Back in August, we launched a new website for Generation Investment Management’s philanthropic arm, Generation Foundation. Since 2004, the company, founded by Vice President Al Gore and former Goldman Sachs co-CEO David Blood, has created a model for responsible investments, combining a traditional research approach with a keen focus on social and environmental responsibility.
From the very start, Generation had in mind the creation of a strong foundational arm; I should know because this was a key part of our conversations when planning and designing their first website in 2004. The foundation would receive a portion of the firm’s profits and invest the proceeds in work that addresses climate change and related social and market challenges. Following is the Generation Foundation’s mission:
Charged with the mission of strengthening the field of Sustainable Capitalism, the Foundation’s funding is based on receiving a distribution from the LLP’s annual profitability.
The term Sustainable Capitalism refers to maximizing long-term economic value creation to address real needs while also considering all costs and stakeholders, including people and the planet.
The Face of the Future
On October 30, 2013, we helped the Foundation release the second of its white papers. Entitled Stranded Carbon Assets: Why and How Carbon Risks Should Be Incorporated in Investment Analysis, the paper proposes a new way of thinking about oil, coal, gas and other non-renewable energy from a quantitative investment perspective. It argues that markets and regulatory bodies will need to change rationally as climate challenges increase and economies respond.
One of the paper’s conclusions is that, given the data and global economic growth, we are on precipice of a wholesale change in attitude about carbon assets—and long-term thinking.
The inevitable transition to a low-carbon economy will revolutionise financial markets at an unprecedented magnitude. Although we cannot, and should not, abandon the world’s current energy infrastructure overnight, investors who equate the transition with drawn-out, incremental change do so at their own peril as the stranding of carbon assets may occur at unforeseen rates and at an unpredictable scale.
The paper is worth a good, sobering read—even if you are not a quant. Or maybe especially if you’re not.