RAOtheAmericas2023 - the Opportunities & the Challenges as seen by leading LP’s & GP’s across the region.
Innovation - Collaboration - Leadership
Our New York summit 2023 for Responsible Asset Owners across North & South America took place last week, and feedback has been excellent. Delegates, speakers and sponsors felt that the day captured the key issues facing the responsible asset community, as they wrestle with the tensions that are emerging between ethical investment and Investor returns.
A diverse group of participants debated and challenged each other on numerous topics, with all recordings individual links below and a summary of key themes here:
The CapEx needed to reach net zero by 2030 is $40 Trillion, broken down as follows:
Energy $15 Trillion
Real Estate $10 Trillion
Mobility $10 Trillion
Agriculture £5 Trillion
A key component of successfully making a transition in all those areas is adaption which, in turn, requires behavioral change and technological innovation.
Canada has stopped waiting for natural alignment between public and private funds and moved to legislation for what it assesses as best practice from other jurisdictions by engaging and collaborating nationally and internationally.
Risk cannot be detached from any area of life and its connectivity, whether political, economic or in the investment sector, must be fully appreciated and factored into every aspect of portfolio construction. Volatility is just a summary assessment of what’s happened, not a holistic approach to markets.
A catalytic level of finance is required for emerging markets and the responsibility to do better doesn’t rest with brands and funds alone, but with each and every person in this space. The reality of each person’s legacy for future generations should keep us all awake at night.
Most ratings for ESG do not relate to the product labeling but you can’t fool people who are actually involved in companies. Data is critical to providing an insight into what’s going on but still requires leaders to interrogate it more thoroughly than they are doing atm. Data as a tool for Risk Management is critical but so is leadership, clarity & commitment.
Performance: 80 US Asset Allocators and 15 in China are well below the average score for global asset allocators in responsible investing. If they are below average, how are we going to address these problems given that together, they make up 40% of the funds being allocated?
Politics has got to get out of investment decision making, whether in red or blue States. Politicians must not dictate where we invest our funds.
Nobody is denying the science of climate change any more, however the interpretation about how to invest in climate change is still woefully disparate, although Europe is doing better than many, with the Dutch and the Danes being exemplary in delivering outstanding returns from Responsible Investing.
See below for all recordings but here are just a few more summary comments:
Climate Change was unavoidably at the forefront of everyone’s mind from the outset, not least because wildfires in Canada massively disrupted air travel, forcing 3 speakers to join by video conference, rather than in person. Adaptability was the watchword for all.
Katharine Prestion, VP of Sustainable Development at Canadian giant OMERS said she was devastated not to be there in person but was nonetheless a powerful contributor to the first panel of the day which was looking at the financing needs for decarbonisation kicking things off with a punch, hosted by Jillian Ashley Partner at Allen & Overy. Tailwinds were self-evidently pushing the Impact of Climate change for Katharine & another panelist, Guillaume Mascotto of US Bank, also stranded by wildfires affecting the skies but despite this, we discovered that the name US Bank is a bit of a misnomer, as their 78,000 employees are spread across Europe & the USA and gave some real insights into the ESG bubble which some are attempting to burst and which Bloomberg picked up on afterwards. At end of this post.
Not waylaid by the smoke issue, Philipp Koch of McKinsey spoke with authority about the business case for sustainable investing, making it a ‘no-brainer’ as a key factor to deliver better returns for investors..
Ken Rivlin Senior Partner at A&O had an engaging chat with Senior Counsel Robert Espositio of Apollo Global Investment about the polarization of the term ESG which he’d just seen a definition of on the side of a truck, defined as Elitist, Socialist & Grifter. Food for thought.
Georges Dyer, Intentional Endowments Network moderated a panel which essentially asked if Public & Private Investors could ever truly be aligned. Pedro Guazo, CEO of the UN Joint Staff Pension Fund explained the process they went through before deciding on an exclusion policy in key areas such as tobacco whilst Guy Pinkman, Chairman of the Lincoln Police & Fire Pension talked about the responsibility of handing a cheque to a grieving family who had lost a brave fireman in the line of duty and weren’t asking questions about ESG, just worried about their future without a breadwinner. Meanwhile, Senator Galvez was replaced - remotely - by Karine Péloffy who spoke about the imperative need to join the dots between environmental and social needs.
The scene was set for the panel on Volatility, expertly moderated, as ever, by Kevin Mahn. Panellist Jon Lukomnik talked about how good Governance was one of the most effective Risk Management tools available to Fund Managers & Owners while Antonio Rodriguez of NYC Board of Education Retirement System added that asset allocation and portfolio construction had Risk Management at its heart.
Tinder for Investors - not a universally popular name for this topic - was hosted by the extremely well informed Lane Jost (pronounced Yost not Jost FYI) of Edelman Smithfield - great supporters of RAO events - who posed a question about how truth and clarity affected market sentiment. David Mikhail of the UN Capital Development Fund talked about the opportunities for growth in new areas, currently being ignored. Stephan Pouyat reinforced the view that widening horizons and exploring new opportunities was not only an opportunity for increased returns, but also an obligation to future generations.
