On May 16, Erika Karp sat down with Laurie Lane-Zucker, founder of Impact Entrepreneur for a wide-ranging discussion of “transformation and impact investing” in an episode of Impact Entrepreneur’s Luminarias webinar series.
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
“Whether it’s the gender pay gap, board of directors seats and equal opportunity for career advancement, or greater access to private market capital funding for female-owned-and-run startup businesses, women are disrupting the status quo in the banking and finance industry. ” Erika Karp joins sustainability consultant Paul Ellis for a webinar with guests Danielle Kayembe, founder of Greyfire, and Jeff Cohen of SASB, for a discussion on these issues and more. Log on here.
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.
Entrepreneur, June 7: “Women… tend to see their investing as a means to an end — a way of accumulating enough money to, for example, buy a house or retire early. A corollary is that, rather than focus solely on commercial gains, more women look for businesses that have a social purpose or are at least sustainable. This is true for all kinds of investments…
Another reason for this is that women also do more research, according to HSBC, who found that 17 percent of women, compared to 13 percent of men, spend more than a month researching investment options. Erika Karp, the founder and CEO of Cornerstone Capital and the former head of Global Sector Research at UBS Investment Bank, told Professional Wealth Management that transparency is at the core of sustainable investing and women like to be thoroughly informed before acting.”
Read full article here.
Conscious Thought Revolution is on a mission to build technology that measures global levels of human consciousness by observing patterns of internet traffic. CTR reporter Kayleigh Donahue conducts a video “#consciousconversation” with Erika Karp.
Cornerstone Capital CEO Erika Karp and Research Analyst Sebastian Vanderzeil talk about the firm’s approach to ESG analysis and conscious investing with Pedram Shojai of well.org.
John Wilson was recently interviewed by Sea Change radio’s Alex Wise for his podcast. We discussed how managers balance trying to please dividend-hungry shareholders with keeping an eye on the future, how automation will affect the global economy, and how all of this is ultimately an issue of sustainability. Click below to hear the replay.
While reverberations of the surprise US electoral outcome will unfold for quite some time, at Cornerstone Capital Group we wanted to take a moment to consider the landscape in which we and our clients operate in the field of sustainable finance.
As policy proposals and realities evolve, and while uncertainty and volatility will persist, there is no doubt that macro and structural trends in the US and Global markets are bigger and more powerful than any administration or regulatory regime over the long term. At Cornerstone we believe that the private sector will power progress in meeting the world’s imperatives including addressing everything from climate change, water scarcity, income inequality, gender equity, and healthcare provision, to infrastructure building. We believe that shifts in the political landscape aside, the rising influence of “universal owners” and advisors with a fiduciary duty to their clients will also continue to move the needle on corporate social responsibility.
We argue that promoting the health of the capital markets through transparency and collaboration will empower the innovation necessary to meet any challenge. Our discipline of deeply integrating the analysis of the pivotal Environmental, Social & Governance (ESG) factors into all investment processes allows for the alignment of our clients’ values and investments. And in seeking those Managers and those Companies in which we place our faith over the long-term, we will aspire to corporate excellence and sustainability. We will remain in relentless pursuit of material progress towards a more regenerative and inclusive global economy.
And we will continue to leverage the power of positive investing. We will stand by those who seek to accelerate the flow of funds into sustainable investment strategies as they demand competitive financial returns. We will highlight the essential nature of an inclusive society where rifts between people and communities are repaired. We offer this view that this shift in political landscape is a call to action … to focus the power of thoughtful and responsible capital markets facilitating solutions to the most critical imperatives of our time.
Click here for a pdf of our note.
Erika Karp is the Founder and Chief Executive Officer of Cornerstone Capital Inc.
Mr. Brent J. Fields
Secretary Securities and Exchange Commission
100 F Street, NE Washington, DC 20549-1090
Re: Business and Financial Disclosure Required by Regulation S-K (File No. S7-06- 16)
Dear Mr. Secretary,
Cornerstone Capital Inc. (dba Cornerstone Capital Group [“Cornerstone”]) appreciates and welcomes the opportunity to submit comments in response to the Commission’s concept release “Business and Financial Disclosure Required by Regulation S-K” (“the Release”).
