Charterholder.


“Increasing rates of antibiotic resistance pose a major threat to human health worldwide. The implications for the investment sector are also substantial. Left unchecked, by 2050 drug-resistant infections could be claiming 10 million lives annually and wiping $100 trillion from global GDP.”

This statement by the Farm Animal Investment Risk & Return (FAIRR) Initiative offers a compelling reason to attend their upcoming event on antibiotic resistance and investment risk in New York City on Monday March 20th 2017. The event will be a forum for investors to learn more about the material risks associated with this issue, to explore strategies to identify and manage these risks, and to share investor and company perspectives on opportunities and challenges in addressing resistance.

Cornerstone’s Research team has tackled the topic of antibiotic use in factory farming in the past, and we are pleased to partner with FAIRR in their efforts to educate investors about both the health risks and investment implications of increasing antibiotic resistance. We encourage our clients and industry colleagues to attend. More details below.

Event info, “Superbugs & Super Risks: The Investment Case for Action”

Date:               Monday 20 March 2017,  15:30 -18:00, followed by a drinks reception

Location:    BlackRock, 55 E 52nd St, NYC 10055

Access the event agenda and registration link HERE.

Related Cornerstone Research:

Antibiotics and Animal Health: Value-Chain Implications in the US (October 5, 2015)

Antibiotics and Animal Health: California Raises the Bar (October 13, 2015)

Tracking our Thesis on Nutritional Feed Additives (February 1, 2016)

Cornerstone Contributes to FAIRR’s Investor Case Studies Report (September 28, 2016)

Antibiotics and Animal Health: Recent Data Points Highlight an Accelerating Move (September 26, 2016)

Poultry Antibiotics in Emerging Markets: Should We Rethink Growth? (October 14, 2016)