Paul Herman, CEO & Founder, HIP Investor, Inc.
Bart Houlahan, Co-Founder, B Lab
Stephen J. Donofrio, VP, Partnerships & Innovation, CDP North America
Bill Baue, Corporate Sustainability Architect
Joy Poland, President, Building Bridges, LLC
What sustainability-related trends are picking up among investors, and are there reasons to believe any of these trends might see mainstream adoption? What next-level benchmarks should brands pay attention to, and why? Are the principles of fossil divestment and localization ever going to take off, or have they already?
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Trends and Tremors in the Sustainable Investing Landscape
1. The New Metrics of Sustainable Business 2013
Trends and Tremors in the Sustainable Investing
Landscape
Paul Herman, HIP Investor, Inc.
Joy Poland, Building Bridges, LLC
Bart Houlahan, B Lab
Stephen J. Donofrio, CDP North America
Bill Baue, Corporate Sustainability Architect
8. IMPACT-RATED MUNI BONDS
City of Seattle = 72%
15 of possible 25
WEALTH points for
17 of possible 25
HEALTH points for
WEALTH
25%
•Median Income
•Affordability of Housing
•Vacant Houses
•Unemployment
•Poverty
EQUALITY
25%
16 of possible 25
EQUALITY points for
•
Obesity/Diabetes
• Crime Rate
• Graduation Rate
• Health Insurance
Coverage
HEALTH
25%
72%
75%
24 of possible 25
EARTH points for
•
Commuting Method
and Duration
EARTH
25%
•
Gender Diversity &
Ethnicity Reflected in
Business Ownership
17. Building
More Value + Profit:
The Rhode Island MVP ™ Program
Building Bridges
Joy Poland
18. Tremors
“Flying in the fog of „False Estimates‟ of real
corporate value is a threat of planetary proportions.
These can be fixed with fundamental shifts in
measurement, reporting and rating companies.”
Allen White, (Guardian Professional) February, 2013
Answer: Bridge the GAAP
20. Trends
Thought-Leaders Using
SI/ESG Fundamentals to
Engage CPAs, Business
Owners & Educators
• Engage the CPA Community ~ Most Trusted Advisor
• Engage the Business Owner (Privately-Held)
~ Valuation & Succession Planning
• Engage Leaders/Job Creation ~ KnowledgeEconomy $$$
• Education Partners ~ Colleges & Universities
21. Tools
MVP (More Value & Profit)™ Program
• Based on People-Driven (and Planet Too) Business Model
• Sustainability Scoring & Impact Ratings; 401K, Pensions (& Endowments)
• Internships ~ MBAs, Sustain’y Accounting: Providence College
• Create New, Viable Profit Centers – Especially for CPAs
• Community Signature ~ Environmental Literacy Programs
~ No Child Left Inside (NCLI)
22. A “People-Driven” Business Model Values
Human, Environmental, Social & Financial Capital
PROFIT-DRIVEN
Financial Data:
Tangibles
• Earning Growth
• Price/Earnings
Ratio
• Return on Equity
• Operations
• Cash Flow
• Risk Management
PEOPLE-DRIVEN™
Profit +
People +
Planet =
Prosperity
Benefits the
Whole
Human Env Social
Data: Intangibles
• Health ~ Stress/Wellness
Program
• Wealth ~ Scoring/Impact
• Earth ~ Energy Efficiency &
Natural Resource Intensity
• Equality ~ Employee
Engagement &Leadership
• Trust ~ Sustainability
Reports/Community
Signature
Why? Intangibles Drive Value
Building Bridges 2012
Copyright 2012 All Rights Reserved
27. Trends: An Emerging Marketplace?
All Investing
$61.9 Trillion
Negatively
Screened Funds +
Impact Investing
$3.1 Trillion
Impact Investing
in 10 years?
• Impact Investing is the
use of for-profit
investment to address
social and
environmental
challenges.
