Field Guide to Investing in a Regenerative Economy: Grasslands
"Greenwich, CT, is a long way from the wind-swept prairies where ranchers Jim Howell, Zachary Jones and Tony Malmberg make their homes. But it is perhaps an early indication of how the capital markets' terrain is shifting that the three found themselves in the heart of hedge fund country recently, updating their investment partners in a custom grazing business who were as interested in rural job creation, carbon sequestration and soil enrichment as they were in how increased stocking rates and fatter cattle would enrich them financially." --From "The Grasslands Story"
Capital Institute contributed to a new Ebook, just published by Harvard University Business School. The Landscape of Integrated Reporting is a collection of articles and thought pieces by those who attended a recent Integrated Reporting Workshop organized by Professor Robert Eccles, co-author of One Report. Our contribution is a letter written by a fictional CEO to her board of directors. Read it below and access the Ebook in its entirety here.
Level 3 Capital Advisors
Level 3 Capital Advisors, LLC, is John Fullerton's holding company for his impact investment activities including direct investments, fund investments, and occasional strategic advisory engagements.
If you open up the papers lately, you’ll find the discussion of the sovereign debt crisis tends to focus narrowly on offending nations’ profligate spending and borrowing habits. While these behaviors have no doubt contributed to fiscal deficits, what is often overlooked is that addressing another kind of deficit--an ecological one--is of equal importance if nations are to sustain healthy and resilient economies. One bank is working to advance this notion by incorporating into its sustainability rating of sovereign debt a country's resource efficiency.
Bank Sarasin, a Swiss private bank founded in 1841, launched the first investment fund based on the concept of eco-efficiency in 1994 and has been including social factors in its sustainability ratings since 1997. Sarasin’s sustainability rating of sovereign debt assesses a country’s creditworthiness based not only on resource availability but also on resource efficiency. Viewing a country’s ability to repay its debt over the long-term through this holistic prism yields some noteworthy results: resource-rich but inefficient economies such as the United States and Russia appear particularly vulnerable to future rating downgrades while resource-scarce but efficient countries like Japan, the Netherlands, and Germany appear much less at risk.
Many members of the Capital Institute community believe that the emerging markets for ecosystem services hold considerable promise as tools for redirecting the flow of capital toward economic activities that honor ecosystem constraints. However, a paper that recently circulated among us entitled "The Environmentality of 'Earth Incorporated'" raised some questions that challenge that belief. The author, Sian Sullivan, argues that the “intrinsic fallacy at the heart” of ecosystem services market initiatives is that they attempt to incentivize environmentally ethical behavior. She maintains that the market does not produce “virtuous behavior” and that it is essentially naïve to take the view that if only we design them correctly we can halt or reverse ecosystem degradation. She further states that the danger of these market initiatives is that they promote the “valuing of nature as money,” and do not acknowledge “nature's immanence or sentience,” or the reality that humans are merely one of many “companions” in nature’s community. Sullivan’s argument might lead one to conclude that efforts to save our fragile ecosystems should be focused more on shifting humanity’s view of its place in the natural order rather than harnessing the financial markets to restore that natural order.
Global Wealth Gap Indicators:
1. Only nine countries, representing four percent of the world’s population, have narrowed the wealth gap while for 80 percent of the world’s population the wealth gap has increased. The five hundred highest income earners earn more than the poorest 416 million people (Source: UN Human Development Report 2005).
August 2012 Update—Since last we spoke with Andrew Kassoy, co-founder of B-Lab, in June of 2010, the organization has been in a state of rapid evolution. When we spoke with Kassoy B-Lab had certified a total of 275 firms as B-Corporations with revenues totaling $1.25 billion. Since that time the number of certified companies has grown to 574 firms generating $3.35 billion in revenues. Sixty industries are now represented among certified B-Corporations, up from 54.
B-Lab has also enjoyed a number of legislative successes over the past two years. For example, the passage of the AB 361 Benefit Corporation Bill in California, authorizing and regulating the creation of new B-Corporations, has helped B-Lab gain additional partners. Similar laws that enable the formation of B-Corporations have been introduced in several other states. In the past four years Hawaii, Maryland, Louisiana, New Jersey, New York, Vermont, and Virginia have all passed B-Corporation laws, while legislation was introduced in three additional states. These pieces of legislation define B-Corporations, and set standards that firms must employ in order to be recognized as such by state governments.
The release of the Global Impact Investing Rating System (GIIRS) in the fall of 2011 was a major step forward in assessing an entity’s effect on all stakeholders. The implementation of this system answers the impact investing community’s call for a set of standardized measurements that would help guide mission-aligned capital to worthy causes. GIIRS rankings allow for a degree of standardization to take place in the impact investment and mission-aligned capital space. Any firm can now request and pay for a GIIRS assessment, and a score of at least 80 makes a business eligible for qualification as a B-Corporation. —Evan Lozier. Evan is the Capital Institute’s Summer 2012 intern.