Volume I. Issue 10 Journal of Sustainable€¦ · Bristol Meyers Squibb, Eli Lilly, Novartis, Pfizer, Merck, GlaxoSmithkline, Apollo, ... managed through the systematic evaluation

Journal of Sustainable Finance & BankingSM

Summer 2014 Volume I. Issue 10

©Thufir/CrystalGraphics

Companies Mentioned in this Issue:

Global Sector Research The Cornerstone Capital Strategy Update Michael Geraghty … p.19

Making Better Investment Decisions: Tools to Enhance Carbon Literacy Margarita Pirovska… p.23 Reframing the Conversation: Industrial Energy Efficiency Wolf, Fitch Benson, Lee, Valdez… p.26

Sustainable Standout Cornerstone Summary of “Earnings Guidance – A White Paper from KKS Advisors & the Generation Foundation” Michael Shavel … p.30

Corporate Governance Teaching Boards to Keep Diversity in Focus Susan Baker, Jonas Kron … p.32

What is Shareholder Engagement... John Wilson … p.35

Enhanced Analytics Confirmation Bias in the Investment Process Michael Shavel … p.38 Learning from Diapers – Life Cycle Assessment… James Fava … p.40 The Customer Knows Best: Wall Street Needs to Prioritize Consumer Research John Hoeppner … p.42

Featured Editorial Green ‘Em Up, Up, Up! Teaching Sustainability Through Story, Song & Stomach Cindy Motz … p.44 Boosting Impact: Why Foundations Should Invest in Education Venture Funds Matt Greenfield, Tom Vander Ark … p.46 Measuring Impact in Ed Tech Michele Demers … p.51 Investing in Prevention: A National Imperative Seen Through the Eyes of a Private Investor John Schaetzl… p.54

Regional Imperatives Learning to Feed a Nation Nasreen Awal… p.56

Open Source Excellence How Purpose-Driven Programs Can Solve the Employee Engagement Problem Susan Hunt Stevens … p.59

Open Hiring: A Culture of Training & Learning Mike Brady … p.61

Westinghouse Air Brake Technologies, Bristol Meyers Squibb, Eli Lilly, Novartis, Pfizer, Merck, GlaxoSmithkline, Apollo, Devry and Strayer.

“The New Financial Literacy.com”

Companies Mentioned in this Issue:

Featured Domain:

http://cornerstonecapinc.com/?p=3467

CEOs Letter on Sustainable Finance & Banking

Erika Karp Founder and Chief Executive Officer of Cornerstone Capital Inc. and Former Head of Global Sector Research at UBS Investment Bank

This month in the “Cornerstone Journal of Sustainable Finance & Banking” (JSFB) we note the extent to which global markets learn ever more about dark pools, securities order routing and execution, t he impact of a selective default in Argentina, central bankers’ views on the role of monetary policy in maintaining financial stability, and tax inversions. At the same time, we witness solid earnings and share price performance in the face of intense geopolitical conflict around the Ukraine and the Middle East. All of this, along with news of some surprising corporate initiatives (e.g., Facebook’s psychological user experiments) and corporate alliances (e.g., IBM and Apple), was met with impressive equanimity by the markets. That said, we still have much to learn about the durability of both the global economic recovery and the market rally, which is also being fueled in recent months by M&A activity.

Speaking of “Learning”, which is the theme of this month’s JSFB, we highlight a note from Cornerstone’s Global Market Strategist Michael Geraghty, who has learned that when we see an increase in the momentum of downward earnings revisions in the Consumer Discretionary sector, it may be optimal to tactically move from a cyclical to a rather more defensive position – and so we move from an overweight to neutral in that sector. While among cyclicals we are overweight IT, we remain underweight in both Energy and Materials.

Michael is a strategist who tends to challenge his assumptions and test his beliefs . . . a critical characteristic for investors who want to reduce the risk of “confirmation bias” in the investment process. In a piece this month, Cornerstone Analyst Mike Shavel argues that this tendency to favor information that confirms existing beliefs and biases can be better identified and better managed through the systematic evaluation of Environmental, Social and Governance (ESG) factors in the analytic process. Attention to these factors may raise flags and inconsistencies that represent avenues for further inquiry. Mike comments further on one particular avenue of inquiry in our “Sustainable Standout” this month. Here we summarize a report from George Serafeim and Gabriel Karageorgiou of KKS Advisors and the Generation Foundation, which addresses the debate around regular Earnings Guidance. The bottom line is that despite popular belief, the perceived benefits of offering the guidance (information symmetry, visibility...) don’t appear to outweigh the associated costs (short-termism).

Moving from market action to Corporate Governance this month, we feature notes from John Wilson, Cornerstone’s Head of Corporate Governance, Engagement & Research, and Jonas Kron and Susan Baker of Trillium Asset Management. Jonas and Susan offer an explicit example of extremely productive collaborative shareholder engagement (Westinghouse Airbrake Technologies, WAB) as it relates to “Boards of Directors keeping Diversity in Focus.” John then goes on to articulate what we can learn about governance practices in response

Cornerstone Journal of Sustainable Finance & BankingSM / Summer 2014 / 2

to shareholder input. Engagement, as a distinctive form of dialogue between shareholder and company, is not based on specifics of business strategy. Rather, the dialogues are intended to understand governance policies and practices that frame business decision-making. Questions about accountability, compensation, and social responsibility allow investors to learn how to unlock the “black box” of confidential shareholder engagement and better inform their investment decisions. In this “Learning” edition of the JSFB, our “Enhanced Analytics” section highlights the ability of investors to continuously be “Learning from Diapers.” Jim Fava, a true industry leader in the field, articulates how we can use “Life Cycle Assessment (LCA) as an Investment Risk Mitigation Tool.” Jim reminds us of the garbage barge debacle of almost thirty years ago, and how it led enterprising businesses to move dramatically towards better recycling efforts. But, in the course of that learning, the extent of the complexities of choosing between cloth and disposable diapers demanded a life cycle perspective on impact. The world has continued to get more complex; and the benefits of LCA are increasingly compelling. Before leaving this section of the JSFB, we also highlight a piece from John Hoeppner of Mission Measurement. Here John offers an analytical approach to allowing consumer-facing companies like restaurants and grocery stores, to truly understand their differentiated positioning in the eyes of their customers. Quantifying the nuances of consumer preferences may prove to challenge conventional wisdom and then offer deeply predictive insights for corporate (and investor) resource allocation decisions. This month we also offer a number of “Featured Editorials” which serve to as examples of business practices and initiatives that can drive profit with purpose. In the long run, as Cindy Motz is “Teaching Sustainability Through Story, Song and Stomach,” as Matt Greenfield and Tom Vander Ark argue for “Foundations Investing in Education Venture Funds,” as Michelle Demers of Boundless shows how we are “Measuring Impact in Ed Tech,” and as John Schaetzl supports the Vitality Institute work on “Investing in Prevention of Disease,” we believe beyond the shadow of a doubt that there must be investments made in “Learning” if we are to maximize the potential of capitalism and corporate profitability. Further in this JSFB, we “Learn to Feed a Nation” with Bangladesh’s Nasreen Awal highlighting how to promote self-reliance in that nation’s food supply. We also learn from Susan Hunt Stevens, Founder & CEO of WeSpire, how the world’s leading corporations can build “Purpose-Driven Programs to address the challenge of Employee Engagement”; and we learn how CEO Mike Brady of Greyston Bakery Inc. celebrates the possibilities of embracing the whole employee population of a community. As we consider these examples, Maryann Calendrille brings the pertinent reminder that “books represent what’s best about the human imagination: our ability to create, question and dream.” Finally this month, in the Cornerstone “Featured Domain” we embrace “The New Financial Literacy.com” as Bloomberg LP’s Michael Marinello and I


argue that, over the course of history, mankind has learned to use our tools in ever more productive ways to enhance prosperity. We have come to a turning point with regard to the understanding of how the tool we call “money” is used for its best and highest purpose. For earning and investing money, we can now embrace the “new financial literacy” which implies a more conscious understanding of the environmental, social and governance (ESG) factors associated with its use. We leave the JSFB this month with simple questions: “Who is managing your money?” and “Are your investments and your resources being deployed by executives who are well versed in the new tools of finance?”

My sincere regards, Erika

Erika Karp Chief Executive Officer


Table of Contents

CEOs Letter on Sustainable Finance and Banking p. 2

Market Summary Overview Market & Global Sector Performance, Monetary Policy & ESG Data

p. 7p. 9

Featured Domain TheNewFinancialLiteracy.com Erika Karp

Michael Marinello

CEO & Founder, Cornerstone Capital Inc.

