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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.
SocialFunds.com --
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."
While 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.
"Combining 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
(EIRiS).
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
[ticker: TM]
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."
Generation aims
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
concluded.
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SRI World Group, Inc. All Rights Reserved.
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