At Inherent Group, we integrate an ESG framework throughout our investment process in pursuit of superior risk-adjusted returns. This article for the Journal of Applied Corporate Finance offers a detailed look at why we take this approach and how … Read More
Companies and investors are increasingly engaging on sustainability. The recent moves on climate issues made by Royal Dutch Shell, Glencore, and BP show how investor pressure (and in particular the Climate Action 100+ investor group) is helping shape corporate … Read More
Inherent Foundation helped create and invested in an innovative financing structure called Pursuit Bonds, which are helping provide workforce training to those with great potential and great need via the Pursuit organization. ‘So far, the graduate placement rate exceeds … Read More
Over the coming year, global capital markets may face a trio of torpedoes in the water: slowing growth, rising interest rates, and net aggregate withdrawal of liquidity by the world’s major central banks. Value-oriented managers are looking forward to … Read More
On December 4, 2018, Tony spoke at the Milken Institute’s London Summit on a panel entitled “The Evolution of ESG and Asset Management.” The panel, moderated by Marisa Drew of Credit Suisse, included representatives from CDPQ London, Shenkman Capital, … Read More
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
On November 13, Inherent Group joined with other investors representing nearly $570 billion of assets under management in signing an open letter to Mr. Jay Clayton, Chairman of the Securities and Exchange Commission, urging the SEC to maintain Rule … Read More
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 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
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
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
Tony Davis is quoted in a piece by Emelia Hamilton Russell in Spear’s Magazine entitled “The New Capitalism: Has Wealth Found a New Conscience?” She discusses the rapid growth in assets invested in impact-related strategies and how capitalism is … Read More
On January 23, 2018, Tony Davis participated in a Knowledge@Wharton podcast entitled “How to Drive Competitive Returns with Impact Investing.” He discussed how Inherent Group incorporates material ESG factors into its investment process, his personal investing approach, and Inherent … Read More
On May 3, 2016, Tony Davis spoke at the Milken Institute on a panel entitled “Impact Investing: Where are the Deals?” Moderated by Amit Bouri, CEO of the Global Impact Investing Network (GIIN), panelists describe a range of approaches … Read More
The Investor Agenda 2019 Annual Progress Report showcases investor action and progress made on climate change. To date, nearly 1,200 investors have taken action in one or more of the focus areas of The Investor Agenda since its launch in September 2018.
This working paper analyzes how integrating 'decarbonization strategies' into a portfolio can lead to better returns and positive alpha.
Written Testimony of Alicia Seiger, Managing Director, Stanford Sustainable Finance Initiative. Prepared for the U.S. House of Representatives, Committee on Financial Services, Subcommittee on National Security, International Development and Monetary Policy.
Peabody Energy Corp. scrapped an $800 million junk-bond sale meant to refinance existing debt and pave the way for a joint venture as investors increasingly wary of the prospects for coal producers demanded double the average yield of similar BB rated peers.
Case study from North Carolina how value-based care is being implemented at the individual provider level, and some of the issues to be worked through.
Ford Foundation lays out its approach to mission-related investing, and makes the point that if all U.S. foundations were to allocate 8% of their assets to MRI investing, together they would have $72 Billion to pressure corporations to broaden their focus from shareholders to include all stakeholders.
Investors in the upcoming initial public offering of The We Company are being asked to lower their standards for corporate governance beyond what other technology startups have demanded, say securities law experts.
MSCI analyzes what tighter anti-plastics regulation and negative consumer sentiment could mean for the oil and gas companies producing petrochemicals - the main inputs for plastics. The financial impact could be significant.
Consumers are increasingly focusing on sustainability when making purchasing decisions, according to research by the Center for Sustainable Business at NYU Stern. Their analysis shows that 50% of the growth in sales of consumer packaged goods in the last five years came from purchases of products marketed as 'sustainable'.
As consumers move away from single-use plastics, Coke and Pepsi are starting to embrace a 'bring your own bottle' business model, particularly on college campuses.
A recent study by CDP, formerly known as the Carbon Disclosure Project, reveals that some of the largest companies in the world expect climate change to pose a trillion dollar financial burden to their businesses. And, many of those effects are expected to be felt within the next five years.
The impact of ESG ratings on companies' cost of capital is on the rise. According to Bloomberg New Energy Finance, $32 Billion in loans are now tied to ESG ratings. That's up from $3 Billion just two years ago. However, the data is still controversial and inconsistent, as the ratings don't necessarily reflect actual performance on ESG metrics.