Founded in 2013, Cornerstone is a financial services firm based in New York. The mission of the firm is to apply the principles of sustainable finance across the capital markets and enhance investment processes through transparency and collaboration. In offering investment advisory, investment banking and corporate advisory services, Cornerstone works with asset owners, corporations and financial institutions to promote new research in the field of Environmental, Social and Governance (ESG) analysis, and facilitate capital introductions for organizations around the world engaged in sustainable business practices.
Because our clients are long-term investors, we have a strong interest in the quality of corporate disclosures, and how well they enable us to evaluate risks and make decisions that will affect the long-term health of our clients’ portfolios. We believe that although current disclosure standards require companies to report on all material issues, companies currently have insufficient guidance regarding disclosure of long-term issues, particularly those related to ESG concerns.
Voluntary sustainability reports separate from financial disclosures have been commonplace for several years. Standards for voluntary reporting have risen considerably, and these reports are valuable to many stakeholders such as employees, communities and customers. Yet current ESG disclosures fail the test of quality, comparability, consistency and materiality that would make them useful to investor decision-making.
Our comments reflect our views on how ESG disclosures could be incorporated into corporate disclosures in a manner consistent with existing disclosure standards and expectations.
Read the full text of the letter from John Wilson and the Cornerstone Capital Research team 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. He also writes and presents widely about the relevance of corporate governance and sustainability to investment performance for academic, foundations, corporate and investor audiences.
Arnie Weissmann, editor in chief of Travel Weekly US, interviewing Erika Karp, CEO of Cornerstone Capital, on ‘Backstage with Arnie’ at the WTTC Global Summit 2016 in Dallas, Texas.
Sustainability and the IRO: Linking Diversity
A conversation at Bloomberg with Erika Karp, founder and CEO of Cornerstone Capital Group, and Greg Elders, senior ESG analyst with Bloomberg Intelligence
As a gay woman, investment executive and entrepreneur, Karp explains how diversity and sustainability are linked, because diversity of thought, experience, perspective and style allow for the observation of what’s going on in the world and bring energy, creativity and innovation to business and finance: ‘Diversity is painful but profitable.’
Sustainability & the IRO: Defining “corporate sustainability” and examples from around the world
A conversation at Bloomberg with Erika Karp, founder and CEO of Cornerstone Capital Group, and Greg Elders, senior ESG analyst with Bloomberg Intelligence
When asked how to separate real sustainability from green-washing, Karp says consistency between mission, incentives, accountability and outcomes is the hallmark. ‘Consistency is the biggest factor separating the signal from the noise when it comes to corporate excellence,’ she says. Karp provides Cornerstone’s definition of corporate excellence, which is its preferred term for corporate sustainability: ‘the relentless pursuit of material progress towards a more regenerative and inclusive economy.’ No company is perfect, but exemplary strivers include Nike, Intel and Goldman Sachs in the US, and BASF and Enel in Europe. Elders, who formerly worked in Europe, acknowledges that less ESG data is reported by US companies compared to Europe, where pension funds, especially in the Netherlands and Scandinavia, have pushed for it.
Erika Karp, Founder and CEO of Cornerstone Capital Inc., speaking at TBLI CONFERENCE USA 2014 in New York on “People, Planet and Profits: The Global Macroeconomic Imperative for Sustainable Finance”.
Chartered Global Management Accountant panel discussion: Lisa Westlake of Moody’s, Prem Parameswaran of Jefferies & Co. Inc., Erika Karp of Cornerstone Capital, Inc. site adherence to core values, social responsibility and an inclusive mindset as key to organizational success. Discover how the Chartered Global Management Accountant (CGMA) designation recognizes the strategic role management accountants play in business.
Moderator Helen Winch, Director of Policy and Research, PRI