Head of Global Communications for

Innovation, Technology and Sustainability, Bloomberg LLP

p. 17

Global Sector Strategy The Cornerstone Capital Strategy Update Less Cyclical, More Defensive

Michael Geraghty Global Markets Strategist, Cornerstone Capital Inc.

p.19

Making Better Investment Decisions: Tools to Enhance Carbon Literacy

Reframing the Conversation on Industrial Energy Efficiency

Margarita Pirovska, PhD

Mark Wolf Erika Fitch Benson Dain Lee Gabriela Koloffon Valdez

Policy & Sustainability Analyst, Cornerstone

Capital Inc.

Columbia University

p.23

p.26

Sustainable Standout Cornerstone Summary of “Earnings Guidance A White Paper from KKS Advisors & The Generation Foundation”

Michael Shavel, CFA Research & Business Analyst, Cornerstone

Capital Inc.

p.30

Corporate Governance Insights Teaching Boards to Keep Diversity in Focus

What is Shareholder Engagement…Why is it Important?

Susan Baker

Jonas Kron

John Wilson

Vice President, Shareholder Advocacy,

Trillium Asset Management

Senior Vice President, Shareholder Advocacy,

Trillium Asset Management

Head of Corporate Governance, Engagement & Research, Cornerstone

Capital Inc.

p. 32

p.35

Enhanced Analytics Confirmation Bias in the Investment Process

Learning from Diapers – Life Cycle Assessment as an Investment Risk Mitigation Tool

Michael Shavel, CFA

James Fava

Research & Business Analyst, Cornerstone

Capital Inc.

Chief Sustainability Strategist, PE

INTERNATIONAL

p.38

p.40


The Customer Knows Best: Wall Street Needs to Prioritize Consumer Research

John Hoeppner Head of Investment Research, Mission

Measurement

p.42

Featured Editorial Green ‘Em Up, Up, Up! Teaching Sustainability Through Story, Song & Stomach

Boosting Impact: Why Foundations Should Invest in Education Venture Funds

“Measuring Impact in Ed Tech:” How Smart Education Investing Can Prepare K-12 Students for the 21st Century

Cindy Motz

Matt Greenfield

Tom Vander Ark

Michele Demers

Member of the Cornerstone Capital Inc. Global Advisory Council

Managing Partner, Rethink Education

Founder of Getting Smart

Founder & CEO, Boundless Impact

Investing

p. 44

p.46

p.51

Investing in Prevention: A National Imperative Seen Through the Eyes of a Private Investor

Regional Imperatives Learning to Feed a Nation

John Schaetzl

Nasreen Awal

Independent Consultant & Adviser and

Lead Director of SustainAbility

Founding Chairperson of the Women Entrepreneurs Association of Bangladesh

p.54

p.56

Open Source Excellence How Purpose-Drive Programs Can Solve the Employee Engagement Problem

Open Hiring: A Culture of Training and Learning

Susan Hunt Stevens

Mike Brady

Founder & CEO, WeSpire

President & CEO, Greyston Bakery Inc.

p.59

p.61

Accelerating Impact Corner Bookshop: Caretaker of Cultural Capital Maryann Calendrille Owner, Canio’s Books p.63

Upcoming Events Global ESG Calendar p.65

Journal of Sustainable Finance & Banking Subscription Form Articles Cornerstone Capital Team

p.66

p.68p.69


http://www.sustainability.com/

Market Summary

Overview

As we enter the “dog days” of summer, major market indices continue to march higher amid an improving global economic backdrop. In nominal terms, the S&P 500 notched another all-time high last week, sparking the increasingly familiar debate around market valuations and investor sentiment. We’ll leave market strategy to our in-house expert, Michael Geraghty, but we simply remind readers that investing discipline is paramount in all market environments. Meanwhile, investors are focusing on what remains of earnings season before the traditionally quiet time at the end of August. Equities in the U.S. edged higher over the last month with economic indicators suggesting an increased likelihood of a self-sustained expansion. The Institute for Supply Management’s Manufacturing Index registered a reading of 55.3, only a tick lower than the prior month, and the new orders index came in two points higher at 58.9. The auto sector continues to report encouraging numbers, with June auto sales surging to an annualized selling rate of almost 17 million, the highest pace since July 2006. Also encouraging is the accelerated improvement in the labor market, as signaled by the 288k jobs added in June. Though backward looking, 2Q GDP advanced at a seasonally adjusted annual rate of 4%, more than offsetting the revised 1Q decline of 2.1%. Despite the generally encouraging economic numbers, housing remains a point of modest concern, as June sales of new single-family homes fell 8.1% versus last year. Bears also point to stubbornly high bond prices as being inconsistent with the current economic recovery, though some point to significant Chinese Treasury bond purchasing in an effort to weaken the yuan. In Europe, equity market performance and economic data are mixed. Though many believe the eurozone has exited its recession, the state of the economy clearly remains fragile. Eurozone industrial production dropped 1.1% in May, and Germany’s Ifo

business climate index fell to 108.0 in July, marking the third consecutive monthly decline and missing estimates of 109.4. Responses to the weak data vary, with some economists underscoring the impact of tensions in Russia and Ukraine, while others highlight the strong Euro’s impact on export-driven economies – namely Germany. Still, green shoots are emerging in Spain with the economy growing 0.5% in the second quarter, the fastest rate in six years, and the Bank of Spain revising up its economic growth forecasts for this year and next. Elsewhere in developed markets, Japan is garnering attention as the Nikkei hits six-month highs. This is running counter to the performance of the domestic economy, which appears to be struggling in light of the increase of the national sales tax in April. Japanese industrial output declined 3.3% month-over-month in June, significantly below than the consensus estimate of a 1.2% contraction, and the worst decline since the March 2011 earthquake. It is feasible, however, that investors are interpreting the recent wave of disappointing economic data as increasing the odds of further easing by the BOJ. In emerging markets, Chinese 2Q GDP indicated that the economy grew by 7.5% year-over-year, up from 7.4% in the first quarter, and June industrial production rose by 9.2% year-over-year, its fastest rate in six months. The Economist notes that easier credit conditions were partly responsible for the rebound, though they concurrently pushed the debt-to-GDP level to 200%, a relatively high level for developing nations (though below aggregate debt levels in more mature economies). After being out of the spotlight for some time, the Indian market is once again a focus for investors that are anticipating the business-friendly overhaul efforts of Prime Minister Modi. Importantly, India released its annual budget earlier this month which outlines government initiatives that include reigning in government debt, encouraging foreign direct investment and ramping infrastructure expenditure.


On a one month trailing basis, the MSCI Emerging Markets index outperformed the MSCI World index (developed market proxy) by approximately 3.2%, and are now outperforming on a YTD basis by about 3%. In a continuation of this year's trend, small cap equities trailed their large cap counterparts by a considerable 4.2% over the last month, bringing YTD underperformance to about 8.5%. From a sector perspective, performance was mixed between cyclicals and defensives. In the MSCI ACWI (broad index for both developed and emerging equities), technology and materials outperformed while utilities and energy lagged. Furthermore, with second quarter earnings season nearing an end, approximately 77% of

S&P 500 companies posted a positive earnings surprise, slightly ahead of the 73% of positive surprises reported in the prior quarter. Topline results have also been impressive, with 73% of companies posting a positive surprise relative to 53% in the prior quarter. Thus far, the healthcare sector has the highest percentage of earnings beats at 94%, while the industrials, financial, and technology sectors have also seen over 80% of their constituents beating estimates. Conversely, the telecom and energy sectors are delivering weaker results, with only 50% and 60% of companies, respectively, beating estimates (it's worth noting that only 2 of the 5 telecommunications companies have reported).