A 2017 study reported that companies with the highest ESG ratings outperformed the lowest-rated firms by as much as 40%. In 2018, Bank of America Merrill Lynch observed that "firms with a better ESG record than their peers produced higher three-year returns, were more likely to become high-quality stocks, were less likely to have large price declines, and were less likely to go bankrupt."
Berkeley, California is requiring coffee shops to charge a 25-cent fee per disposable cup to encourage people to produce less plastic waste.
Decreasing meat consumption will not have as large an impact on the environment as many believe. Meat production does not generate more greenhouse gases than the transportation sector, and the continuation of meat consumption is necessary to sustain the increasing world population.
The privatization of academic programs leads to an increase in profits, and an increase in inequality among those who can attend college. Online colleges, if not for their high prices, could have lessened inequality within the higher education system.
Is corporate America more 'scandal-prone' than Europe? An interesting piece by the Economist suggests this is the case, and thus far the 'financial cost' to the companies involved has been limited.
"The total market value of American firms involved in big incidents that have become public since 2016 is $1.54trn. At least 200m consumers have been affected. The figures are only $600bn and under 30m for European firms, including carmakers that faked emissions tests and Nordic banks involved in money-laundering."
U.S. offshore wind is a $68 million dollar investment opportunity that suppliers are poised to benefit from.
McKinsey offers a 'roadmap' to close the $12,000 electric vehicle profitability gap for car manufacturers.
An energy study shows that a business-led transition to renewable energy could sustain an economy with a net cost less than that of business-as-usual.
According to a recent report, New York City's buildings are responsible for two thirds of the city's greenhouse gas emissions. In pursuit of the goal to reduce emissions by 40% by 2030, the City Council is attempting to pass legislation placing an emissions cap on many large buildings, including the Empire State Building.
As renewable alternatives become more affordable, large corporations, such as Exxon, are shifting towards them.
This is one of the first 'sustainable improvement loans' in the U.S., whereby sustainability performance is tied directly to the cost of capital. Xylem is a global water technology company.
The European Parliament and European Union countries agreed in March on sustainable investment disclosure rules for institutional investors, which will require money managers to integrate environmental, social and governance factors into their investment decisions and disclose how they are doing so.
Increasingly, both investors and companies are waking up to the costs and inefficiencies caused by the short-termism of capital markets
Companies will face a record number of climate-related shareholder proposals this proxy season.
Paul Singer of Elliott Management weighs in on the issue of dual share class structures for public companies.
The importance of underwriting carbon risk - especially in companies that might not seem to have obvious exposure.
Companies will face a record number of climate-related shareholder proposals this proxy season.
KitchenAid as a case study: How the tight labor market is highlighting the competitive advantage a company can create by investing in its employees and their ongoing education.
The second annual sustainability ranking of public companies from Barron's.
As plastic waste piles up, consumer packaged goods companies look to shed the 'branded litter' image for something more wholesome, like the 'milkman'.
An analysis of the growing movement behind looking at more than just companies' financial performance.
Investors and corporate executives are increasingly paying attention to and acting on the environmental impact of the food and agriculture sector, which accounts for about a quarter of global carbon dioxide emissions.
This opinion piece provides an overview of shareholder action related to climate change and advocates that shareholders should hold directors to a stronger standard for their actions, or lack thereof, on climate change-related matters.
An overview of the impact of climate change on large companies, including PG&E's bankruptcy.
An overview of the growing catastrophe-bond market and the risks playing out in a bond affected by the recent Camp Fire in California.
Working with a group of institutional investors convened by Ceres, Shell has committed itself to public net carbon footprint targets, linking such targets to executive compensation, and related goals.
A detailed account of the growth and recent challenges of what was once America's biggest company.
An overview of the large and growing business of selling location data from mobile phones and apps.
The author alleges that many investors are at best confused and at worst misled by their investment funds' apparent focus on ESG, especially among ETFs.
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.
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.
This piece details some clean energy ballot initiatives around the US in November’s mid-term elections and how they fared.
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.
The latest example of a vicious circle in climate change.
US SIF’s 2018 report details growth in impact investing and key themes.
Another example of the growing concern and policy response to plastic usage.
A federal report details the significant economic consequences of inaction on global warming.
An overview of the way food production will need to change in the coming decades to meet growing global demand.
Case studies of two efforts at improving health care outcomes and reducing costs—increasingly urgent as health care spending approaches 20% of US GDP.
An analysis of the under-appreciated “dismantling” of reforms that have helped China grow over the last few decades.
How the development of EVs and autonomous vehicles will impact the auto industry, particularly in Germany.
