Blood and Gore endorse sustainable investment
Many investment portfolios are full of risky assets of businesses too reliant on carbon-intensive energy, warns former United States vice-president Al Gore.
The 2007 Nobel Peace Prize-winner and environmental campaigner was in Geneva on Tuesday promoting a tie-up between a sustainable investment fund he heads and a private Swiss bank, Lombard Odier Darier Hentsch.
“More money is allocated by markets around the world in one hour than by all the governments on this planet in the entire year,” he told journalists. “Sustainability factors have to be fully integrated into every investment decision.”
Gore helped set up Generation Investment Management with top banker David Blood four years ago to encourage the financial sector to change its approach and encourage a greater share of resources in the fight against global warming.
“Our goal is to prove the business case that when you take sustainability into the heart of financial management it improves the process,” he added.
The niche sector of socially responsible investing, for clients who care as much about where their money is invested as about how much they earn, is popular in both the US and Europe.
While the term has been interpreted in many different ways, in general socially responsible investors try to avoid companies that exploit workers, cause pollution, add to global warming or operate in countries with dubious human rights records.
Nice returns?
Believers in sustainable investing think that selecting the best companies on non-financial criteria will ultimately lead to higher returns. But the jury is out on whether this is really the case.
“In general you have slightly lower returns than non-ethical invesments.
“But you have better control where your money goes and the returns are less financially and more socially, ecologically and ethically oriented,” says Anne-Kathrin Glatz of the non-governmental organisation Berne Declaration.
“I have the impression that more and more people are interested in them. It’s a niche sector with a significant growth potential,” she told swissinfo.
The NGO recently published a practical consumer guide on ethical investments.
But in a recent article in Swiss News magazine, financial adviser Brien Donnellon said that “recent evidence confirms that socially responsible firms included in the FTSE4Good index (a new index of ethical share performance) actually deliver better returns than conventional indices”.
David Blood felt that companies like Generation were definitely benefitting from recent market turmoil.
“Markets have been very difficult over the past nine months. In an environment where there has been re-pricing of risk and a movement towards higher quality businesses, that’s good for firms like Generation,” he said.
Climate research
Launched with $60 million (SFr61.9 million) of partners’ capital in April 2004, Generation is now managing just under $1 billion and the firm says it has a capacity of about $5 billion.
Generation and the Swiss bank joined forces in November 2007.
The fruit of their partnership is a new investment fund, LODH Horizon – Generation Global, which manages $260-280 million, but still has a negative performance.
As a next step, the firms intend to cooperate on research into renewable energies, the carbon market, sustainable agriculture and clean fossil-based industries such as those involved in carbon capture and sequestration technologies.
During his presentation, Gore took time to underline the importance of Swiss climate change research.
“A great deal of the seminal research that led to the world’s understanding of climate change was done here in Switzerland. When I put together my book, An Inconvenient Truth, I relied heavily on Swiss research,” he said.
swissinfo, Simon Bradley in Geneva
Generation Investment Management, co-founded by Al Gore, the former US vice-president and Nobel Prize-winning environmental campaigner, was established in April 2004.
The company, with 27 staff, including 14 investment professionals, manages just over $1 billion.
It has offices in London and Washington and plans to open another in Melbourne in 2008.
The firm’s investment approach is based on a belief that sustainability factors, such as economic, health, environmental and social impact and standards of governance, will ultimately drive a company’s share price ooer the long term.
Al Gore is to be awarded an honorary doctorate by the Federal Institute of Technology in Lausanne for his work in publicising the issue of climate change. Gore will receive the doctorate in person on April 15.
Founded in 1796, Lombard Odier Darier Hentsch is the oldest firm of private bankers in Geneva and one of the largest in Switzerland and Europe.
It has over SFr179 billion in assets under management and 1,800 employees with a presence in 17 countries.
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