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Employees put the final touches during the installation of the exhibition 'Paris de L'Avenir', a showcase for tangible climate solutions in the context of the COP21 World Climate Summit, in front of Paris city hall, France, November 26, 2015. Cows are seen in this aerial view on a deforested plot of the Amazon rainforest near Rio Pardo, in the district of Porto Velho, Rondonia State, Brazil, September 3, 2015. And yet, with a U.N. climate summit in Paris set to promote a switch to a low-carbon economy, data from the U.N. body urging investors and asset managers to give more weight to non-financial considerations, including the environment, shows a patchy response, at best. The U.N.-backed initiative, Principles for Responsible Investment (PRI), encourages asset managers worldwide to commit, among other things, to factor Environment, Social and Governance (ESG) issues into their investment decision-making. The initiative seeks to acknowledge the growing long-term influence on asset values of 'non-financial' factors such as carbon emissions, the gender make-up of the board or the rigor of policies on bribery, safety or low pay. A Reuters analysis of PRI data shows that, by Sept. 21 this year, 657 asset managers had been signed up to PRI for more than a year, and therefore published an annual report. PRI comprises a series of basic compulsory measures and more advanced voluntary measures, and the reports give an insight into how prepared the managers are to handle the type of investment challenges that could be presented by the Paris meeting. The voluntary commitments include three that particularly highlight how thoroughly ESG criteria are being applied: showing how ESG processes have influenced portfolio construction; showing how investing using ESG has improved financial or ESG performance and reduced risk; and showing how ESG has affected the firm's investment view or performance. Of the 350 equity- or bond-focused firms that Reuters examined in detail who published PRI reports, only 83 said they had met all three of these commitments. A further 195 firms with combined assets of roughly $28 trillion failed to meet at least one of the measures, while 72 firms with combined assets of just over $11 trillion met none of them. Among that last group were JPMorgan Asset Management (JPM.N), which manages $1.7 trillion; Aberdeen Asset Management (ADN.L), which manages $490 billion; and UBS Global Asset Management UBSN.VX, which manages $652 billion. Both JPMorgan and UBS declined to comment, while Aberdeen said it was in the process of enhancing its ESG activity and would meet the objectives next year. Examples of companies whose value has suffered because of failings in areas covered by ESG include oil company BP (BP.L), which saw its share price slide after it was forced to pay out billions of dollars after an oil spill that was ultimately down to poor business practice, as well as Volkswagen (VOWG.DE). Meanwhile, if the Paris conference can produce pledges to limit greenhouse gas emissions sufficiently to keep a global temperature rise below a U.N. ceiling of 2 degrees Celsius (3.6 Fahrenheit), equities and infrastructure in emerging markets are one sector likely to get a boost, a report by consultants Mercer showed. And a study published this month by the University of Cambridge Institute for Sustainability Leadership said global investment portfolios could lose up to 45 per cent as a consequence of short-term shifts in climate change sentiment. ( bit.ly/1WMorRi ) One firm looking to make more allowance for ESG factors in general is Standard Life Investments (SL.L), its Chief Investment Officer Rod Paris told the Reuters Investment Outlook Summit last week. "We're seeing much greater demand for us to demonstrate that principles around (ESG) investing are meaningfully embedded in the investment and research processes of fund managers; that it's real, that it's part of how we look at companies." Paris, whose firm met some but not all of the voluntary ESG criteria, said managers needed to address ESG issues to avoid scandals like those at VW. "If this is important to society, it will get priced into markets at some stage. And if it's being priced into markets, as a good investor, I want to be ahead of it, I want to understand it ... that's where the competitive advantage comes from."


