ESG Celebration-The Most Successful Failure in History!

According to the UN Principles for Responsible Investing, there are over 5000 signatories, who signed the PRI (Principles for Responsible Investing) with an estimated AUM of US$130 trillion committing to ESG principles. Started in 2005, at the invitation of United Nations Secretary-General Kofi Annan, who invited a group of the world’s largest institutional investors to join a process to develop the Principles for Responsible Investment. This led to Principles for Responsible Investing. These are the principles:

Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.

Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.

Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.

Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.

Principle 5: We will work together to enhance our effectiveness in implementing the Principles.

Principle 6: We will each report on our activities and progress towards implementing the Principles.

On any scale, one would consider this a massive achievement in realigning investment to restore the social and environmental balance, as well as achieve a financial return, with good governance. However, if we look at the outcome, not the money flows based upon a vague definition of ESG, one can only conclude that this has been a monumental failure. Few, if any of the environmental or social challenges facing the world, which the PRI was intended to address have been met. We have seen lots of fees for service providers and asset managers, but society and the earth has suffered deeply.

Responsible Investment is not working!

Social and Environmental Challenges not addressed.

Climate Change Destruction

Biodiversity loss

Water Shortage

Food shortage

Health Crisis (Diabetes)

Income Inequality (Living Wage)

Pollution

Threat of War

Many have benefited financially and all seem happy to enjoy the party on the sinking titanic, earning their fees, and accolades, toasting to selfies, press releases, and other photo ops. There are few serious conversations or questioning of present ESG 1.0 have been held. In the eyes of many, ESG, as it is done now, has become a “death march in the wrong direction but slower“. That is the progress part.

Next week. PRI will be hosting the PRI in Person Summit, in Barcelona on Nov. 30th, with over 2000 attending, including asset owners, asset managers, and service providers. If we look at the program, there is little serious open discussion questioning the status quo. Nearly no serious independent thinker who is questioning ESG methodology has been invited to speak. It has become a love-in for all those eating from the pig trough of fees, and benefiting financially from the present status quo.

Where are the true critical independent thinkers like Mark Campanale, Prof. Paul Watchman, Desire Fixler, Glenn Frommer, Bonnie Lorraine Smith, Angelica Lips da Cruz, Mats Andersson, Geoff Kendall, Leesa Soulodre, Paul Clements-Hunt Dr Raj Thamotheram, Wouter van Dieren, Kate Raworth, Alexandra Mihailescu Cichon, Alexandra Pittman, Alexandra Smith, Andrew Behar, Andrew Gazal, Andrey Bogdanov, Anne-Marie Brook,Antoine Mach, Arthur Wood, Bertrand Gacon, Bob Willard, Brett Wallington, Daniel Klier, Gabe Rissman, Gabriel Thoumi, Gabriela Gaby Herculano, Jennifer Rae Pierce, Kai Chen, Kevin Franklin, Linda Nemec, Luke Wilcox, Mark Tulay, Martin G. Viehoever, Matt Moscardi, Meeta Misra, Michael Bogosyan, Ned Harvey, Paul Allard, Paul Herman, Pavan Sukhdev, Peppi-Emilia Airike, Philip Sugai, Ralph Thurm, Reid Thomas, Richard Rothenberg, Sonia Zugel,Stefania Di Bartolomeo, Tee Ganbold, Tim Nicolle

How can you ever fix a totally bankrupt and broken system with only those that are supporting, financing and benefiting from this environmental and social destruction on stage. We need critical dialogue, not a cheerleading section saying who great we are when we aren’t

As I said, financially ESG with the PRI at the forefront has been successful beyond our wildest dreams, but some of us actually want the earth and society to improve and the balance restored so we can thrive. We need a financial system that works for all stake holders and not just investors.

“I’m worried about greenwashing. I think we should come down on it very, very hard, whether it’s with criminal intent or actively deceptive.” John Elkington

If you feel that ESG needs significant fixing, and want to hear many of the independent critical thinkers mentioned above, help us stop the greenwashing and vote during the Better World Prize on Dec. 1.

November 27, 2022 2019, 2022, ESG Investing, Impact Investing, Investment, Sustainability, TBLI Conference No Comments on ESG Celebration-The Most Successful Failure in History!

Are you an Impact Investor or Unicorn Hunter?

Thank you to Annie Spratt for this photo.

Have you noticed how many investment funds have been created in last 5-10 years all claiming to have Impact Investing focus. It is overwhelming to see so many investment professionals raise money, govt. institutions allocate money , or asset owners invest their own to fix or improve society. Admirable and noble. Billions have been raised to help fix societal and environmental challenges. This is inspiring at first glance, until you actually look under the hood.