~$1 Trillion
850+ B Corporations $7.0 Billion Marketplace 60 Industries
28. Who makes Impact Investments?
DFIs
• OPIC
• IFC
• IADB
Private
Foundations
• Rockefeller
• Ford
• Skoll
Private Equity & Debt
Real Estate
Financial
Institutions
•
•
•
•
Pension
Funds
JP Morgan
Prudential
UBS
Morgan
Stanley
• TIAA Cref
• PPMG
HNWIs and
Corporations
• Starkbucks
• Danone
•“Double & Triple” Bottom Line Funds
•Cleantech funds
•Investments in land conservation, green buildings, and
affordable housing
Fixed Income
•Screened Portfolios of Gov’t Bonds
•Targeted Community Development Bond Funds
Cash & Cash
Equivalents
•Deposits at a CDFI or B Corporation
850+ B Corporations $7.0 Billion Marketplace 60 Industries
29. What do they want to Measure?
Operational Impact
Business Model Impact
Governance
Workers
Intensity
Reach/Scale
Community
Environment
Efficacy
Serving Those
In Need
Consumers
Industry
Impact/ Sector
Innovation
850+ B Corporations $7.0 Billion Marketplace 60 Industries
30. Tremors: New Corporate Forms
Benefit Corp: Twenty
Passed
(DE, PA, CA, HI, IL, LA, MA
, MD, NJ, NY, SC, VT, VA, D
C, AZ, AR, NV, OR, CO, RI)
Not Alone
L3C
Flexible Purpose Corp
Social Purpose Corp
UK / Chile
850+ B Corporations $7.0 Billion Marketplace 60 Industries
33. Discovering corporate sustainability trends &
tremors through CDP disclosure assessment
Sustainable Brands
#NewMetrics
Philadelphia 25th September 2013
Stephen Donofrio
Vice President, Partnerships & Innovation
Stephen.Donofrio@CDP.net / 212.378.2086
132 Crosby Street, 8th Floor, New York, NY 10012
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 33
34. Agenda
• Trends
Increasing investor interest & corporate disclosure
Quality of corporate disclosure is ever-improving
• Tremors
Scope 3: Financed emissions minimally reported by financials
Scope 3: Investments methodologies exist, but no standard
• Tools
Case Studies of Scope 3: Investments calculated by financials
CDP overview
Action and engagement on financed emissions
850+ B Corporations $7.0 Billion Marketplace 60 Industries
34
35. Agenda
• Trends
Increasing investor interest & corporate disclosure
Quality of corporate disclosure is ever-improving
• Tremors
Scope 3: Financed emissions minimally reported by financials
Scope 3: Investments methodologies exist, but no standard
• Tools
Case Studies of Scope 3: Investments calculated by financials
CDP overview
Action and engagement on financed emissions
850+ B Corporations $7.0 Billion Marketplace 60 Industries
35
36. 750
90
CDP Signatories & Signatory Assets: 2003 - 2013
75
600
60
Assets ($ trillion)
Number of Signatories
Trends:
Increasing investor interest & corporate disclosure
Climate Change
4600+
Companies
disclosed via CDP
in 2013
To transform the global economic system to prevent
Water
dangerous climate change and value our natural resources
45
340+
by putting relevant information at the heart Companies disclosed
of
in 2012
business, investment and policy decisions.
30
450
300
150
15
Forests
100
0
0
2003
2004
2005
2006
Climate change signatories
Climate change assets
2007
2008
Water signatories
Water assets
2009
2010
2011
2012
2013
Companies disclosed
in 2012
Forests signatories
Forests assets
850+ B Corporations $7.0 Billion Marketplace 60 Industries
36
37. Trends:
Quality of corporate disclosure is ever-improving
Transparency
Verification
97%
71%
min score for G500 disclosure
leaders in 2013
8% increase from 2011
of G500 companies verified
their GHGs in 2013
2X % from 2011
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 37
38. Agenda
• Trends
Increasing investor interest & corporate disclosure
Quality of corporate disclosure is ever-improving
• Tremors
Scope 3: Financed emissions minimally reported by financials
Scope 3: Investments methodologies exist, but no standard
• Tools
Case Studies of Scope 3: Investments calculated by financials
CDP overview
Action and engagement on financed emissions
850+ B Corporations $7.0 Billion Marketplace 60 Industries
38
39. Tremors:
Scope 3: Financed emissions minimally reported by financials
Energy:
Energy companies’ reported scope 3 emissions are 4X higher
than the
sector’s scope 1 and 2 emissions;
98% of these are emitted through the use of sold products.
whereas…
Financials:
Financials makes up 24% of respondents, however,
represents only 0.6% of
total S1+2 emissions;
Only 6% report the carbon impact of their investments…
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 39
40.
• Under the CDP, in 2012 RBS reported greenhouse gas emissions of
735,437 tonnes of carbon dioxide equivalent (tCO2-e)... RBS did
not report any emissions resulting from the money it loans to
fossil fuel companies or projects. These ‘financed emissions’
resulting from the bank’s loans to coal, oil and gas companies
bring the bank’s 2012 carbon footprint to up to 1,200 times the
footprint reported...
- RBS’s true carbon emissions 2012, The World Development Movement (WDM)
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 40
41. •
Various approaches exist:
2o Investing Initiative id’ed a dozen
• Standardization efforts:
results in 2014-2015?
Investments are categorized as a
downstream scope 3 category
because the provision of capital or
financing is a service provided by the
reporting company.
- GHG Protocol (WRI/WBCSD)
–
•
UNEP-FI (global) & VfU (regional)
Methods mentioned in
CDP’s
2013 disclosure cycle:
UNEP-FI (10 mentions), GHG Protocol (9
mentions), VfU (7 mentions), WRI (7
mentions) & WBCSD (3 mentions)
–
850+ B Corporations $7.0 Billion Marketplace 60 Industries
41
42.
There are many factors to be
We have tested all available
considered including
methodologies to assess GHG
availability, credibility, and
emissions from investments, but
consistency of information as well as
none of them meets our criteria in
the direction of the regulatory
terms of reliability and bias.
landscape in North America.
