Conference Presentation, Panel
Investing in Sustainable Development
Milken InstituteSusan Mac Cormac, Anne Finucane, Vicki Fuller, Scott Minerd, Clifton Robbins, Markus Voigt
- Public Benefit Corporations and SBCs are shifting fiduciary duties to include social and environmental goals alongside profitability, with the PBC model backed by KKR filing to go public.
- Major institutional investors including BlackRock, Bank of America, Blue Harbor, Guggenheim, and the New York State Common Retirement Fund are integrating ESG factors into investment processes to reduce risk, enhance returns, and manage regulatory and litigation exposure.
- Bank of America targets a $125 billion ESG funding commitment by 2025, while the New York State Common Retirement Fund allocated approximately $1.5 billion to strategies meeting sustainability principles.
- ARIAM plans to expand investment teams into North Africa and Asia, employing 2,000 to 4,000 people for a few years to maintain hybrid solar and battery systems and establish training centers.
- The New York State Common Retirement Fund anticipates that 40 companies will begin providing emissions data within one year of launching their index and engaging shareholders.
- Scott Minard predicts that five years from now, the rare manager will be one that does not consider ESG, while Cliff Gibbons expects 99% of asset managers to adopt ESG integration upon understanding its importance.
- Markus Voigt forecasts that storage costs will decrease in the near future, with solar costs dropping from 10 million euros per megawatt to 600,000 euros per megawatt over the next 12 to 13 years.
- Bank of America projects that returns on green bonds may be measured in cash or carbon credits, citing a 2.1% return on a Los Angeles LED lighting project.
- Blue Harbor moved to fully integrate ESG considerations about a year ago to assess every company for risk, planning to exclude poor profiles and drive change as a lead stockholder for troubled ones.
- Guggenheim is collaborating with the World Wildlife Fund to develop a sustainability quotient for infrastructure projects, a process expected to take several years, aiming for an open architecture with third-party ratings.
- BlackRock's hedge fund demonstrates that companies with poor social or environmental profiles can be financially well-run, while output-positive companies like solar may underperform due to weak internal ESG.
- The New York State Common Retirement Fund codified sustainability principles to mitigate vulnerability to regulatory policies, viewing ESG integration as a fiduciary necessity to protect future beneficiaries.
- Scott Minard warns that economic models assuming gradual climate risk braking are flawed, predicting that technology changes will leave industries with stranded assets and that utilities facing these changes could be punished.
- ARIAM intends to structure project bonds for developing countries to provide necessary refinancing, relying on ESG criteria and finalized infrastructure projects to secure placements.
- The number of institutional shareholders asking about ESG has grown significantly, with the fastest-growing proxy categories in the U.S. related to climate and deforestation policies.
- Cliff Gibbons notes that without independent, verifiable reporting systems, greenwashing will persist for small and mid-cap companies, though millennials are expected to prevent its continuation.
- SASB is expected to continue gathering industry-specific data to establish materiality and reporting consistency, while new corporate forms are moving into the mainstream as cutting-edge investment tools.
- Scott Minard suggests that philanthropic capital can be used to take first losses to de-risk investments in frontier markets, allowing subsequent investors to assume higher risk profiles.
- ARIAM expects the energy efficiency team in Germany to remain a major investment force for the next few years while diversifying to produce additional returns for conservative investors currently receiving around 5% in long-term German funds.
- Anne Funiken expects that over the long term, ESG matters for corporations will correlate with lower bankruptcy rates, higher returns, and less volatility.