Market Summary

Market and Global Sector Performance

MARKET / INDEX PERFORMANCE As of 07/29/2014 (local currency) T1M (%) T3M (%) YTD (%) 2014 P/E 2014 P/B Div. Yield

US Equity Indices

DJIA 0.48 2.87 3.32 15.0 2.8 2.3

S&P 500 0.57 5.41 7.78 16.5 2.6 2.0

Nasdaq 1.07 8.61 7.08 21.5 3.5 1.1

Russell 2000 -3.97 2.20 -1.20 26.2 1.9 1.2

Developed International Indices

Euro STOXX 50 -1.01 1.58 5.64 14.7 1.5 3.6

FTSE 100 0.84 1.43 3.13 14.3 1.9 3.7

CAC 40 -1.57 -0.90 4.18 15.3 1.5 3.2

DAX -1.65 0.73 1.06 13.6 1.7 2.9

Nikkei 225 3.01 9.29 -3.25 17.5 1.5 1.7

ASX 200 3.58 2.96 7.47 15.5 2.0 4.5

Emerging Market Indices

IBOVESPA 7.45 10.19 10.89 12.0 1.4 3.8

Shanghai Comp 7.90 10.93 6.27 8.7 1.2 3.5

KOSPI 2.99 5.13 2.55 11.8 1.1 1.2

SENSEX 3.97 16.91 24.39 16.7 2.6 1.6

Global Market Indices

MSCI World 0.53 4.71 6.98 16.0 2.1 2.5

MSCI All-Country World 0.94 4.87 8.30 13.4 1.5 3.3

MSCI EAFE -0.24 2.61 4.68 15.0 1.6 3.2

MSCI Emerging Markets 3.76 9.32 9.63 11.9 1.5 2.8


MARKET / INDEX PERFORMANCE (CONTINUED)

As of 07/29/2014 (local currency) T1M (%) T3M (%) YTD (%) 2014E P/E 2014E P/B Div. Yield

Sustainable Indices

DJ Sustainability World Comp 0.45 3.47 7.91 15.0 1.9 3.0

FTSE4Good Global 0.60 4.66 7.18 11.4 1.4 3.7

MSCI KLD 400 Social 1.17 6.32 7.96 20.6 3.1 1.8

Bovespa Corp. Sustainability 4.44 7.79 5.86 12.1 1.5 4.4

Fixed Income

Barclays US Aggregate 0.12 1.46 3.95

Commodities Levels

7/29/2014 1/29/2014 7/29/2013

WTI Crude 100.95 92.59 93.58

ICE Brent Crude 107.5 104.98 100.99

NYMEX Natural Gas 3.818 4.45 3.872

Spot Gold 1300.09 1243.78 1326.37

LME 3mth Copper 7120 7140 6862

CBOT Corn 371 446.75 504.25

Currencies Levels

7/29/2014 1/29/2014 7/29/2013

EUR/USD 1.34 1.36 1.33

USD/JPY 102.11 102.72 98.03

GBP/USD 1.69 1.65 1.52

AUD/JPY 95.81 90.34 88.84

DXY Index 81.21 80.51 81.66

Source: Bloomberg, Barclays. Equity Returns: All returns represent total return for stated period. Dividends and coupons are not included in the DAX and BOVESPA indices. Bond Returns: All returns represent total return for the stated period. Index characteristics: P/E, P/B, and Dividend Yield are based on Bloomberg consensus estimates for the stated period.


MSCI ACWI SECTOR PERFORMANCE

as of 7/29/14

1 Month Price Return (%)

Source: Bloomberg. Sector returns are based on GICS methodology. MSCI ACWI is a free-float weighted equity index that includes both emerging and developed world markets.

YTD Price Return (%)

Source: Bloomberg. Sector returns are based on GICS methodology. MSCI ACWI is a free-float weighted equity index that includes both emerging and developed world markets.

U.S. EQUITY STYLE PERFORMANCE

Style box returns are based on Russell Indices with the exception of the Large-Cap Blend box, which reflects the S&P 500 Index. All values are cumulative total return for the stated period including the reinvestment of dividends. The index used from left to right, top to bottom are: Russell 1000 Value Index, S&P 500 Index, Russell 1000 Growth Index, Russell Midcap Value Index, Russell Midcap Index, Russell Midcap Growth Index, Russell 2000 Value Index, Russell 2000 Index and Russell 2000 Growth Index.

1 Month

Source: Bloomberg

Year to Date

Source: Bloomberg

Info TechMaterialsTelecom

FinancialsMSCI ACWI

HealthcareCons

StaplesCons DiscIndustrialsEnergyUtilities

-2 -1 0 1 2 3 4 0 5 10 15

UtilitiesInfo Tech

EnergyHealthcare

MaterialsMSCI ACWI

Cons StaplesFinancials

TelecomIndustrialsCons Disc

Value Growth Blend

0.3

-4.2

-0.7

0.3

-4.0

-0.9

0.3

-3.8

-1.1 Mid

La

rge

Smal

l

8.6

-0.4

10.0

7.6

-1.2

7.4

6.6

-2.0

5.1

Value Growth Blend

Smal

l La

rge

Mid


SECTOR SNAPSHOT – TOP 5 COMPANIES BY MARKET CAP as of 7/29/14

Company Name Ticker Industry

Mkt Cap (US$ Bn)

Price (Local)

Total Return YTD % (local)

P/E 2014E

EV/EBITDA 2014E

Div Yield % 2014E

Consumer Disc. Toyota Motor Corp 7203.JP Automobiles 205.2 6133.00 -2.8 9.9 9.6 N/A

The Walt Disney Co DIS Media 149.3 86.20 12.8 20.5 11.6 1.0

Amazon.com AMZN Internet & Catalog Retail

147.9 320.00 -19.8 116.3 23.0 N/A

Comcast Corp CMCSA Media 142.2 54.99 6.7 18.7 8.1 1.6

Volkswagen VOW3.GR Automobiles 113.0 177.75 -11.1 8.3 7.2 2.3

Consumer Staples Nestle NESN.VX Food Products 244.8 68.85 8.8 19.8 13.6 3.1

Wal-Mart Stores WMT Food & Staples Retailing

243.2 75.44 -2.9 14.6 8.0 2.5

The Procter & Gamble Co

PG Household Products 212.8 78.65 -1.1 18.8 12.5 3.3

The Coca-Cola Co KO Beverages 177.3 40.35 -0.8 19.4 14.9 3.0

Anheuser-Busch Inbev ABI.BB Beverages 176.9 82.04 8.2 20.8 11.6 3.5

Energy Exxon Mobil XOM Oil, Gas &

Consumable Fuels 444.7 103.55 3.7 13.2 6.2 2.7

Royal Dutch Shell RDSA.LN Oil, Gas & Consumable Fuels

266.4 2415.50 14.4 11.0 4.8 4.6

Chevron Corp CVX Oil, Gas & Consumable Fuels

252.1 132.42 7.9 12.3 5.2 3.2

Petrochina Co 857.HK Oil, Gas & Consumable Fuels

232.8 10.44 25.4 11.3 5.4 3.8

Total SA FP.FP Oil, Gas & Consumable Fuels

166.6 52.22 20.2 11.1 3.5 4.6

Financials Berkshire Hathaway- CL B

BRK/B Diversified Financial Services

314.2 127.36 7.4 19.2 N/A N/A

Wells Fargo & Co WFC Banks 270.6 51.54 15.1 12.6 N/A 2.7

JPMorgan Chase JPM Banks 220.6 58.64 2.3 10.6 N/A 2.7

Ind & Comm Bank of China

1398.HK Banks 212.8 5.28 7.5 5.3 N/A 6.2

HSBC Holdings HSBA.LN Banks 206.3 637.50 -1.0 11.8 N/A 5.2


SECTOR SNAPSHOT – TOP 5 COMPANIES BY MARKET CAP (CONTINUED) as of 7/29/14


Mkt Cap (US$ Bn)

Price (Local)


P/E 2014E

EV/EBITDA 2014E

Div Yield % 2014E

Health Care Johnson & Johnson JNJ Pharmaceuticals 288.5 101.96 12.9 17.2 11.0 2.7

Roche Holdings ROG.VX Pharmaceuticals 251.8 265.80 9.8 17.9 12.0 2.9

Novartis AG NOVN.VX Pharmaceuticals 238.7 80.00 16.1 16.7 14.9 3.1

Pfizer PFE Pharmaceuticals 189.4 29.73 -1.2 13.3 8.3 3.5

Merck & Co MRK Pharmaceuticals 171.2 58.58 18.9 16.9 11.3 3.0

Industrials General Electric Co GE Industrial

Conglomerates 255.2 25.45 -7.7 15.1 12.3 3.5

Siemens AG SIE.GR Industrial Conglomerates

110.4 93.44 -2.9 14.3 9.5 3.2

United Technologies UTX Aerospace & Defense 98.2 107.33 -4.7 15.7 9.7 2.2

3M MMM Industrial Conglomerates

94.2 144.02 4.0 19.3 11.4 2.4

The Boeing Corp BA Aerospace & Defense 88.1 122.32 -9.4 15.4 9.2 2.4

Info Tech Apple AAPL Technology

Hardware, Storage & 589.1 98.38 24.2 15.5 7.6 1.9

Google GOOGL Internet Software & Services

398.7 593.95 5.9 22.5 13.0 N/A

Microsoft Corp MSFT Software 362.5 43.89 19.0 15.7 8.8 2.6

IBM IBM IT Services 194.1 195 4.9 10.9 8.7 2.3

Samsung Electronics 005930.KS Semiconductors & Semiconductor

199.1 1386000 1.0 7.9 3.2 1.0


SECTOR SNAPSHOT – TOP 5 COMPANIES BY MARKET CAP (CONTINUED)

as of 7/29/14


Mkt Cap (US$ Bn)