- Bank of Montreal
2013 CDP Climate Change Disclosure
- BNP Paribas
2013 CDP Climate Change Disclosure
850+ B Corporations $7.0 Billion Marketplace 60 Industries
42
43. Case Studies of Scope 3: Investments calculated by Financials
Commonwealth Bank of Australia
% of financing X total lifetime
project emissions
1 project (25 year life) in ’12
Uses Australian govt’s def. of
‘emissions intensive’ to identify
deals closed during reporting yr
July 1, 2011 - June 30, 2012
(metric tonnes CO2)
Scope 1
Scope 2
Scope 3
11,160
145,989
39,634,361
39,791,510
S3 Investments
39,469,868
S3 Investments/Total
99%
S3 Investments/(S1+S2)
251 times
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 43
44. Case Studies of Scope 3: Investments calculated by Financials
Mizuho Financial Group
% of equity x emissions as
reported to CDP or other
Top 30 companies held by the
parent company
Accounts for ~20% of the
value of consolidated noninvestment holdings
April 1, 2012 - March 31, 2013
(metric tonnes CO2)
Scope 1
Scope 2
Scope 3
16,177
202,850
8,658,200
8,877,228
S3 Investments
8,601,803
S3 Investments/Total
S3 Investments/(S1+S2)
97%
39 times
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 44
45. Case Studies of Scope 3: Investments calculated by Financials
Citigroup
% of financing X total lifetime
project emissions
January 1, 2011 - December 31, 2011
(metric tonnes CO2)
1 project (30 year life) in ’11
Scope 1
Scope 2
Scope 3
Project-specific GHGs are
derived from the plant’s capacity
& heat rate, the carbon content
of the fuel, and projected
capacity utilization
36,751
1,039,178
7,528,870
8,604,799
Scope 3 Investments
7,400,000
S3 Investments / Total
S3 Investments / (S1 + S2 )
86%
7 times
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 45
46. Agenda
• Trends
Increasing investor interest & corporate disclosure
Quality of corporate disclosure is ever-improving
• Tremors
Scope 3: Financed emissions minimally reported by financials
Scope 3: Investments methodologies exist, but no standard
• Tools
Case Studies of Scope 3: Investments calculated by financials
CDP overview
Action and engagement on financed emissions
850+ B Corporations $7.0 Billion Marketplace 60 Industries
46
47. Tools:
CDP overview
CDP is an international, not-forprofit organization providing the only
global system for companies and cities
to measure, disclose, manage and
share vital environmental information.
Mission is to transform the global
economic system to prevent
dangerous climate change and value
our natural resources by putting
relevant information at the heart of
business, investment and policy
decisions.
CDP has 501(c)3 charitable status in the U.S. via its fiscal agent and sponsor
liaison, Rockefeller Philanthropy Advisors
850+ B Corporations $7.0 Billion Marketplace 60 Industries
47
48. Tools:
Action and engagement on financed emissions
General Motivations:
CDP Efforts:
Pressure from NGOs.
UNEP-FI Scope 3 - Investments
Companies want
investor
feedback
force
task
CDP is increasing work on sector
disclosure & materiality focus
Mandatory reporting
requirements will increase
financed
emissions reporting tool
CDP could be utilized as a
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 48
49. Discovering corporate sustainability trends
through CDP disclosure assessment
Sustainable Brands
#NewMetrics
Philadelphia, 25th September 2013
Stephen Donofrio
Vice President, Partnerships & Innovation
Stephen.Donofrio@CDP.net / 212.378.2086
132 Crosby Street, 8th Floor, New York, NY 10012
850+ B Corporations $7.0 Billion Marketplace 60 Industries
Page 49
50. Trends & Tremors in the
Sustainable Investing Landscape:
Threshold Investing
Sustainable Brands #NewMetrics Conference
Wharton, UPenn, September 24, 2013
Bill Baue
Co-Founder
Sustainability Context Group
56. Tool
Triple Bottom Line Threshold Screening
True Sustainable Investing
Pssst: Build Portfolios That Profit From Sustainability Solutions
Editor's Notes
Provides clarity to directors and officers that their fiduciary duty includes creating a material positive impact on society and the environment, even in liquidity scenarios;Offers legal protection to directors and officers to consider the non-financial interests of the workforce, community, and environment when making decisions, even in liquidity scenarios;Helps maintain mission over time by 1) expanding shareholder rights to enforce this expanded definition of fiduciary duty and standard of consideration; and 2) requiring a 2/3 majority vote of shareholders to remove these higher standards;Creates a marketing opportunity to differentiate the business as a Benefit Corporation, a new class of corporation required by law to benefit society as well as shareholdersCreates press opportunity for early adopters
Financials:Sector Stats:The most reported risk and opportunity is reputation;Scope 3:Business travel, employee commuting and waste generation are 3 most commonly disclosed categoriesEnergy:Sector Stats: 50% of energy companies have a performance band of C or lower; The sector has the highest proportion of companies without emission targets (24%); andScope 3: Reported scope 3 emissions are four times higher than the sector’s scope 1 and 2 emissions. 98% of these are emitted through the use of sold products.