News Article | December 3, 2015
Site: http://cleantechnica.com

Since 2011, Renovate America has financed more than $1 billion in home improvements through its HERO program. This is a significant investment which is paid back over twenty years. Thus it is not surprising to read about Renovate America’s 5th securitization of PACE bonds. “We have worked over the last three years to establish a proven asset class with PACE bonds. Now, we can also clearly demonstrate to investors the positive social and environmental impact of PACE improvements and their capacity to create clean energy jobs in local communities,” said CEO J.P. McNeill. His company has big expectations for 2016. It has financed 90% of America’s residential PACE projects to date. More than 350 cities and counties have adopted the program, but all in California. McNeill says they intend expand into “four or five states.” The only names mentioned so far are Florida and New York, but these are negotiations rather than contracts. They will need big money to carry out these plans. Renovate America is issuing $201,532,000 in Class A Notes rated AA (sf) by Kroll and AA (sf) by DBRS, and representing 8,939 home improvements made that reduce energy or water consumption or produce renewable energy. The company had to put in $207.8 million as collateral so it could issue $201.5 million in green bonds. Sustainalytics, a leading global provider of ESG and corporate governance ratings and research, has verified that the selection process for Renovate America’s projects and products is robust, and investments in them will help to create more energy efficient homes. Renovate America completed four prior securitizations of PACE Bonds between March 2014 and July 2015. It partners with local governments to provide the HERO PACE Program (Home Energy Renovation Opportunity), which allows homeowners to finance installations of energy-efficient products like HVAC, windows, and roofing; renewable and alternative products like solar; and water efficiency products for indoor systems and outdoor landscaping. Homeowners make payments along with their property taxes, and in the event the property is sold, the remaining balance may be able to transfer to the new owner. All images courtesy Renovate America    Get CleanTechnica’s 1st (completely free) electric car report → “Electric Cars: What Early Adopters & First Followers Want.”   Come attend CleanTechnica’s 1st “Cleantech Revolution Tour” event → in Berlin, Germany, April 9–10.   Keep up to date with all the hottest cleantech news by subscribing to our (free) cleantech newsletter, or keep an eye on sector-specific news by getting our (also free) solar energy newsletter, electric vehicle newsletter, or wind energy newsletter.  


News Article | March 15, 2016
Site: http://www.fastcompany.com

These days, we have high expectations of what companies should be. It’s not enough that they make good products. They also need to be good citizens. We expect them to minimize their social and environmental harm, to report their "impacts," and to give money to charity. And we expect them to do more than simply follow the law. In 1970, the economist Milton Friedman said businesses should think only about making profit (any idea of social responsibility was a distraction and a disservice to shareholders, he wrote). But in the 21st century we're starting to demand even more: Companies need to solve problems and aid causes, whether it’s Coca-Cola’s diarrhea program in Africa or Pampers’ one-for-one vaccine campaign with Unicef. Management theorist Michael Porter says business is entering a new, third stage in its relationship with society. First, there was philanthropy: Companies made money doing bad things, but then gave some of their earnings to good causes. Second, there was corporate responsibility (or minimizing harm): Companies tried to do fewer bad things. And now companies are working (or should work) on actual solutions: products and services that serve social problems. "The ultimate impact businesses can have is through the business itself," he told Co.Exist last year. "There are huge unmet needs in the world today. The question now is how to get capitalism to operate at its best because capitalism is fundamentally the best way to meet needs. If you can meet needs at a profit, you can scale." Porter's Shared Value Initiative looks at how companies can make profits by catering to the need for things like water, sanitation, and economic opportunity. It argues that social causes are sources of competitive advantage, particularly in the developing world, and that socially focused business rebrands what companies are about. Porter says companies have allowed themselves to be portrayed as parasitic and unfeeling toward society, when in fact there's enormous good that capitalism can do, properly executed. The notion of companies delivering social value as an explicit goal is a radical one. It takes commerce beyond Friedman's maxim, and beyond the defensiveness of corporate social responsibility. It embraces positivity and action, and allows profits to be linked to economies that won't improve unless people's lives improve. In the absence of government action, companies have a role in fixing social problems (water, electricity, lighting)—much the better to build local markets. The trick for multinationals—as a string of "impact startups" is showing—is to create "appropriate" technology, at appropriate prices. Fixing problems gives multinationals credibility in local markets and plenty of on-the-ground knowledge. "Fixing problems" is an entryway into the hearts and minds of consumers. It's a crucial part of reaching