Price (Local)


P/E 2014E

EV/EBITDA 2014E

Div Yield % 2014E

Materials BHP Billiton Ltd BHP.AU Metals & Mining 192.8 39.06 4.6 14.1 7.1 4.8

Rio Tinto RIO.AU Metals & Mining 110.2 65.75 -1.8 12.4 6.9 4.6

Saudi Basic Ind. SABIC.AB Chemicals 102.8 128.58 20.9 13.9 7.4 3.9

BASF BAS.GY Chemicals 99.8 81.06 8.1 14.0 8.5 3.3

Glencore GLEN.LN Metals & Mining 84.6 376.05 22.7 17.4 9.7 1.9

Telecom Verizon Communications

VZ Diversified Telecommunication

215.4 51.97 9.3 14.6 7.1 4.1

China Mobile 941.HK Wireless Telecommunication Ser

224.0 85.45 8.6 13.1 4.2 3.9

AT&T T Diversified Telecommunication

189.9 36.59 8.2 14.0 6.2 5.0

Vodafone Group VOD.LN Wireless Telecommunication Ser

90.9 202.90 -18.3 29.8 5.8 7.6

Softbank Corp 9984.JP Wireless Telecommunication Ser

88.8 7556.00 -17.7 18.2 7.9 0.5

Utilities GDF Suez GSZ.FP Multi-Utilities 64.2 19.86 20.4 14.6 6.8 5.9

EDF EDF.FP Electric Utilities 59.5 23.84 -4.7 11.8 5.0 5.2

National Grid NG/ LN Multi-Utilities 55.7 879.50 15.3 16.0 10.1 5.3

Enel SpA ENEL.IM Electric Utilities 54.4 4.31 39.9 13.6 6.9 3.0

Duke Energy DUK Electric Utilities 52.3 73.98 9.6 16.2 10.5 4.3

Source: Bloomberg. The securities in each sector represent the largest companies by market cap in the MSCI ACWI in their respective sectors. Sector classification is based on GICS methodology. Equity characteristics: P/E, EV/EBITDA and Dividend Yield are based on Bloomberg consensus estimates for stated period.

GDP / CONSUMER PRICE INFLATION / RATES

Source: Bloomberg. Estimates are composite of Bloomberg contributor estimates. *Italicized text represents actual data. ** India fiscal year runs to March 31. Therefore, 2013E is India's FY13 GDP.

Region/Countries 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016EUnited States US 1.7 3.0 3.0 2.0 2.2 2.3 0.25 1.00 - 3.1 3.6 -Euro Area EU 1.0 1.5 1.6 0.7 1.2 1.5 0.13 0.13 - - - -Japan JP 1.5 1.2 1.0 2.7 1.8 1.9 0.10 0.10 - 0.7 0.9 -UK GB 3.0 2.5 2.4 1.7 1.9 2.0 0.63 1.38 - 3.1 3.5 -Australia AU 3.1 3.0 3.2 2.8 2.6 2.8 2.50 3.25 - 4.2 4.8 -China CN 7.4 7.2 7.1 2.5 3.0 3.0 6.00 6.00 - 4.2 4.1 -Brazil BR 1.3 1.7 2.6 6.4 6.2 6.0 11.00 11.75 - - - -**India IN 4.7 5.4 6.2 9.5 8.0 7.5 8.00 7.63 - 8.5 7.9 -

Real GDP (% YoY) CPI (% YoY) Official Rates Long Rates


MONETARY POLICY

Jul-14 Jan-14 Jul-13 Monetary Base growth (YoY) 21.5% 36.6% 23.5% M-2 growth (YoY) 6.8% 5.4% 6.6% Money multiplier (M-2/mon base) 2.9 3.9 3.8

4Q13 4Q12 4Q11 Velocity of money (GDP/M-2) 1.56 1.59 1.65

Source: Federal Reserve Bank of St. Louis

ESG DATA

2013 2012 2011 2010

Total Global Wind Installations (MW) 318,105.0 283,048.0 238,050.0 197,637.0

Annual World PV New Build (MW) 38,352.0 30,011.0 30,133.0 17,151.0

1Q13 4Q11 4Q10 Global Aggregate % of Women on Boards 11.0 10.5 9.8

ESG DISCLOSURE SCORES OF LARGEST ECONOMIES (2013)

HIGHEST ESG DISCLOSURE SCORES

Composite Environ Social Governance1. United States 13.8 18.4 16.1 48.8 2. China 17.6 10.2 21.2 43.2 3. Japan 19.7 25.9 19.9 44.4 4. Germany 25.1 33.0 40.9 38.4 5. France 37.0 37.0 48.7 52.9 6. Brazil 31.2 30.0 52.1 36.7 7. U.K. 28.1 20.6 33.6 52.3 8. Russia 13.2 18.0 22.9 38.4 9. Italy 29.6 34.7 45.0 43.9 10. India 14.2 14.4 17.3 44.6

Composite Environ Social GovernancePortugal 41.7 40.9 46.4 50.7 Spain 40.0 46.9 57.1 44.6 Finland 37.3 36.6 37.9 56.6 France 37.0 37.0 48.7 52.9 Sweden 34.9 29.1 38.2 54.9 Sri Lanka 34.1 36.3 36.5 55.6 Hungary 31.8 49.1 30.3 31.5 Switzerland 31.6 33.9 35.7 49.4 Brazil 31.2 30.0 52.1 36.7 Netherlands 30.8 29.7 41.1 52.9


KEY ECONOMIC CHARTS

C&I Loan Growth (%)

Source: Bloomberg

University of Michigan Survey of Consumer Sentiment

Source: Bloomberg

NFIM Small Business Optimism Index

Source: Bloomberg

ISM Manufacturing Purchasing Managers Index

Source: Bloomberg

U.S. Treasury Yield Curve

Source: Bloomberg

U.S. Initial Jobless Claims

Source: Bloomberg

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Featured Domain

TheNewFinancialLiteracy.com

By Erika Karp, Founder & CEO, Cornerstone Capital Inc. and Michael Marinello, Head of Global

Communications for Innovation, Technology and Sustainability at Bloomberg LP

Each month in the Cornerstone Journal of Sustainable Finance & Banking (JSFB), we will offer thoughts on a “Featured Domain,” which is selected from our proprietary “Sustainable Domain Bank.” The Cornerstone “Sustainable Domain Bank” contains 2,000+ addresses on the Internet, which are an articulation of business processes, business practices and aspirations for a more regenerative form of capitalism. Many of these domain names have the potential to be developed into business plans reflecting a robust interpretation of sustainable capitalism and finance. In particular, each “Sustainable Domain” captures a principle, or reflects a value inherent in the systematic understanding of the Environmental, Social and Governance (ESG) imperatives facing businesses and the economy today. Each Domain is intended to facilitate dialogue across functions and sectors of the capital markets; and each is available for collaborative partnership, purchase or transfer should it have particular appeal to Cornerstone clients and colleagues.

Money. Ever since the Code of Hammurabi was created around 1760 BC, money has served as a unit of account, a store of value, a medium of exchange for civil society. Today money is THE tool with which people go about the critical business of life on earth. Money used as a tool, rather than a barter system, can offer greater efficiency, convenience, clarity and prosperity as good tools generally do.

Throughout history, we have evolved our tools to serve our most pivotal needs. In the capital markets "financial literacy" is our understanding of how to use the very special tool which we call money.

In this article we assert that the time has come to embrace “TheNewFinancialLiteracy.com” and better use the information and insights available to unlock the true power of money. We are within reach of having a better understanding of how money works in the world, how it can be earned, and how it can be invested for the future and for positive returns to all forms of capital . . . financial, human and natural.

The New Financial Literacy implies an understanding of the true costs and benefits, to a broad group of stakeholders, of utilizing the tool of money in business and commerce. For both individuals and institutions,

©Quang Ho/Shutterstock

public and private, for profit and not, it implies a systematic analysis of the environmental, social and governance (ESG) factors that need to be considered in allocating resources and evaluating risk-adjusted returns.