Take a look at the mission statements or ambitions of several of the funds created recently.

  • “investment platform focused on generating superior returns aligned with sustainable principles”
  • “Assist great entrepreneurs developing products and services for the three billion people in the bottom half of the world’s economic pyramid.”
  • “We invest to build more inclusive and equitable societies.”
  • “We back founders on a mission to build a better world”
  • “dedicated to startups leveraging exponentially accelerating technologies to address humanity’s grand challenges.”
  • “investing into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.”
  • “seeking deeper positive net impact across the spectrum of capital”
  • “We believe that investment capital can help meet large-scale global challenges”
  • “enables private sector investment in projects aimed at climate adaptation and mitigation in developing countries.”
  • “We back entrepreneurs building climate tech for a regenerative world.”
  • “Our ambition is to identify and invest in high-impact solutions for climate mitigation, as well as to catalyse and multiply capital to scale them.”
  • “family office investing in regenerative food systems”
  • “vision to invest in entrepreneurs building sustainable enterprises that can catalyze development impact for excluded communities and remote geographies across the globe.”
  • “support promising entrepreneurs, with growth capital and proven business tools to reach their full potential and enable them to achieve systemic change.”
  • “backs technology businesses committed to having a positive impact that answers the most pressing social and ecological challenges of our time, in a way that is both scalable and sustainable.”
  • “invests in companies driving measurable social impact alongside business performance and strong returns.”
  • “we believe that we can address and alleviate some of the world’s challenges by investing with purpose. “

These are all fine and important aspirations but are these investment funds or investors really purpose driven or do they revert to traditional investment mind set of “hunting unicorns”. Those companies that will have a 1 billion dollar valuation. Isn’t that the purpose of investments to maximise returns for the investor. I don’t have a problem with that. I have a problem with the false packaging. If you are just hunting unicorns, just say so, so the entrepreneur won’t lose any time who’s mission is not to be a unicorn, but a zebra (focussed on improving society and environment, not exponential growth) . Most investments will never be unicorns.

It is hard to start and run a company and do the continuous capital raise. They should not be wasting their time with investors that want to be entertained, informed or are pretending to be interested when they are just researching competitive investments. Perhaps the most important question to ask an investor “are you a unicorn hunter?”. If they are and your ambition is to drawdown carbon by improving the soil and livelihoods of small holder farmers, without any apps, then the fit is wrong. If you want to create meaningful jobs for unemployed youth by doing vocational hospitality training then unicorn hunters are not going to help or invest. If you are a long term developer to de-commoditise the food system then don’t bother with unicorn hunters. If the mission or purpose is your raison d’être, then you are not helped and won’t get money from unicorn hunters. They are looking for an app, few employees, super fast scaling, warp speed growth and monopoly. It is a win-lose approach mindset.

Many investors and most vc’s are fund managers driven by achieving the carry, asap. Few ever ran a company. Growth, Market share, IPO’s are the mantra. They are looking for that big payoff asap. Zebras won’t do that, unicorns will. Maybe they will. At least in the eyes of unicorn hunters they will.

If you are looking to fundamentally restore the social and environmental balance first and foremost, as well as make a profit to fund all your activities and growth, avoid unicorn hunters; especially those pretending to be impact Investors. Those are the worst. They wrap themselves in something that is important to you, but has no value at all to them. Be discerning. Ask them are you a UH (unicorn hunter) or II (Impact Investor) .

The secret of life is honesty and fair dealing. If you can fake that, you’ve got it made.

Groucho Marx

November 7, 2021 2019 No Comments on Are you an Impact Investor or Unicorn Hunter?

Happy New Decade!

The Decade of transitioning from Responsible Investment to Investing 2.0

For several decades, ESG and Impact Investing has been heralded as the way to address societal and environmental challenges. Present state of affairs must bring into question the efficacy of this strategy. The following challenges seem insurmountable.

  • Climate Change Destruction
  • Biodiversity loss
  • Water Shortage
  • Food shortage
  • Health Crisis (Diabetes)
  • Income Inequality
  • Pollution
  • Threat of War
  • List goes on.

One can only conclude that ESG and Impact are either too weak and not effective, or they are not large enough, or the entire methodology of environmental, social, governance, and financial risk and reward need to be redesigned.

TBLI will be focussing on this debate. Come join us and Frame the Future Design.

