November 09, 2004
Al Gore and David Blood Graft Sustainability Research into Traditional Investing Analysis
by William Baue
The former US vice president and the former Goldman Sachs CEO launch a new investment firm whose
research team fully integrates sustainability with fundamentals.
Sustainable and responsible investing (SRI), also known as socially responsible investing, has
increasingly been gaining a toehold in the mainstream since the Institutional Investor Summit on
Climate Risk at the United Nations co-chaired by former US Vice President Al Gore last year.
Yesterday, Mr. Gore helped move sustainability investing a significant step forward, placing its
feet firmly in the mainstream by launching Generation Investment Management, a firm that will fully
integrate sustainability research into its fundamental equity analysis.
"Transparency, innovation, eco-efficiency, investing in the community, nurturing and
motivating employees, managing long-term risks, and embracing long-term opportunities are integral
parts of a company's enduring capability to create value," said Mr. Gore, who chairs Generation.
"Business leaders who align their business strategy and technical development with sustainability
and social accountability will deliver superior long-term results to shareholders."
Generation bridges the Atlantic with offices in London and Washington, DC, its founders also bridge
the worlds of sustainability and traditional investment. Mr. Gore championed environmental and
social sustainability throughout the 1990s in the Clinton Administration; managing director David
Blood brings to the table significant experience in traditional investing as former CEO of Goldman Sachs Asset Management.
fundamental equity analysis and sustainability research at the beginning, middle and end of the
investment process is just a more sensible way to invest and deliver superior returns to our
clients," said Mr. Blood. "Sustainability combines the principles of economic growth,
environmental stewardship, and social accountability."
Generation's founders have
contributed a total of "double-digit" millions of dollars to the startup according to the
Financial Times. In addition to Messrs. Gore and Blood, the founders include former Goldman
Sachs executives Mark Ferguson and Peter Harris as well as Colin le Duc, former director of
research for Sustainable Asset Management (SAM), a Zurich-based sustainability investment firm.
"One of the fundamental premises of our approach is that there is no difference between
fundamental equity research and sustainability research," said Mr. le Duc, who serves as
Generation's head of research. "The lessons I learned at SAM and the lessons my colleagues learned
at Goldman Sachs taught us that the next evolution in long-term, sustainable investing was to fully
integrate the team."
Mr. le Duc explains how his 13-person research team, which also
includes sustainability researchers Duncan Austin from the World Resources Institute (WRI) and Niki Rosinski from SAM, is advancing the
next-generation evolution of sustainability investing.
"The first generation of SRI was
negative screening, the second was best-in-class; in each of those cases, you had an SRI research
group that would produce a list of companies that would then be handed to the investment management
team," Mr. le Duc told SocialFunds.com.
Negative screening excludes "sin" sectors such
as tobacco, while best-in-class screening rewards corporate social responsibility (CSR) best
performers in "dirty" sectors such as the extractive industries.
"What differentiates us
is that we are doing equity research that includes sustainability research--all
considerations are integrated together," Mr. le Duc added.
"Furthermore, we're doing primary
research exclusively--that means we will not buy in any research at all."
Most SRI firms
purchase CSR data from research firms such as Innovest Strategic Value Advisors, KLD Research & Analytics, or Ethical Investment Research Services
Mr. le Duc illustrates how
Generation's research differs from both traditional and SRI approaches by describing examples.
"When we assess management quality at every company, we will ask very traditional questions
about the company's strategy and the quality of the management, but the sustainability aspects are
embedded within that definition of quality," he said. "For instance, we would rate Toyota's
strategy as being absolutely of high quality with regards to traditional aspects as well as
sustainability aspects, but we're not making a distinction between them."
to begin its investment management business in early 2005, catering to institutional investors such
as pension funds, foundations, and endowments as well as high net worth individuals. It will
invest in global equities, an underdeveloped asset class in SRI.
"The trends we saw at
SAM and the trends my colleagues saw at Goldman Sachs were all pointing in this direction, so if in
a few years the mainstream is adopting this approach, that would be a great thing," Mr. le Duc