It means embracing the understanding that the rapid nature of technological advances impacts everything we do. In turn, it forces us to constantly rethink the future because practices and processes that worked





five years ago, and work today, may be outdated tomorrow. Embracing this concept also means that we are aware of the fact that what doesn’t exist today, might be the norm further down the road. Without “The New Financial Literacy”, there is simply no way to make fully informed and effective investment decisions. In fact, in the next generation of capitalism where information, transparency, collaboration and purpose come together, we will be able to better harness the tool of money. Therefore, we can underscore the message that there need be no dichotomy between what is good for business versus what is good for society. And we can be certain that there is no conflict between long-term competitive financial returns and efforts to address massive societal needs for better education, nutrition, healthcare, infrastructure and renewable energy.

The new financial literacy becomes even more important when you consider recent research showing that the market value of the companies making up the S&P 500 deviates significantly from their book value. This “value gap” research indicates that physical and financial accountable assets reflected on a company’s balance sheet comprises less than 20% of their true value. Intangible assets include things like

intellectual property and “brand value” but accounting rules do not acknowledge this shift in the valuation of companies. With the impact of intangible assets growing, accounting rules need to keep pace to ensure investors understand the full picture.

So, the questions we pose to those who invest the world’s capital and run the world’s corporations and institutions is this: “Are we financially literate?” Do we know the pivotal questions to ask by industry, country and company so we can truly evaluate the real economic outcomes of our investment decisions? If not, we may lose out to those with a more complete understanding of "The New Financial Literacy."

Erika Karp is the Founder & Chief Executive Officer of Cornerstone Capital Inc. and the former Head of Global Sector Research at UBS Investment Bank.

Michael Marinello is Head of Global Communications for Innovation, Technology and Sustainability at Bloomberg LP and an Adviser to the C40 Cities Climate Leadership Group (C40)



Global Sector Research / Global Markets Strategy

The Cornerstone Capital Strategy Update Less Cyclical, More Defensive

By Michael Geraghty, Global Markets Strategist at Cornerstone Capital Inc.

©don fiore /Crystal Graphics

We have updated the inputs to the Cornerstone Capital Sector Strategy Model in which we rank the ten GICs in the MSCI All Country World Index (ACWI). Figure 1 summarizes the most recent rankings. Figure 1: Cornerstone Capital Global Markets Equity Strategy Model Sector Overview

Relative to the previous rankings (published in the June edition of the Cornerstone Journal of Sustainable Finance & Banking), our sector strategy is now less cyclical and more defensive:

• We are now only overweight Information Technology (Figure 2). Consumer Discretionary was downgraded from Overweight to Neutral, while Industrials remain Neutral. A number of factors led to the downgrade of the Consumer Discretionary sector, most notably a rise in the number of downward earnings revisions. Then, too, margins in the Consumer Discretionary sector — as well as in the Industrials and Materials sectors — have rebounded strongly from their 2011 lows, suggesting the potential for downside surprises.

• We are no longer underweight Consumer Staples, while the ranking of the Health Care sector has improved (although it is still Neutral). The relative valuation of the Consumer Staples

GIC WeightingValuation (Relative)

ESG (Relative)

Earnings Momentum

Earnings Revisions

Margin (Relative)

Share Buybacks

Information Technology

OW Positive Positive Positive Positive Positive Neutral

Financials Neutral Positive Neutral Neutral Positive Neutral Negative

Health Care Neutral Negative Negative Positive Negative Positive Negative

Consumer Discretionary

Neutral Positive Negative Positive Negative Neutral Neutral

Industrials Neutral Neutral Positive Neutral Positive Negative Negative

Consumer Staples Neutral Neutral Neutral Neutral Negative Neutral Neutral

Telecoms Neutral Neutral Positive Negative Negative Positive Neutral

Energy UW Neutral Negative Negative Negative Negative Neutral

Utilities UW Negative Neutral Neutral Positive Negative Negative

Materials UW Negative Neutral Negative Negative Neutral Negative


http://cornerstonecapinc.com/2014/06/strategy-update/

http://cornerstonecapinc.com/2014/06/strategy-update/

Michael Geraghty is the Global Markets Strategist at Cornerstone Capital Inc. He has over three decades of experience in the financial services industry including working as an investment strategist at UBS and Citi.

A shift in focus has played a key role in the emergence of biopharma.

sector has become more favorable while earnings revisions (although still downward) have become less negative. As for Health Care, its relative earnings momentum has improved, while earnings revisions have also become less of a negative.

• We remain Underweight Materials, and are now alsoUnderweight Utilities and Energy. A key factor here is that therelative valuations of the Utilities and Energy sectors have bothbecome less attractive.

Figure 2: Cornerstone Capital Global Sector Strategy Model Ranking Sectors by Weighting Valuation, ESG Scores and Earnings

A Focus on Health Care As noted above, the ranking of Health Care in our sector strategy model has improved materially. Almost three quarters (72%) of the MSCI ACWI Health Care Index is comprised of the Pharmaceuticals and Biotechnology sectors. However, the lines between the “pharmaceuticals” and “biotechnology” sectors are becoming increasingly blurred. With 35-40% of the earnings of global large cap pharmaceutical companies coming from biologics, it is probably more accurate to refer to these companies as operating in the “biopharma” industry.

A shift in corporate focus has played a key role in the emergence of biopharma. The “old” business model of large cap pharmaceutical companies, which was in place from about the 1990s to the mid-2000s, had five elements to it:

• Strategy: A focus on primary care areas.

Info Tech Financials Health Care Cons Disc Industrials Cons Staples Telecom Energy Utilities Materials

Overweight

UnderweightUnderweight

UW


• Drug development: A focus on “small molecule” drugs (i.e., non-biologics taken orally). As their patents expired, these drugs faced intense competition from the manufacturers of generics.

• Research & Development: A “shotgun” approach to R&D, with many projects underway at a given point in time with a goal of developing a handful of “blockbusters.”

• Mergers & Acquisitions: Mega deals like Pfizer/Wyeth and Merck/Schering-Plough.

• Business model: A diversified Health Care model.

The “new” business model, which emerged in the late 2000s, modified those elements as follows:

• Strategy: A focus on specialty care areas, which offer relatively high margins.

• Drug development: A focus on “large molecule” drugs (i.e., biologics.)

• Research & Development: More targeted R&D focused on specialty care areas.

• Mergers & Acquisitions: More “bolt-on” M&A deals typically involving smaller biotech companies such as Bristol-Myers Squibb/Medarex, Eli Lilly/Imclone and Novartis/Chiron.

• Business model: A pure drugs business model. One consequence of a less diversified structure has been a large number of divestments lately, for example, Abbott Laboratories split in two and spun off its research pharmaceuticals business as a new entity (AbbVie); GlaxoSmithKline sold its Ribena and Lucozade drinks businesses and Novartis sold its blood transfusion diagnostics unit.

The ongoing shift to biologics in the biopharma sector is likely positive for secular earnings growth for a number of reasons:

• Longer product lives: Product cycles are relatively long in biotech, typically greater than ten years. Given the technical complexities involved, biologics are not easily replicated by generic manufacturers.

• New product areas: In large part because of the growth of biologics, the FDA has approved a significant number of new drugs in recent years 27 New Molecular Entities in 2013 and 39 in 2012; by contrast, in 2002 only 17 were approved. In terms of new product areas, immunotherapy is a new way of treating cancer, which involves turning the body’s immune system against cancer cells. Some analysts see immunotherapy doing to cancer


what new therapies did to HIV, dramatically transforming life expectancies.

• A better pricing environment: Although biotech products are typically very expensive, the level of innovation being delivered by many new biotech therapies likely justifies the cost.

In summary then, the Health Care sector is becoming increasingly attractive:

• From a tactical perspective — as measured by the Cornerstone Capital sector model.

• From a strategic perspective — the emergence of biopharma.


Global Sector Research

Making Better Investment Decisions: Tools to Enhance Carbon Literacy

By Margarita Pirovska, Ph.D, Policy & Sustainablity Analyst at Cornerstone Capital Inc.

©alphaspirit /Crystal Graphics

At Cornerstone Capital, we have articulated the overarching effects of climate change on the economy, and the need for better analysis of the mechanisms at play that affect markets and investment decisions1. While a tentative consensus is emerging among market players on these issues, the actual level of “carbon literacy”, or the understanding of how CO2 emissions are intertwined in the economy, is relatively low2. There is a need for tools to address this gap in the market, and many organizations are already providing them. But for true investor insight, we believe a more collaborative approach is needed.