Here is a fantastic speech which questions many of the assumptions philanthropists and impact investors had. This speech led to the publication of his excellent book Winners Take All. Enjoy and Reflect. If you want to get to the hear of the matter, jump to 26:00
Anand Giridharadas: The Thriving World, The Wilting World, & You

“Going slower in the wrong direction is not progress”

Rober Rubinstein
January 3, 2020 2020 No Comments on Happy New Decade!

Who dominates the impact investing space?

No one! Why?

That is a fact, although in a time of fake facts it doesn’t matter.

Why is there not a single bank, wealth manager, or major financial institution the leader in the “race for values investors”. We keep hearing how ESG and Impact is booming and trillions are pouring into the space. If that was true, then why is it that not a single bank is perceived as the leader, the champion, THE IMPACT BANK for UHNW(Ultra High Net Worth) or HNW (High Net Worth) Investors.

One only needs to engage with the Private Banks, Wealth Managers, or Mega Banks to understand the issue here. These institutions are spending nothing on ESG and Impact Investing capacity building. Spending is going to the following:

  • ICT
  • Cybersecurity
  • Compliance
  • Capital Buffers
  • Traditional marketing
  • Bonuses

With this lack of commitment financially, psychologically and emotionally, ESG and Impact are just new products to add to the list of offerings to clients. It is not an important strategy!

It seems that the financial institutions are schizophrenic. All of them don’t want to be seen as a Sustainable, Impact or Values Bank, because they are afraid that clients or staff might leave . However, they also don’t want to be seen as a Bank not embracing ESG, Impact and Values Investing. Make up your mind. You can’t be partially pregnant. To paraphrase Danny Ocean asking Linus Caldwell in Ocean’s 11. “Your either in our out.”

I have met with many Private Banks and Wealth Managers. Nearly all seem to be really out of touch with clients wishes, particularly nextgen clients. The lack of commitment to see the opportunity for clients and the bank is beyond belief. Most of the time it is lip service and most of the time the banks just want to learn some tricks to convince their clients that they understand enough. However, when we (TBLI Group) speak to clients, they are keen, looking and open to a Values Investing strategy. When we ask “do you want a financial return with a social and environmental added values”, they all say, “absolutely. Can you do that?” If you want to you can. No one ever said to me “No I want all my money to make life miserable for everyone and I am working at that 24 hours a day.”

I have heard for years that the problem is the client. They are not interested. I don’t believe that anymore. Sure there are some clients that don’t believe or are not convinced. That is an educational exercise. Do the work to convince. When TBLI started, nearly 25 years ago, educating asset owners and managers, there was no PRI, CDP, EVPA, AVPN, Eurosif. No infrastructure at all. However, TBLI was still able to make inroads, and help build that infrastructure, because we were committed.

Recently, I was at FT seminar on ESG and Japan. The entire day was taken up with complaints by asset managers complaining that ESG date is not good enough. Over and over and over. They kept repeating “ESG is not Good Enough”. I have heard this for 25 years. The moderator asked are there any questions from the audience. I raised my hand and said that “I have heard for 25 years this complaint that ESG Data is not good enough. Why don’t you ever say that the financial data is not good enough? We have gone through a financial meltdown, Maddoff, Worldcom, Parmelat, Enron, etc. The financial sector has lost trillions of dollars and there has never been a single company that went bankrupt on questionable esg data.” I was told that my comment was not a question and we moved on.

Perhaps no one will take a leadership role to own the Values Investing space. That’s fine, but the market or clients are there. Particularly when we dispel the myth that there are no deals. There is no shortage of deals. There is a lack of infrastructure to find illiquid opportunities, at scale. They exist but they are not to be found in traditional places. Different neighbourhood. Doesn’t mean they don’t exists.

TBLI has spent 25 years educating asset owners and managers about ESG and Impact Investing. Convincing has never been a challenge, particularly when you speak to wealth holders. Banks need to allocate the resources needed to dominate the space and grow the industry. They need to approach this as they would if it was an M&A. Until that time, the only big story will be the press releases coming out about how such and such a bank is committed to Values Investing .

To paraphrase Yoda “Do or do not, there is no try”.

A pig and a chicken were walking down the road. As they passed a church, they notice that a potluck charity breakfast was under way. Caught up in the spirit, the pig suggested to the chicken that they each make a contribution.

“Great Idea!” the chicken cried. “Let’s offer them ham and eggs!”

“Not so fast.” said the pig. “For you, that’s just a contribution, but for me, it’s a total commitment.”

June 4, 2019 2019 2 Comments on Who dominates the impact investing space?