the 3 billion people who live on less than $2.50 a day. And, as such, shared value builds on the "Bottom Billion" and "Bottom of the Pyramid" ideas of Oxford professor Paul Collier and the late Harvard professor C.K. Prahalad, which posit that there is a huge market for products that target the world's poorest. But even in this advanced conception of what companies can do, there are several weaknesses and less-than-desirable aspects to this plan. If we're to expect still higher things of big business in the future—and history tells us that we should—we might look at other parts of the picture. For instance, we might look at whether companies themselves are good, not just whether they can do good. Shared value is a limited vision of what companies can be in the future. It's related to activities, not function or constitution. Today, the goal of social value is still an add-on to what most companies do. They may improve lives as a by-product of making profits. But it's not the explicit goal of the enterprise. And, in many aspects, the relationship between profit-making and social goals is an awkward one in companies. Departments are unaligned. One division makes a climate-conscious product, another makes a climate-negative product. Companies account for their impact on forests and oceans, but still harm forests and oceans. They sell socially useful products, then hand the profits to socially negligent shareholders. The notion of "shared value" itself is not everything it implies. As with sharing economy companies, such as Uber or Airbnb, the most visible "shared value companies" are not in fact sharing anything—at least not in the sense of foregoing something. "It's not about the company giving anything up. It is about creating value for society that also creates value for shareholders," says Porter's colleague, Mark Kramer. In other words, the shared value version of social good requires no fundamental change to the enterprise itself. Shared value is just a different version of making a profit. Nothing wrong with profit, you might say. Except that in the future we might begin to expect another change in how businesses operate: that they produce profit without harming the environment or society in other ways. That means looking at how they're constituted, legally speaking; how they're funded; how they relate to shareholders, or whatever these stakeholders are called in the future; and how they position themselves in their communities. We don't have to look far for companies that have to make fewer tradeoffs. There are now more than 1,600 "B corporations" that meld making profit with social responsibility (Etsy, Patagonia, Kickstarter, Warby Parker, and Seventh Generation among them). These businesses must meet a threshold of "impact" compared to their peers, and, in their governing documents, agree that shareholder interests are not the only interests the company will consider. The company also needs to do well by its workers, suppliers, customers, and community. B corporations are different from companies that do good as a sideline; constitutionally, the do-gooding is required. If they fail in their social mission, they can be sued, just as traditional shareholder-owned companies can be sued for not pursuing profit aggressively enough. "We're seeing many more entrepreneurs that wouldn't be in business were it not for the social and environmental [aspects] of what their doing," says Don Shaffer, CEO of RSF Social Finance, an impact-oriented financial services firm in San Francisco. "This is not a fad. It's part of a long-term trend, in my opinion." Could major corporations themselves become B corporations? We're seeing the first signs of that. Natura, a big Brazilian cosmetics and toiletries brand, signed up to B Lab's certification program last year (B Lab is a nonproft that certifies that a company's ethical business practices and impact are legitimate. Its certification has a legal requirement but it is not the same as incorporating as a benefit corporation). And Unilever, the massive homewares conglomerate, is investigating B-corp status as well. "The B-corp movement is a critical part of the shift to a more inclusive and purpose-driven economy, which is unquestionably needed," Paul Polman, Unilever's CEO, said recently. If publicly traded companies such Unilever become B corporations, that would mark a big shift. For one thing, these companies would have to report their impacts differently. They would no longer just talk about the negative "impacts" they were producing. They would quantify their positive impacts as well, instead of just putting out a press release about a new program. At the moment, industry measures and reports environmental, social, and governance (ESG) metrics—but it's questionable how much this disclosure leads to better outcomes. Mostly importantly, negative impact disclosure doesn’t stop companies doing harm. For example, BP or ExxonMobil might say in sustainability reports exactly how many carbon emissions they produced. Admirable. But that doesn’t stop them saying in another report that they’re prospecting for fossil fuels that, for climate reasons, we know we can’t burn. Responsibility rankings routinely recognize companies for depth of disclosure, passing no judgement on their actual impact. And these disclosures are often contextless. A company will say it saved so much water last year, but it won’t tell you about the water conditions where it’s operating. The numbers pay no attention to ecological limits and rely on the market taking care of sustainability problems, even though it doesn’t. "The underlying and unspoken assumption of ESG is that we have a