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.
New measurement tools indicate that the speed of global warming is more rapid than previously thought.
Companies are becoming more vocal in pushing for regulation, and further in advance of government action.
The Intergovernmental Panel on Climate Change releases its latest, most alarming report on the prospective impacts of global warming and the actions required both to mitigate and adapt to climate change.
California’s new law mandates 100% carbon-free electricity by 2045.
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.
An interesting example of how a social issue is getting written into private equity deal documents.
Sorkin suggests that the growth in populism globally is an aftershock of the financial crisis.
An inside look at the culture of Wells Fargo and internal efforts to change it.
Execution and implementation of new ideas is difficult at any scale.
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.
Water use is out of balance and leading to more frequent crises and potential conflicts.
Interview with Steve Levine, author of The Powerhouse: America, China, and the Great Battery War, on the current state of the battery industry.
Makes the case that the circular economy “will result in one of the largest investment opportunities in the US over the next decade.”
An excellent infographic that shows how land is used across the US.
An S&P Global study that quantifies the effects of severe weather on company results.
An in-depth analysis of efforts in the late 1970s and 1980s to identify the causes and dangers of climate change and potential solutions.
How online retail is affecting the behavior of inflation.
Some bricks and mortar retailers are adapting well to the new normal.
States use creative solutions to address the future of work as “laboratories of democracy.”
Business leaders insist on the business case for ESG investments.
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.
A discussion of the risk premium added to borrowing costs attributable to climate-related issues.
An open letter to Jefferies employees shared publicly regarding the value of questioning any company’s leadership.
Some guidance on the numerous reporting framework acronyms.
An opinion piece from Jamie Dimon and Warren Buffett regarding the costs of managing to quarterly earnings.
An analysis of the trends in 2018’s proxy season.
A history of the disposable straw, the environmental controversy surrounding it, and broader lessons on capitalism.
An overview of an interactive map depicting the development of coal power plants since 2000.
A look at the global environmental impact of plastic, 40 percent of which is used just once before being discarded
An analysis of the strategy behind the world’s largest CEO pay package--and one of the most unique.
A professor discusses her view of where EM markets are in the cycle.
A look at the growing world of direct-to-consumer companies.
An opinion piece about the value of Starbucks’s bias training.
A professor’s view on how to improve capitalism, the “world’s largest co-operative system.”
An empirical analysis that demonstrates the alpha generation of a lower carbon investment portfolio.
A look at the increasingly public role many CEOs are playing in weighing in on controversial political and social issues.
How Cape Town and its residents are coping with an unprecedented water shortage, and its implications for business.
Setting a self-imposed emission target and deadline is an intriguing leadership step for a company with McDonald’s visibility.
Merck’s CEO reflects on his career and the role of CEOs today.
A look at the radical, productive culture of the electric truck company, Chanje.
An opinion piece about why the movement away from hospitals is a good thing.
One of the largest oil companies in the world predicts 300 million electric vehicles on the road by 2040, up from 3 million today.
Two of the US’s largest retailers voluntarily take a leadership stance on gun sales.
Ben Thompson describes the theory for the Amazon-Berkshire Hathaway-JPMorgan long game.
The world's largest index fund manager calls on companies to foster long-term value.
Consumer behavior differs based on natural human tendencies.
Data falsification highlights need for a “chief quality officer” to matter as much as chief financial officer.
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.
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.
This study explores the value and limitations of ESG data currently, as a tool to drive portfolio performance outcomes. The paper suggests more effective ways of integrating existing data into investment decision-making processes.
The authors explore the relative performance of portfolio decarbonization strategies, and how performance is affected by institutional investor fund flows.
The authors investigate the effect of a corporate culture of sustainability on multiple facets of corporate behavior and performance outcomes.
This study illustrates how performance on financially material ESG issues, as identified by the Sustainability Accounting Standards Board (SASB) can contribute to the United Nations’ Sustainable Development Goals.
This paper explores the performance implications of adopting strategic sustainability practices for both return on capital and expectations of future performance as reflected in price to book valuation multiples.
This study empirically investigates the risk-return relationship between corporate environmental performance and financial performance, with a focus on companies’ carbon footprint.
The authors study the financial impact of investor activism promoting ESG improvements.
This study focuses on the positive impact of sustainability practices that are material to a company’s vertical on operational and stock performance.
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.
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.
These case studies illustrate the range of ways in which equity investors incorporate ESG factors into their investment analysis and management processes.
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.
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.
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.
This whitepaper 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.