On Our Minds

On Our Minds

SDG Investor Seminar

On December 3, 2018, Tony spoke at the Morgan Stanley SDG Investor Seminar. (The SDGs are the UN’s Sustainable Development Goals.) Tony discussed how Inherent integrates the SDGs into our investment process, primarily using them as a way to … Read More

Despite Headlines, US Climate Policy Advances

Mid-term election results showed that decarbonization remains a second-tier issue for most voters. Initiative 1631, a carbon tax in Washington State was defeated, the second time the Washington electorate voted no on a carbon tax. In addition, Carlos Curbelo, … Read More

Inherent Group Joins Open Letter to New GE CEO

Inherent Group joined a group of investors in signing an open letter, released today, to Mr. Lawrence Culp, the new CEO of General Electric. The letter urges GE to invest more in the development and deployment of clean power … Read More

ESG Can Improve Corporate and Investment Performance

There’s long been a debate about the role of business in society, which I’ll address in a later post. For now, let’s stick with related question of whether it pays for an investor to focus on ESG. There’s a … Read More

Death by Survey

Over the past year we have spoken with dozens of companies about ESG performance and disclosure. Sustainability teams are thinly staffed and overwhelmed by the sheer volume of surveys, requests for information, and the alphabet soup of reporting frameworks … Read More

November 2018

Unlocking the Inclusive Growth Story of the 21st Century: Accelerating Climate Action in Urgent TimesThe New Climate Economy

This fourth report of a cross-disciplinary group of former government officials, economists, and business leaders provides a detailed road map of actions that can create growth globally while addressing climate challenges.

Norway’s Sovereign Wealth Fund Builds Tool to Analyze Climate Risk to PortfolioReuters

The world’s largest pension fund has created a tool to analyze climate risk in its portfolio amidst rising costs, including how much of a company’s carbon dioxide emissions can be passed on to customers.

Fossil Fuel Money Crushed Clean Energy Ballot Initiatives Across the CountryVox

This piece details some clean energy ballot initiatives around the US in November’s mid-term elections and how they fared.

Drought Tests Australia’s Model Water MarketThe Wall Street Journal

Australia’s pioneering effort, at scale, to put in place the systems required to freely trade water rights is coming under criticism for putting pressure on farmers.

Startling New Research Finds Large Buildup of Heat in the Oceans, Suggesting a Faster Rate of Global WarmingThe Washington Post

The latest example of a vicious circle in climate change.

Report on US Sustainable, Responsible and Impact Investing TrendsUS SIF

US SIF’s 2018 report details growth in impact investing and key themes.

UK to Consult on Plastic Packaging Tax, Chancellor SaysThe Guardian

Another example of the growing concern and policy response to plastic usage.

U.S. Climate Report Warns of Damaged Environment and Shrinking EconomyThe New York Times

A federal report details the significant economic consequences of inaction on global warming.

October 2018

Earth’s Population is Skyrocketing. How Do You Feed 10 Billion People Sustainably?Washington Post

An overview of the way food production will need to change in the coming decades to meet growing global demand.

Transforming Health Care from the Ground UpHarvard Business Review

Case studies of two efforts at improving health care outcomes and reducing costs—increasingly urgent as health care spending approaches 20% of US GDP.

China’s Great Leap BackwardForeign Policy

An analysis of the under-appreciated “dismantling” of reforms that have helped China grow over the last few decades.

Can Germany survive the ‘iPhone moment’ for Cars?Financial Times

How the development of EVs and autonomous vehicles will impact the auto industry, particularly in Germany.

The Conservative Case for a Carbon TaxNiskanen Center

This detailed paper from the think tank Niskanen Center published in 2015 argues the conservative case for a carbon tax, addressing a series of common conservative objections.

Startling New Research Finds Large Buildup of Heat in the Oceans, Suggesting a Faster Rate of Global WarmingWashington Post

New measurement tools indicate that the speed of global warming is more rapid than previously thought.

Why Climate Change and Other Global Problems Are Pushing Some Business Leaders to Embrace RegulationHarvard Business Review

Companies are becoming more vocal in pushing for regulation, and further in advance of government action.

September 2018

California Just Adopted its Boldest Energy Target Yet: 100% Clean ElectricityVox

California’s new law mandates 100% carbon-free electricity by 2045.