sustainability crisis because we don't have the information. All we need to do is get companies to report and we'll solve the problem," says John Fullerton, a former J.P. Morgan managing director and founder of the Capital Institute. "I would argue that markets are just a tool and all the reporting in the world isn't going to solve the problem." With the growth of B corps and other impact companies, we've lately seen a burst of capital going into the social good space. Goldman Sachs, BlackRock, Bain Capital, Zurich, and AXA all now have funds for startups that generate "social returns" alongside profits. The Ford Foundation, MacArthur Foundation, and other philanthropies are investing part of their endowments in impact startups. And Mark Zuckerberg and Priscilla Chan have pledged to invest most of their $44 billion fortune in impact ventures. More than $60 billion has already gone into impact investments, a survey last year from J.P. Morgan and the Global Impact Investing Network showed. This is obviously exciting, with the potential to scale beneficial projects. But there's also a question of whether "impact" really equals "responsible," and whether some of these new companies meet higher-good standards we might expect in the future (or for that matter, the standard of B Corp certification). For instance, is it really possible to make as much money with an impact company as you can with a conventionally conceived company? Goldman Sachs would say yes—that's why it's invested in the sector. Others would say no, that the profits required by an investment bank might intrinsically make a company unsustainable. Leslie Christian, an impact adviser based in Seattle, argues that responsible investing necessarily involves lower returns and a different set of outcomes than, say, putting money into Amazon or GE. "I believe you can make high returns doing impact investing," she says. "You can make a lot of money dong renewable energy, recyclable commodities, or finding a cure to a disease. But what does it cost in other ways? What is happening to that profit? Is [the business] putting further strain on the planet? Is it contributing to further inequality?" A Wall Street veteran, Christian says the definition of impact is becoming stretched, with normal sorts of impacts—say, employing people—included. It’s no longer about having a responsible impact across stakeholders, just having an impact through the product or service. "[The impact] needs to include all the parties involved, not just the investors, but also customers, suppliers, the natural environment, and the community. That means a fair return to investors, but not an exorbitant return," Christian says. It may be that if we want better companies, we have to change the way we invest in them. Our expectations for good are only worth as much as what we're prepared to suffer as investors. If we expect bigger and faster returns all of the time, it's not surprising that we end up with companies that are less good than we want. Some impact investing is more like venture capital with a twist. And it tends to involve the same old high-net-worth folks, rather than everyday people. To scale impact investing more democratically, we need to open up the market through new instruments, such as crowd-investing (where retail investors take equity in businesses). "I believe in 10 years there will be many more options for people to invest [in social startups], even if it's in a pooled vehicle of some kind," says Don Shaffer, at RSF Finance. Shaffer argues that direct connections between investors and entrepreneurs are more likely to lead to productive relationships. Before Shaffer invests in a social startup, he makes sure that he knows the entrepreneur personally—and, where possible, investors in his company's $100 million Social Investment Fund know the entrepreneurs as well. Shaffer thinks this is important for maintaining the values of the fund and making sure everyone involved feels they're working toward the same goals. Every quarter, RSF organizes "pricing meetings" where everyone agrees on the amount of interest the entrepreneurs will pay on their loans. The rate is set collaboratively, not according to the market rate. "It's immensely fulfilling for people to come into contact with what their money is doing," he says. "People think investors want higher returns and the borrowers would rather have lower rates of interest to pay. But that doesn't happen. Often, it's the opposite. Invariably, the investors stand up and say, 'This environmental and social impact you're having is so compelling that if you want less return, I can probably do that.'" Personal connection changes the nature of transaction and leads to a more cooperative, human-sized arrangement, Shaffer says. In other words, it's the exact opposite of what happens when you invest in a mutual fund, and you're 10 steps away from what a company does with your money. In the future, we need to build more direct, accountable relationships into investing, so we knew where our capital is going. Replicating something like RSF's pricing meetings on a larger scale—say, in agreeing on the size of shareholder dividends—would lead to a more responsive type of enterprise. Could Wall Street organize quarterly forums where companies and investors would discuss the ratio of financial to social returns? The future of progressive business isn't just about what we can expect of companies. It's also about what we, as individual investors, are prepared to accept. If we want good companies, we should ask for open companies, and start a debate. It's only by telling companies what we want that we can start to get what we want.


