Responsible Investor

Partnership deals in the retail funds market, such as a recent exclusive tie up with Commonwealth Bank and a distribution arrangement with Sampo, the Finnish financial services group, suggest Generation is tapping into the public recognition of global warming that Gore is beating the drum for.

Its global large cap equities business, the bedrock of Generation’s offer to date, has grown to 14 fund managers. Blood and Gore are the public face of its second preoccupation: advocacy for long-term investment and the incorporation of sustainability into investment decisions: “We both spend a lot of time talking publicly on these topics as well as climate change.”

In addition, every year, five per cent of company profit goes to the Generation Foundation, which aims to promote sustainability in capital markets.

“Every year, five per cent of company profit goes to the Generation Foundation.”

The fund manager is now taking a third strategic step by launching a climate change solutions fund by the end of this year, which will incorporate aspects of private equity investment.

Blood explains: “It will be a hybrid including growth stage private equity investments and small cap equities. We’re not getting into the private equity field per se because we will be selecting companies for investment using our existing investment process. We see a lot of

medium-sized and smaller opportunities to address the challenges of climate change.”

“We see a lot of medium-sized and smaller opportunities to address the challenges of climate change.”

These, he says, include companies working in the clean energy, carbon capture in sequestration, energy efficiency, and water scarcity fields.

Generation’s targeting of smaller companies could give credence to some commentators who argue that there is potential for a carbon bubble as institutional investors with an existing large cap bias concentrate greater capital in stocks considered more sustainable and less exposed to reputation risk.

Blood says investment in carbon solutions requires a robust focus on the investment opportunities in the market: “It’s awkward because people could lose a fair amount of money just like they did in the dot.com boom. There is no question the internet has changed our lives and I am sure that the shift to a low carbon world will do the same, at least from a business perspective. We are at the beginning of the process and clearly there will be winners and losers.”

The rules of investment are also constant: Generation has to buy companies cheaply and sell them higher: “We see plenty of instances of interesting stocks that are way overpriced. We may find the most sustainable company in the world wide but if everyone else knows about it then there’s no value.

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