How the BBC Women are Working Toward Equal PayThe New Yorker

In depth overview of equal pay, the gender pay gap, and the lengthy process of attempting to achieve equity at a large company in the UK.

Big Investors Seek a #MeToo ClawbackThe Wall Street Journal

An interesting example of how a social issue is getting written into private equity deal documents.

From Trump to Trade, the Financial Crisis Still Resonates 10 Years LaterThe New York Times

Sorkin suggests that the growth in populism globally is an aftershock of the financial crisis.

At Wells Fargo, Discontent Simmers Among Female ExecutivesThe Wall Street Journal

An inside look at the culture of Wells Fargo and internal efforts to change it.

Why Big Companies Squander Good IdeasFinancial Times

Execution and implementation of new ideas is difficult at any scale.

The Ocean Cleanup is Starting, Aims to Cut Garbage Patch by 90% by 2040Forbes

An ocean clean-up company started by Boyan Slat at the age of 18 is reaching “production phase.” Uses clever design to gather plastic without harming marine life.

August 2018

The Water Crises Aren’t Coming, They’re HereEsquire

Water use is out of balance and leading to more frequent crises and potential conflicts.

The US is Losing the High-stakes Global Battery WarVerge

Interview with Steve Levine, author of The Powerhouse: America, China, and the Great Battery War, on the current state of the battery industry.

Recycling Can Put Money in Every American’s PocketMedium

Makes the case that the circular economy “will result in one of the largest investment opportunities in the US over the next decade.”

Here’s How America Uses Its LandBloomberg

An excellent infographic that shows how land is used across the US.

The Effects of Weather Events on Corporate Earnings are Gathering ForceS&P Global

An S&P Global study that quantifies the effects of severe weather on company results.

Losing Earth: The Decade We Almost Stopped Climate ChangeThe New York Times

An in-depth analysis of efforts in the late 1970s and 1980s to identify the causes and dangers of climate change and potential solutions.

Growth of Online Retail is Changing InflationFinancial Times

How online retail is affecting the behavior of inflation.

July 2018

Best Buy Should be Dead, but it’s Thriving in the Age of AmazonBloomberg

Some bricks and mortar retailers are adapting well to the new normal.

Governors can Determine the Future of WorkCommentary

States use creative solutions to address the future of work as “laboratories of democracy.”

Building Trust as Boards Make Long-term Strategic Investment DecisionsHigh Meadows Institute

Business leaders insist on the business case for ESG investments.

Now in Sight: Success Against an Infection that BlindsThe New York Times

This enduring cross-sector partnership illustrates the kind of social, and economic, impact that the private sector can help drive. Paula Luff, Inherent's Director, Sustainability & Impact, helped create and lead this program while she was at Pfizer.

Climate Vulnerable Countries Face $168 Billion In Higher Debt CostsForbes

A discussion of the risk premium added to borrowing costs attributable to climate-related issues.

Please ‘Disrespect’ Your Senior Management TeamJefferies Insights

An open letter to Jefferies employees shared publicly regarding the value of questioning any company’s leadership.

June 2018

Demystifying the Alphabet Soup of Reporting FrameworksEthical Corporation

Some guidance on the numerous reporting framework acronyms.

Short-Termism Is Harming the Economy

An opinion piece from Jamie Dimon and Warren Buffett regarding the costs of managing to quarterly earnings.

Surprises from the 2018 Proxy SeasonHarvard Law School Forum on Corporate Governance and Financial Regulation

An analysis of the trends in 2018’s proxy season.

Disposable America: A History of Modern Capitalism from the Perspective of the Straw. SeriouslyThe Atlantic

A history of the disposable straw, the environmental controversy surrounding it, and broader lessons on capitalism.

The Story of Coal in the 21st Century, in One Amazing MapVox

An overview of an interactive map depicting the development of coal power plants since 2000.

May 2018

We Made Plastic. We Depend On It. Now We’re Drowning In ItNational Geographic

A look at the global environmental impact of plastic, 40 percent of which is used just once before being discarded

Elon Musk’s Unusual Compensation Plan Isn’t Really About Compensation at AllHarvard Business Review

An analysis of the strategy behind the world’s largest CEO pay package--and one of the most unique.

Harvard’s Reinhart Says Emerging Markets Are in Tougher Spot Than During ‘08 CrisisBloomberg

A professor discusses her view of where EM markets are in the cycle.