Why is carbon literacy important? Most environmental reporting managers and climate change specialists understand the basic mechanisms of climate change and greenhouse gas emissions, and the existing ways to measure emissions and to estimate the carbon embedded within the economy. But savvy market players are another story. Anyone who intends to make decisions that fully integrate the challenges and risks of climate change should possess at least a basic knowledge in this area, in the same way they possess some level of financial literacy.

Climate change combines research and analysis from many fields, including oceanography, atmospheric analysis, astrophysics, economics, demography, etc. The Intergovernmental Panel on Climate Change (IPCC) publishes extremely dense research findings within publicly available reports,3 although the general public or corporate people with limited time may find these reports overly complex and inaccessible.

Closer to markets, organizations such as Ceres have produced toolkits for corporate leaders to better grasp the effects of climate change on their business4. The IIGCC (Institutional Investors Group on Climate Change), together with the United Nations Environment Programme Finance Initiative and Cambridge University, have synthesized the findings of the IPCC report that are most relevant for investors and the financial sector5. Another example of joint collaboration is the Global Canopy Initiative

1 http://cornerstonecapinc.com/2014/06/a-statement-on-climate-change/ 2 http://www.unpri.org/events/research-on-responsible-investing-strategies/ 3 http://www.climatechange2013.org/images/report/WG1AR5_SPM_FINAL.pdf 4 http://www.ceres.org/resources/reports/climate-risk-toolkit-for-corporate-leaders-2006/view and http://www.ceres.org/resources/reports/physical-risks-from-climate-change/view 5 http://www.iigcc.org/publications/publication/climate-change-implications-for-investors-and-financial-institutions


http://cornerstonecapinc.com/2014/06/a-statement-on-climate-change/

http://www.unpri.org/events/research-on-responsible-investing-strategies/

http://www.climatechange2013.org/images/report/WG1AR5_SPM_FINAL.pdf

http://www.ceres.org/resources/reports/climate-risk-toolkit-for-corporate-leaders-2006/view

http://www.ceres.org/resources/reports/physical-risks-from-climate-change/view

http://www.iigcc.org/publications/publication/climate-change-implications-for-investors-and-financial-institutions

Margarita Pirovsksa, Ph.D is the Policy & Sustainability Analyst at Cornerstone Capital Inc.

which published the Little Climate Finance Book,6 gathering knowledge and analysis related to the specific topic of climate finance. Carbon literacy has also been the focus of local authorities. In Manchester, the United Kingdom, the City Council is financing a project aimed at providing carbon literacy training for everyone living, studying or working within the city’s limits7. Reporting on greenhouse gas emissions has increased substantially over the past twenty years. The Carbon Disclosure Project (CDP), founded in 2000, has become a central repository of corporate carbon reporting, and received in 2013 data from more than 4,500 companies. The CDP works with companies and investors to enhance knowledge not only of global climate change risks and opportunities, but also of related environmental issues such as water scarcity and deforestation.8 A Broader Set of Tools But how would investors or corporate managers, on a large scale, develop a level of carbon literacy comparable to their level of financial literacy, without delving into complex science or technical reporting requirements? Beyond the existing products, we could imagine the potential for broader collaboration on a mainstream project or set of learning tools that would be the equivalent of an advanced course in climate change and CO2 emissions. Such a compendium would be regularly updated with the latest scientifically shared understanding of the effects of climate change, basic numbers and facts on greenhouse gas emissions, estimates on how carbon is emitted in industrial processes or embedded in market products and services, and how it can be reduced, mitigated or offset. Carbon jargon/vocabulary, the main players, sources of information and works in progress would also be useful knowledge for most investors and corporates. Collectively, these datasets would help increase investor appreciation of the risks and opportunities of climate change on their products and services, supplier chains, and also better evaluate the total impacts of existing and expected regulations. It might, most of all, contribute to the rising consensus on the importance of climate change that we currently observe. Today, nearly all this knowledge exists, but is not tailored to the market of general “climate aware” individuals who still do not understand the mechanisms and rules at play. If we are to successfully decarbonize the economy, we all need to possess this basic knowledge. Capitalizing on

6 http://www.globalcanopy.org/materials/little-climate-finance-book 7 http://www.carbonliteracy.com/the-project/ 8 https://www.cdp.net/en-US/WhatWeDo/Pages/investors.aspx


http://www.globalcanopy.org/materials/little-climate-finance-book

http://www.carbonliteracy.com/the-project/

https://www.cdp.net/en-US/WhatWeDo/Pages/investors.aspx

existing tools, or developing ad hoc products to increase carbon literacy within companies, can certainly help in gaining relevant know-how, and maybe a competitive advantage. As we have asserted in this Journal, “economic models that do not integrate the full potential impacts of climate change may become increasingly unrealistic”9. Therefore, addressing carbon literacy throughout the economy is a necessary step. In this short article we have cited a few examples of existing products, but there are many others, developed by academia, corporations and international organizations that can contribute to building and enhancing this common knowledge challenge. We therefore encourage market players to consider investing in carbon literacy as a way to gain a better understanding of what will shape the markets of tomorrow – and to ensure that their investments will have a better chance of enduring the deep changes coming to our economic system.

9 http://cornerstonecapinc.com/2014/06/a-statement-on-climate-change/, op.cit.


http://cornerstonecapinc.com/2014/06/a-statement-on-climate-change/

Global Sector Research

Reframing the Conversation on Industrial Energy Efficiency

By Mark D. Wolf, Erika Fitch Benson, Dain Lee, Gabriela Koloffon Valdez1

©mypokcik /Crystal Graphics

It seems that climate change is in the news almost daily and stakeholders on all sides are seeking greater accountability. But we haven’t begun to scratch the surface when it comes to energy. Annually, an estimated $180 billion2 in operational energy efficiency improvements is being left on the table by the U.S. industrial sector. For example, when just one Nissan plant implemented measures to improve energy efficiency by 7.2%, the company saved $1.2 million in costs and 250 billion BTU annually. The investment required to reduce expenses was $331K, only 28% of the payback. Further, under a U.S. Department of Energy pilot program (in which Nissan took part), participating industrial companies achieved on average:

• Annual savings of $87,000 to $984,000 using no-cost or low-cost operational measures

• Paybacks of 1 year or sooner in facilities with annual energy costs > $3 million

• Paybacks of less than 2 years in facilities with annual energy costs > $1.5 million

• 10% reduction in energy costs within 18 months

• 6% to 25% improvement in energy performance over three years across industries

Energy efficiency seems like a no-brainer for a sector of the economy that consumes about 30% of the total U.S. energy diet. European industrial manufacturers are ahead on the number of energy efficiency programs underway using the ISO 50001 standard3. As of 2014, only one percent of ISO 50001 globally certified firms are in the U.S. Clearly, domestic industrial firms are not embracing the opportunity to operate more sustainably and efficiently in their energy usage. A graduate student team from Columbia University was tasked by the Natural Resources Defense Council (NRDC) to research more effective

1 Mark Wolf obtained an M.S. Sustainability Management and Erika Fitch Benson, Dain Lee and Gabriela Koloffon Valdez obtained a Masters in International Affairs from Columbia University, May 2014. The research was conducted in fulfillment of degree requirements on behalf of the Natural Resources Defense Council. Prof. Adam Hinge served as the academic advisor. The full report is available here. 2 Source: McKinsey estimate. 3 ISO 50001 - This International Standards Organization 2011 management standard system aims to help organizations continually reduce their energy use, and therefore their energy costs and their greenhouse gas (GHG) emissions. It specifies the requirements for establishing, implementing, maintaining and improving an energy management system, whose purpose is to enable an organization to follow a systematic approach in achieving continual improvement of energy performance, including energy efficiency, energy security, energy use and consumption.


https://sipa.columbia.edu/academics/capstone-workshops/boosting-industrial-energy-management

http://www.mckinsey.com/client_service/electric_power_and_natural_gas/latest_thinking/unlocking_energy_efficiency_in_the_us_economy

http://www.iso.org/iso/home/standards/management-standards/iso50001.htm

http://en.wikipedia.org/wiki/Efficient_energy_use

Mark D. Wolf earned an M.S. Sustainability Management from Columbia University. Erika Fitch Benson, Dain Lee and Gabriela Koloffon Valdez earned a Masters in International Affairs from Columbia University.

ways of increasing the scope of energy efficiency improvements in the U.S. industrial sector. Our aim: to significantly capitalize on the $180 billion opportunity and reduce associated greenhouse gas (GHG) emissions from a business-as-usual approach. The findings are indeed actionable. Jim Ruggiero, Director Energy Procurement, National Gypsum Co., who was among those interviewed for the study said, “National Gypsum runs lean in terms of corporate staff and it was insightful to see how other companies are getting their wins with limited human resources . . . [this study] gave us an opportunity to refocus on these important money saving issues and as a direct result we reassigned some resources to focus on energy efficiency and measurement systems.” The research found, somewhat surprisingly, that the issue is less about finance and more about line-of-sight from the factory to the C-Suite. And it identified existing barriers to strategic energy management uptake within the industrial sector:

• Energy efficiency is not discussed using C-Suite language.

