BlackRock’s Vice Chairman Philipp Hildebrand was talking about sustainable and impact investment long before the financial giant’s slew of high-profile pledges earlier this year.
At Davos in 2018, he highlighted emerging evidence within BlackRock that there were financial benefits to sustainable and impact investment and now he has gone even further, telling the Global Steering Group for Impact Investment (GSG) Summit last week that not considering sustainability in financial decisions undermined fiduciary duty.
“Looking through a fiduciary lens, it’s wrong to think there is a trade-off between value and values. Ignoring sustainability risk in a client’s portfolio will undermine the long-term value of that portfolio,” he said.
Cliff Prior, Chief Executive of the GSG, tells RI it was one of many powerful statements at the Summit. “It’s the most senior people now talking about this,” he says, pointing to another speech from Kristalina Georgieva, Managing Director of the International Monetary Fund.
Prior is three months into his role at GSG, following a four-year stint as Chief Executive of the UK’s Big Society Capital, the world’s first social investment bank. Reflecting on the shift from an in-person annual GSG Summit, originally planned to be held in South Africa, to a virtual one in the face of the Covid-19 pandemic, he says: “You can make it radically affordable for a social entrepreneur who would never be able to fly to another continent. And likewise the VIPs who can only spare half an hour. They can do it too.”
The event had speeches from people living in slums and informal settlements, to global figures such as Cardinal Peter Turkson, former UK Prime Minister David Cameron and Hollywood actress Jessica Alba, which Prior says shows impact investment is coming “out of its bubble”.
‘We reckon that we will get to a $1trn in impact investments by the end of this year,” he says’ – Cliff Prior, head of GSG
Emmanuelle Faber, CEO of food multinational Danone, talked with GSG chair and impact investment pioneer Sir Ronald Cohen about the firm’s first carbon-adjusted EPS (earnings per share) figures, published in its financial accounts to show shareholders that “carbon is not an externality for a company like us, that derives all its products and its value from agriculture”.
Faber said that soil, which relies on carbon as a vital nutrient, had to be replenished and regenerated by the company to ensure its long-term survival. “We are distributing to shareholders half of our EPS in dividend,” he said. “So basically we are paying you dividends, my friends, my shareholders, before we actually pay the total price of staying resilient.”
But perhaps the most powerful speech at the Summit was from Darren Walker, President of the Ford Foundation, who delivered a severe warning to elites on escalating inequality: “We need to have a fundamental conversation about the allocation of capital,” he said. “The average worker feels marginalised in their own economy and society by elites who spend lots of time at think tanks and global gatherings of other elites. And it does not translate into tangible, meaningful improvements in their lives.”
“If we don’t deal with the issue, we will in the future have inequality and climate change put us on a trajectory, the implications of which I can’t really fully consider.”
Focusing on Milton Friedman, whose infamous letter on corporate purpose turned 50 this month, Walker said: “On the 50th anniversary of Friedman’s letter we need to reflect on the damage done by an ideology that provided the intellectual scaffolding for decades of stagnation and a sense of being left behind by most workers and where elites like myself and those with assets can invest in stock markets. It’s wrong that in the middle of a pandemic where billions are hurting, those in the stock market are better off."
Prior says Walker – one of the first children to benefit from the Head Start programmes launched in 1965 by the US Department for Health and Human Services – “really understands what inequality looks like and what achieving equality looks like. It was a very, very powerful statement.”
Reflecting on the future for the impact investment movement, Prior says it has moved from being “an interesting toy at best” or misinterpreted as charity or philanthropy to being on the lips of major investors, asset managers, global agencies and government regulators.
“We reckon that we will get to a $1trn in impact investments by the end of this year,” he says.