Author: Mark Sloss

It was announced yesterday that Pax World Management, LLC, one of the venerable names in the SRI and ESG market, has entered into an agreement to be acquired by Impax Asset Management Group plc. The press release with initial details can be found here.

It is our continuing belief at RIS that this is not unique or an aberration but in fact a further expression of the forces at work in the industry as ESG and impact move toward center stage. Whereas this used to be a cloistered market that provided safe space for modestly sized asset management boutiques to operate unmolested, the mainstream move we are experiencing is bringing in some of the largest players in the asset management industry into the frame. In what is (finally) a viable market for ESG, competition is now driven by Porter’s five forces, and so scale and reach, diversity and deep pockets matter more than ever before.

In the “traditional” asset management marketplace, there have always been small boutiques players with unique value propositions, and the same will hold as the ESG marketplace takes on the attributes of, or really merges with, the traditional marketplace. But, the real asset growth comes from scale players, or boutiques that become scale players. We expect to see more activity like Impax/Pax, Trillium/Portfolio 21 and Eaton Vance/Calvert in the coming months and years, which in our view is as evidentiary as anything that ESG and impact are no longer at the fringe and powerful and seasoned market forces will be driving asset growth going forward.

This has been such an extraordinary Summer in terms of markets, governments and business there has been too much about which to write. But, something inevitably comes along that stands out as distinctive and worthy of note.

Charlottesville, VA, this past weekend was the focal point for expressions of some of the ugliest thoughts, images and behaviors that fester in America. These rights have been tested before in our history, and my own recollections immediately returned to Skokie, IL, in 1977 and 1978, when the National Socialist Party of America sought to stage a neo-Nazi rally in a heavily Jewish suburb of Chicago. 40 years later we are still trying to sort out whether this type of activity is constitutionally protected. But, from the perspective of a socially or environmentally aware investor, the question is rarely “can you?”; It is “should you?”.

Continue reading “When CEOs Divest”

Chipotle Mexican Grill (CMG) has had it rough (not to mention some of its more unfortunate patrons). There is clearly market fatigue over food-safety scandals with their retail outlets. After a spate of issues in the last couple years that severely damaged their reputation Chipotle went through some significant practice changes to try to ensure a cleaner, more consistent and safer food supply chain from sourcing to preparation. After years of emphasizing local prep in their business model they started to move toward the more traditional central kitchen model embraced across the fast food industry, and sought a best-in-class approach to food safety practices.

But, this blog is not about the cleanliness of the supply chain, locally sourced ingredients, or some of the other more obvious ESG issues that could be raised about a fast food chain. In fact, Chipotle stands up fairly well on many of these metrics. This is about the human capital. And this is not only about CMG.

Continue reading “RAISE the roof on food safety”

Our latest addition to the library is an article discussing the Department of Labor and the Fiduciary Rule as it pertains to whether financial institutions sustainably practice what they preach. As an industry we collectively need to do more to inhabit the values that we espouse and even demand of the companies in which investments are made. Shared responsibility and consumer protections are very common factors in corporate ESG analysis. Time for a look in the mirror. Take a stroll through our Library for more.

It is one thing to have a corporate culture based on asking forgiveness rather than permission, and another having a toxic corporate culture seemingly devoid of respect for people and even the rule of law. One is brash and entrepreneurial, and the other exploitive and abusive. If ride-hailing were gold and silver (which, to the shareholders, it is to the tune of $70 billion), the headlines Uber has been generating could just as easily have applied to the California Gold Rush. How much progress has there really been since 1848?

Continue reading “The end valuation does not justify the means”

Plenty of ink has been spilled already on the implications of a US retreat from the commitments under the Paris Agreement, and politicians from both sides of the aisle have had plenty to say for and against the move. The best we can recommend is to read the agreement itself and draw your own conclusions about its viability and advisability.

In terms of leadership in the US, we are finding cooperation on the climate in some unexpected places, although with only limited real impact so far. You can find a list of strange bedfellows in the Climate Solutions Caucus, a bipartisan Congressional group that “…will serve as an organization to educate members on economically-viable options to reduce climate risk and protect our nation’s economy, security, infrastructure, agriculture, water supply and public safety”. If you are a constituent or a business leader, call your Congressperson and express your support for at the very minimum working from a common set of facts and understanding.

Continue reading “Pittsburgh, not Paris”

Rather than just celebrate the tenth anniversary of the United Nations Principles for Responsible Investment, it seemed more appropriate to focus instead on the work not yet done. The last decade has been critical in terms of socializing the Principles and gaining signatories. The uptake has been dramatic. From a cold start the PRI is now at roughly 1,500 signatories representing more than US$60 Trillion.

Now the question is what are those signatories doing with the Principles. The mission states: “The PRI will work to achieve this sustainable global financial system by encouraging adoption of the Principles and collaboration on their implementation; by fostering good governance, integrity and accountability; and by addressing obstacles to a sustainable financial system that lie within market practices, structures and regulation.”

The numbers do not yet add. Continue reading “UN PRI turns ten”

Credit where credit is due — the art and editorial departments at CityWire USA took a few fun liberties when I referred to carrot cake in my latest article unpacking when a fund is and is not good for your ESG portfolio. Jean-Jacques Rousseau is believed to have originated the quote “Qu’ils mangent de la brioche” which was then ascribed to Mme. Antoinette. The allusion as it turns out is quite apt and timely for a discussion of ESG issues, though. With the hollowing out of the middle class and the near polar separation of the very wealthy and the poor, matters of economic justice become matters of peace and stability even in developed economies. An ESG portfolio should not be disconnected from these realities, and addressing vertical slices of environmental, social and governance factors without looking across the totality presents its own risks to portfolio and purpose.

In the previous article, which is also now posted to the library, I take up a discussion of the mechanisms and merits of divestiture in public market portfolios. Is it possible to divorce a portfolio from activities that contravene the purpose and principles of the asset owners, and to do so without accepting out-of-bounds risk or sub-market returns? And while we are on the subject of literary and artistic allusion, no, the artwork does not suggest an Ayn Randian bent.  If anything, we need Atlas to cherish the responsibility for the world on his shoulders, not shrug. Divestiture should be part of a program to address the world’s problems, not retreat from them.

Head on over to the Library, pull up a chair (not too posh — remember poor dear Marie) and peruse both articles.

Happy International Women’s Day. Today is an opportunity to speak with a more personal than corporate voice.

Those who know me or read what I publish know that I am a champion of engagement over detachment on issues of consequence in business, society and the environment. I understand and embrace the motivations behind a day without women, but I worry that the lasting positive impact will not be sufficient to offset the lost wages and other difficulties women will face making it happen. How do we help sustain the positive impact of a day of direct action beyond tomorrow morning’s headlines?

I am asking my fellow Y-chromosomes to be advocates for gender equality and inclusiveness, and women to take the opportunities that a day like today creates to engage with men, or frankly anyone in a position of privilege and power. Catalyst puts out an excellent resource guide that can help foster this type of engagement that I recommend reading and sharing. We should not need a day or a month on the calendar to be aware and engaged on matters of gender equality and diversity but we have it so we should use it for maximum impact. Give people the tools and language to start effecting durable change:

First Step – Engaging Men