• Energy costs are seen as fixed costs, not investments nor a manageable expense.

• Energy efficiency is treated differently around the world. The U.S. firms that adopt ISO 50001 typically do so because of European mandates and incentives.

• The complexity of the current energy efficiency and energy management environment confuses and clutters the landscape and slows engagement.

• There are different requirements for certification across energy efficiency programs.

• Energy usage and efficiency management systems are not standardized.

A Continuum of Awareness It is clear from our research that most of the engagement around energy efficiency is at the plant, not C-Suite, level. We identified a continuum of U.S. industrial awareness and engagement with energy usage and efficiency, including very different situations (ranging from the highest to the lowest). Highlights include:

• A company that has used energy management/measurement for a while and realized that their high level metrics did not give them


what they needed to find the next 25% usage reduction to which the CEO publicly committed.

• Firms that do not have the manpower to engage with federal programs, or the expense of a dedicated employee(s) is too high for them to absorb.

• Local utility or government entities have worked with the firm aggressively to help make a new factory much more energy efficient, through rebates, incentives, tax breaks, etc. Energy efficiency is not seen much as a system, but as an ever expanding list of projects.

• Companies that have changed light bulbs and initiated some other improvements in HVAC/motors/compressors in past years, but unless they are able to provide a clear payback period of less than a year, they need to get incentives from utility/government to offset extra costs.

• And finally, companies who are always looking for opportunities to reduce costs because it helps them be more profitable, survive competition and respond to changing customer demands. However, they believe energy is a fixed cost.

While energy efficiency advocates (non-profits, government and to a lesser extent, utilities) have talked about energy efficiency in terms of financial payback and the environmental impact, the C-Suite tends to think in terms of ROI and are often most concerned with risk management and operational excellence. Thus, the current communication and message efforts of energy efficiency advocates are not aligned with C-Suite interests. What Needs to Change? Absent a cap-and-trade system, it is clear that U.S. experts must start using the language and planning cycles of business in their discussions. Risk management, operational excellence, and brand reputation are business imperatives for a CEO, while energy efficiency is not. At the CFO level, the focus is on income statement metrics and risks to operational performance, of which energy efficiency is perceived to be a relatively small part (even though energy cost is often a significant expense). We believe that there is a great need to reframe the energy efficiency conversation. This can best be accomplished through proactive communications and strategies that embrace other members of the energy efficiency universe. By highlighting case histories in language that C-Suite and other decision makers see as relevant to their roles, we can accelerate progress on operational performance improvement and energy supply risk reduction.


Specifically, we think a more compelling and relevant message must be made to the C-Suite proving the merits of greater efficiency as a business imperative. It means moving beyond arguments centered on payback and environmental benefits and talking frankly about the business risks of rising future energy prices, future carbon regulations, or supply disruptions (due to natural disasters, environmental degradation, political upheaval or some combination of the above). Lastly, we believe that picking one existing program that aligns with business interests offers a way to get both non-profits and manufacturers more focused on taking action. The landscape is cluttered and there is confusion about all the different programs available. We identified Energy Star as the strongest and most well-known brand for energy efficiency solutions in the industrial sector. Introduced in 1992 by the U.S. Environmental Protection Agency, Energy Star Buildings & Plants is the oldest and most well-known certification process among U.S. strategic energy management programs. Energy Star Buildings & Plants certification in the industrial sector has been responsible for “saving more than $9 billion and preventing nearly 120 million metric tons of greenhouse gas (GHG) emissions from entering our atmosphere.” Therefore, we believe this is the one program that should be leveraged heavily as it offers the largest foundation upon which to build. No matter your vantage point — whether the plant floor or corner office — the financial stakes are measurable ($180 billion annually, with only a third required as a one-time investment) and the savings to the environment in terms of GHG emissions is equivalent to taking all U.S. vehicles off the road for four months. The benefits are clear, it is time to change the conversation!


Sustainable Standout

Cornerstone Summary of “Earnings Guidance A White Paper from KKS Advisors & the Generation Foundation”

By Michael Shavel, CFA, Research & Business Analyst, Cornerstone Capital Inc. What do these three quotes have in common?

“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”

“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

“For investors as a whole, returns decrease as motion increases.”

Aside from the obvious point that all three declarations advocate long-term investing, the common thread tying them together is their source. Indeed, these are excerpts from Berkshire Hathaway shareholder letters which, more notably, are penned by legendary investor Warren Buffet. Given Mr. Buffet’s unprecedented success and candor as it pertains to his investment process, one may assume that investors would largely follow his lead. This assumption, however, would run in stark contrast to reality. The fact of the matter is that capital markets have moved away from a long-term mindset and more towards a focus on short-term results. This trend has been well observed by market participants and academics alike, yet the question as to what will serve as a catalyst to reverse the trend remains. To this end, it’s worth highlighting a recently released white paper by The Generation Foundation and KKS Advisors focusing on the impact of regular Earnings Guidance. Thorough examination of the topic leads to the following conclusions:

• Many companies practice regular earnings guidance because they perceive guidance to bring capital market benefits in terms of analyst coverage, reduced volatility, and a

©digitalista/Crystal Graphics

lower cost of capital. Those benefits though are just perceived rather than real.

• Costs, however, are very real. Regular earnings guidance seems to be associated with myopic behavior decreasing investments that allow the firm to remain competitive in order to achieve short-term capital market targets.

• Perhaps the most worrisome part for a senior leader of a company is that regular earnings guidance attracts short-term investors. While this is not necessarily a bad thing in every case, there are many instances where a short-term oriented investor base has put pressure on the firm to maximize short-term earnings rather than the long-term value of the firm.

• Studying leading companies that have moved away from earnings guidance, the authors derived a framework and several concrete steps that CEOs can implement to move away


http://genfound.org/media/pdf-earnings-guidance-kks-30-01-14.pdf

http://genfound.org/media/pdf-earnings-guidance-kks-30-01-14.pdf

from the practice. These steps are also designed to help minimize any confusion and uncertainty about the move among capital market participants.

In assessing the debate around the impact of regular Earnings Guidance, the authors, George Serafeim and Gabriel Karageorgiou, first provide an overview of the evolution of the issue and regulatory milestones that shaped reporting practices. Notably, Earnings Guidance popularity increased rapidly in 1996 following the extension of the Safe Harbor Law that protected companies from legal liability in performance forecasts. Following the relaxation of regulatory rules, “companies aimed to increase their transparency and provide the market with additional information while exploring new communication channels that would attract the market’s attention.” Thereafter, Serafeim and Karageorgiou discuss the perceived benefits and actual costs associated with Earnings Guidance. On the cost side: the risks associated with incentives to manage earnings, the likelihood of attracting a more short-term oriented investor base, increasing analyst herding, and the link between managers’ financial incentives and short-term performance of their firms. On the other hand, the authors address the perceived benefits in that Earnings Guidance reduces information asymmetry, increases visibility, reduces stock price volatility and lowers litigation risk. They conclude that “the perceived benefits are either not justified by the empirical evidence (i.e., reduction of stock price volatility, increased analyst visibility) or do no justify

regular adoption of the practice (i.e., information asymmetry reduction, lower litigation risk exposure). It’s one thing to identify an issue; it’s another to provide a potential solution. Serafeim and Karageorgiou aptly anticipate the question “If not Earnings Guidance, then what?” They discuss alternative forms of communication that would benefit investors and other stakeholders including Integrated Reporting. As part of this, Integrated Guidance should be provided by which management discusses how various forms of capital (i.e., financial, intellectual, human, social) are enhanced or depleted. In recognizing that eliminating Earnings Guidance may be perceived as a negative signal (sign of uncertainty), the authors propose a seven-step process that CEOs can use as a roadmap in ending Earnings Guidance while minimizing the risk of being perceived negatively. Furthermore, the study offers recommendations for other organizations in the capital markets, such as sell-side brokerage houses and asset managers. Finally, the study offers case studies whereby large, well respected companies either ended the practice of Earnings Guidance (i.e., Coca-Cola, Unilever) or chose not to provide it in the first place (i.e., Google).

Michael Shavel, CFA is the Research & Business Analyst at Cornerstone Capital Inc. and a former Research Analyst on AllianceBernstein’s Global Growth & Thematic team.