Paul O’Brien, also calling in because of the travel disruption had one of the most diverse and eclectic panels of the day. Afterwards, in an email to me,, he said some of his takeaways included::
There will be an enormous demand for capital to finance the energy transitions from which knowledgeable and flexible investors can benefit.
Fiduciary rules limit what institutional investors can do but still leave plenty of space for action.
We need governments of all colours and countries to act and he was glad to hear some speakers talk about efforts to shape climate policies at that level.
See below for recordings of all panel sessions
The panel he moderated with Scott Kalb, Former CIO of the KIC (and fluent in Korean btw), Irene Aldridge of AbleBlox, Catherine Banat of Women & Climate and Bryan Gurhy of the World Bank gave some clear insights on the role data & AI - when understood and used intelligently - could play in a better world. Bryan spoke with the authority and passion of someone who sees the impact at ground level which sound investment can make, rather than just a dry academic document.
After a well deserved break for coffee, with conversations buzzing, Lane Jost was back to moderate a second panel of the day with another incredibly diverse and interesting group of speakers, Kunal Khatri from the UK Government who, having served in countries around the globe, was able to share first hand insights about the impact and opportunities available to Leaders with vision & commitment. Stephanie Wood of Competent Boards spoke about the fiduciary obligations driving key areas, with the excellent Rebecca Patterson, Former CIS Bridgewater able to share both a huge corporate view (Bridgewater currently has $235 billion AUM), as well as anecdotal evidence about attitudes towards delivering on commitments.
On the basis that not all hero’s wear capes, Jeff Gitterman was definitely a hero that day! It is always disappointing news for any Moderator when one of your panel is unavoidably detained but when all 3 are having to dial in, a lesser person might have put their head in their hands and given up. Fortunately, Jeff is made of sterner stuff than that and rounded the day off with an insightful view on the pace of climate change and its economic impact on portfolio construction with more excellent contributions from Katharine Preston, Paul O’Brien - still at his desk - and firm favorite at RAO events, Travis Antoniono of CalPERS who is extremely aware of how wildfires can burn through investments as quickly as environments, from his base in California.
The need to increase the speed at which we are moving if we are to meet the urgent challenges that climate change, sustainability, AI & Technology are driving was a message throughout the day.
And so, with thanks to our speakers, delegates and hosts, Allen & Overy, that was a wrap! For the Americas 2023 anyway.
The next RAO event, with another outstanding line up of speakers will be in October this year in London. Register your interest now to speak, sponsor or attend to be sure that you and your brand is seen and heard at the next gathering of Responsible Asset Owners.
Bloomberg post:
European Green-Investing Rules May Create Clean-Tech Bubbles (1)
By Saijel Kishan
29 June 2023
Bloomberg Law | Link
European rules for sustainable investing may have the negative consequence of creating “asset bubbles” in clean technology companies, according to a U.S. Bancorp sustainability manager.
A rule that stipulates that investments “do no significant harm” to environmental or social objectives means that investors will boost holdings in clean technology, as well as the broader technology industry and biotechnology, because they’re easier to defend from an environmental standpoint, said Guillaume Mascotto, managing director of sustainable finance at U.S. Bancorp.
“But that creates massive bubble inflation” in those sectors, Mascotto said Wednesday at a Responsible Asset Owners Global event in New York hosted by law firm Allen & Overy.
Moreover, investors will miss out on putting their money to work in asset-intensive industries such as mining and tar sands that need the capital to transition to cleaner operations, Mascotto said. “It’s a risk that we see in the market,” he said.
Mascotto said U.S. Bancorp sees opportunities in companies, including fossil fuel producers, that are both shifting to cleaner energy and cognizant of their impacts on local workforces and communities. He pointed to European companies that have switched to renewables from oil and gas, and said that local suppliers may be negatively affected when a company abruptly transitions and sells their polluting assets.
An “abrupt transition might be a bit more difficult for us considering the commitment we have to the communities and to the people that are currently dependent on a lot of these asset intensive sectors,” Mascotto said.
He added that U.S. Bancorp’s venture group is focused on investments in the so-called circular economy, which promotes products that can be reused, repaired or remanufactured.
Watch recordings of all panel sessions here
The following discussion between Ken Rivlin of Allen & Overy & Robert Esposito of Apollo Global Management Inc is subject to Chatham House Rules which mean that under the Chatham House Rule, anyone who comes to a meeting is free to use information from the discussion, but is not allowed to reveal who made any particular comment. It is designed to increase openness of discussion. The rule is a system for holding debates and discussion panels on controversial topics, named after the London headquarters of the Royal Institute of International Affairs, where the rule originated in June 1927.
The following discussion between Georges Dyer of IEN, Pedro Guazo of UN JSPS, Guy Pinkman of Lincoln Police and Fire Pension Plan Investment Board & Karine Peloffy of the Canadian Government is subject to Chatham House Rules which mean that under the Chatham House Rule, anyone who comes to a meeting is free to use information from the discussion, but is not allowed to reveal who made any particular comment. It is designed to increase openness of discussion. The rule is a system for holding debates and discussion panels on controversial topics, named after the London headquarters of the Royal Institute of International Affairs, where the rule originated in June 1927.