Why Starbucks’s Bias Training, Despite Skepticism, Is an Important StartThe New York Times

An opinion piece about the value of Starbucks’s bias training.

April 2018

The Fix for ‘Extractive Capitalism’Top 1000 Funds

A professor’s view on how to improve capitalism, the “world’s largest co-operative system.”

Is ‘Being Green’ Rewarded in the Market?: An Empirical Investigation of Decarbonization and Stock ReturnsStanford Global Project Center Working Paper

An empirical analysis that demonstrates the alpha generation of a lower carbon investment portfolio.

Divided We LeadHarvard Business Review

A look at the increasingly public role many CEOs are playing in weighing in on controversial political and social issues.

March 2018

Counting Down to Day Zero in Cape TownThe New Yorker

How Cape Town and its residents are coping with an unprecedented water shortage, and its implications for business.

McDonald’s Becomes the First Restaurant Company to Set Approved Science Based Target to Reduce Greenhouse Gas EmissionsGlobe Newswire

Setting a self-imposed emission target and deadline is an intriguing leadership step for a company with McDonald’s visibility.

Merck C.E.O. Ken Frazier on Death Row Cases and the Corporate SoulThe New York Times

Merck’s CEO reflects on his career and the role of CEOs today.

A Meditating Truck Company: What Investing in Company Culture Really Looks LikeThrive Global

A look at the radical, productive culture of the electric truck company, Chanje.

February 2018

Are Hospitals Becoming Obsolete?The New York Times

An opinion piece about why the movement away from hospitals is a good thing.

BP Says Oil Demand to Peak by Late 2030sFinancial Times

One of the largest oil companies in the world predicts 300 million electric vehicles on the road by 2040, up from 3 million today.

Walmart and Dick’s Raise Minimum Age for Gun Buyers to 21The New York Times

Two of the US’s largest retailers voluntarily take a leadership stance on gun sales.

January 2018

Amazon HealthStratechery

Ben Thompson describes the theory for the Amazon-Berkshire Hathaway-JPMorgan long game.

Larry Fink’s Letter to Portfolio Company CEOs

The world's largest index fund manager calls on companies to foster long-term value.

Why People Conveniently ‘Forget’ that Child Labor Made their JeansMoneyish

Consumer behavior differs based on natural human tendencies.

Japan Inc.: A Corporate Culture on Trial After ScandalsFinancial Times

Data falsification highlights need for a “chief quality officer” to matter as much as chief financial officer.

Improving Workplace Culture, One Review at a TimeNew Yorker

How Glassdoor and sites like it provide radical transparency into corporate cultures.

The readings on this page provide an overview of the fundamentals of
ESG-integrated investing and some recent developments in the field.

1.
Journal of Sustainable Finance and Investment

The authors conclude that the large majority of over 2,200 studies of ESG’s influence on corporate financial performance demonstrate positive influence and that the results appear to be stable over time.

2.
The Accounting Review

This study focuses on the positive impact of sustainability practices that are material to a company’s vertical on operational and stock performance.

3.
Barclays

While most studies on the financial impact of ESG focus on equities, this study illustrates the positive impact that ESG integration can have on fixed income portfolios. This study focuses on investment grade corporate bonds.

4.
Hermes

This paper describes a model for identifying the influence of ESG risks on credit-default spreads, broadening the applicability of ESG analysis beyond investment grade instruments as in the Barclays paper immediately above.

5.
UN PRI

These case studies illustrate the range of ways in which equity investors incorporate ESG factors into their investment analysis and management processes.

6.
Review of Financial Studies

The authors’ analysis shows that active engagement with corporate management by investors on material corporate social responsibility (CSR) matters can positively impact operating performance, profitability, efficiency, governance, and stock performance.

7.
Harvard Business Review

The authors argue that the agency theory, under which maximizing shareholder returns is the primary goal of corporate management, is flawed. They sketch a new approach focusing on the long-term health of the corporate enterprise that can deliver both strong performance and value to society.

8.
McKinsey Global Institute

An interesting counterpart to the HBR paper immediately above, this study demonstrates that management teams who focus on long-term performance deliver better financial results than those who are short-term oriented.

9.
Bank of America Merrill Lynch

This recent survey provides an overview of the current impact investing landscape along with results demonstrating the positive influence of certain impact investing strategies and tools investors can use to effectively incorporate ESG factors.