And yet, with a U.N. climate summit in Paris set to promote a switch to a low-carbon economy, data from the U.N. body urging investors and asset managers to give more weight to non-financial considerations, including the environment, shows a patchy response, at best. The U.N.-backed initiative, Principles for Responsible Investment (PRI), encourages asset managers worldwide to commit, among other things, to factor Environment, Social and Governance (ESG) issues into their investment decision-making. The initiative seeks to acknowledge the growing long-term influence on asset values of 'non-financial' factors such as carbon emissions, the gender make-up of the board or the rigor of policies on bribery, safety or low pay. A Reuters analysis of PRI data shows that, by Sept. 21 this year, 657 asset managers had been signed up to PRI for more than a year, and therefore published an annual report. PRI comprises a series of basic compulsory measures and more advanced voluntary measures, and the reports give an insight into how prepared the managers are to handle the type of investment challenges that could be presented by the Paris meeting. The voluntary commitments include three that particularly highlight how thoroughly ESG criteria are being applied: showing how ESG processes have influenced portfolio construction; showing how investing using ESG has improved financial or ESG performance and reduced risk; and showing how ESG has affected the firm's investment view or performance. Of the 350 equity- or bond-focused firms that Reuters examined in detail who published PRI reports, only 83 said they had met all three of these commitments. A further 195 firms with combined assets of roughly $28 trillion failed to meet at least one of the measures, while 72 firms with combined assets of just over $11 trillion met none of them. Among that last group were JPMorgan Asset Management (JPM.N), which manages $1.7 trillion; Aberdeen Asset Management (ADN.L), which manages $490 billion; and UBS Global Asset Management UBSN.VX, which manages $652 billion. Both JPMorgan and UBS declined to comment, while Aberdeen said it was in the process of enhancing its ESG activity and would meet the objectives next year. Examples of companies whose value has suffered because of failings in areas covered by ESG include oil company BP (BP.L), which saw its share price slide after it was forced to pay out billions of dollars after an oil spill that was ultimately down to poor business practice, as well as Volkswagen (VOWG.DE). Meanwhile, if the Paris conference can produce pledges to limit greenhouse gas emissions sufficiently to keep a global temperature rise below a U.N. ceiling of 2 degrees Celsius (3.6 Fahrenheit), equities and infrastructure in emerging markets are one sector likely to get a boost, a report by consultants Mercer showed. And a study published this month by the University of Cambridge Institute for Sustainability Leadership said global investment portfolios could lose up to 45 per cent as a consequence of short-term shifts in climate change sentiment. ( bit.ly/1WMorRi ) One firm looking to make more allowance for ESG factors in general is Standard Life Investments (SL.L), its Chief Investment Officer Rod Paris told the Reuters Investment Outlook Summit last week. "We're seeing much greater demand for us to demonstrate that principles around (ESG) investing are meaningfully embedded in the investment and research processes of fund managers; that it's real, that it's part of how we look at companies." Paris, whose firm met some but not all of the voluntary ESG criteria, said managers needed to address ESG issues to avoid scandals like those at VW. "If this is important to society, it will get priced into markets at some stage. And if it's being priced into markets, as a good investor, I want to be ahead of it, I want to understand it ... that's where the competitive advantage comes from."


News Article | April 6, 2016
Site: http://www.nytimes.com/pages/technology/index.html?partner=rss&emc=rss

It’s called ESG investing, for environmental, social and governance factors, and firms are feeding this data to an algorithm to decide where to invest.

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