Corporate Governance

Teaching Boards to Keep Diversity in Focus

By Susan Baker, Vice President, Shareholder Advocacy, Trillium Asset Management and Jonas Kron, Senior Vice President and Trillium’s Director of Shareholder Advocacy

©Michael Davey Brown/Crystal Graphics

While shareholder advocacy can often bear the trappings of confrontation and debate, there are many examples of companies embracing suggested reforms brought to them by investors. One story that captures this dynamic well is Trillium’s engagement with Westinghouse Air Brake Technologies Corp (Wabtec, NYSE:WAB) of Pennsylvania. First, a little bit of background on the company. Wabtec is a producer of products and services primarily for rail and transit industries, which has strong appeal from an environmental perspective. As a key component of inter-city and metro public transit systems, the company can help support the urban transportation systems necessary to addressing energy and environmental challenges. And rail provides one of the most fuel-efficient ways to transport freight. However, the company is not without room for improvement. In particular, Trillium has been concerned that the company has no women on its board of directors and until recently did not disclose whether diversity, inclusive of gender or race, was part of its board nominee search process. As many people know, and many more are learning, numerous studies have underscored the nexus between greater board and management diversity and improved corporate governance and financial performance. A 2012 study by Miriam Shwartz-Ziv concluded that boards with three or more women directors were roughly twice as likely to request further information and to take an initiative, leading to higher return on equity and net profit margins compared to peer companies.1 And a 2012 report by Credit Suisse found that, over a six-year period, companies with greater gender diversity exhibited less volatility in earnings and had better financial performance. 2 In addition, Trillium is deeply concerned about the social implications from having so few women in corporate leadership positions. What

1 Schwartz-Ziv, Miriam. “Does the Gender of Directors Matter?” November 2012 2 https://www.credit-suisse.com/newsletter/doc/gender_diversity.pdf


http://www.aeaweb.org/search.php

https://www.credit-suisse.com/newsletter/doc/gender_diversity.pdf

Susan Baker is Vice President, Shareholder Advocacy at Trillium Asset Management. Her work includes communication with company leadership, shareholder proposals, and public policy advocacy on issues such as board and workplace diversity, human and labor rights and environmental health. Jonas Kron is a Senior Vice President and Trillium’s Director of Shareholder Advocacy. With over fifteen years of experience in shareholder advocacy, Jonas is responsible for leading and coordinating Trillium’s extensive advocacy program, which works to engage companies on their environmental and social performance.

impact does this have on career and life choices for today’s and future generations of women? What is the negative impact on women’s social equality of this stratification at the highest echelons of the business world? These findings led Trillium, starting in 2012, to file shareholder proposals at eight companies including a proposal at Wabtec asking it to “publicly commit itself to a policy of Board inclusiveness to ensure that women and minority candidates are routinely sought as part of every Board search the company undertakes.” Happily, the filing at Wabtec led to a dialogue with Emilio Fernandez, Wabtec’s Chairman of the Board. Even better, Trillium was able to bring to the table two important constituents, the 30% Coalition and the Deputy Treasurer for Pennsylvania, where Wabtec is headquartered. The 30% Coalition is a national organization of 70 members (including companies and investors) working to increase the representation of women on boards by focusing on the demand side of the issue. Their goal: to achieve a 30 percent representation of women across all public company boards by the end of 2015. This dialogue, which occurred over several meetings during the 2013-14 winter, led Wabtec to amend its Corporate Governance Guidelines, Nominating & Corporate Governance Committee Charter and 2014 proxy statement to include a clear definition of diversity, inclusive of gender and race, and make diversity an intentional part of board nominee search criteria. The cooperative nature of the dialogue is perhaps best captured in the words of the participants. “Wabtec values constructive dialogue with its shareholders and commends Trillium for its dedication to shareholder issues,” said Albert J. Neupaver, Chairman and Chief Executive Officer. “We are highly committed to principles of diversity as part of our drive to create sustainable value for all of our shareholders. As part of this commitment our Board believes that a diverse membership with varying perspectives and experiences is an important Board attribute.” And Pennsylvania Treasurer Rob McCord put it this way: “I’m proud that Wabtec — a company with deep roots in the Pennsylvania economy — agrees that a diverse board can lead to increased value to the company and its shareholders. I also commend Wabtec for committing that future director searches will include diversity as a focus.” Since the withdrawal of the proposal, the Board met in May to review search firms, the majority of which are women owned/managed, and will meet again in July to select one firm to complete the search for women candidates. Wabtec’s board chair has also instructed board


http://www.trilliuminvest.com/staff/advocacy-team/susan-baker-esg-research-shareholder-advocacy/

http://www.trilliuminvest.com/staff/advocacy-team/jonas-kron-esq-esg-research-shareholder-advocacy/

members to offer prospective woman candidates for consideration. Trillium expects to engage with the company and gauge its progress later this year. This dialogue has allowed us to open discussions on other topics with the company, the most recent being on adopting a comprehensive non-discrimination policy. We very much hope and expect that Wabtec will follow in the steps of Cree, another company Trillium engaged with this past year. In December 2013, following our engagement, the company named respected executive Anne Whitaker to its board. We are confident Wabtec will move quickly to build a board with diverse talents and perspectives, inclusive of gender and race, to enhance the culture of innovation, and critical thinking in the boardroom.


Corporate Governance

What is Shareholder Engagement…Why is it Important?

By John Wilson, Head of Corporate Governance, Engagement & Research at Cornerstone Capital Inc.

©pressmaster/Crystal Graphics

The article by Susan Baker and Jonas Kron provides a fascinating example of how Trillium Asset Management has used its influence as an investor to impact corporate policies on an important social issue. But is Trillium’s story an outlier or part of a trend? Do companies change their governance practices in response to input from shareholders? If so, why? And more importantly, does it benefit the bottom line? Corporate governance engagement is a distinctive form of dialogue between shareholder and company. In contrast to analyst calls or shareholder activism, corporate governance engagement is not based on the specifics of business strategy. Instead, shareholders ask whether corporate governance policies and practices are likely to lead to decisions made in the best long term interests of shareholders. As a part of this, shareholders may raise questions about board accountability to shareholders, executive compensation, or corporate social responsibility practices. Until recently, anecdotes were the only evidence of the effectiveness of these practices. Because shareholder dialogues are confidential, little data was made available to researchers to study trends. However, new partnerships between academics and investor advocates have begun to unlock the “black box” of shareholder engagement on corporate governance. A 2014 study by Carleton Center for Community Innovation1 studied 6,000 corporate dialogues conducted over twenty years by members of the Interfaith Center on Corporate Responsibility, an association of primarily religious investors dedicated to promoting corporate social responsibility. The study focused in particular on engagements which included the filing of a shareholder proposal, in which shareholder places a question on a company annual meeting proxy ballot related to a governance issue. The filing of a shareholder proposal implies resistance from the company to adopting the requested changes, yet the study found that in half of the cases studied, the company did make at least some of the requested changes. The study concludes that

1 “Power and Shareholder Saliency,” Tessa Hebb, Andreas Hoepner, Tatiana Rodionova and Imelda Sanchez, 2014


John Wilson is the Head of Corporate Governance, Engagement & Research at Cornerstone Capital Inc. Prior to Cornerstone, he was the Director of Corporate Governance at TIAA-CREF and the Director of Socially Responsible Investing at the Christian Brothers Investment Services. He is also an Adjunct Assistant Professor at the Columbia University Graduate School of Business.

shareholder proposals help to open the door to engagement between shareholders and companies, and that this engagement can lead to tangible governance changes, and that engagement has become more effective over time. One limitation of the Carleton Center study was that it did not examine the factors that led to successful dialogue once initiated by a shareholder proposal. A qualitative study by Fabrizio Ferraro and Daniel Beunza2 sheds light on the mechanisms by which shareholders wield influence. Although in some cases they may raise the same issues as outside activist groups, religious investors gain legitimacy and trust through their long-term investment in the company: shareholders are seen as insiders having a credible voice within corporate decision-making processes. The particular capability of these investors is to reframe moral issues as business issues, helping companies to identify concerns that may become business risks. These dialogues often help lower level managers who agree with the investors gain the attention of senior managers. Finally, investors can use tactics such as shareholder proposals to force companies to confront issues that they would rather ignore. The authors conclude that corporate governance engagement functions as a tool of corporate learning, rather than as a pressure tactic used by outside groups to force unwanted change. Because both these papers used data supplied by religious investors, they did not include the experience of larger institutional investors whose experiences may be distinct from those of smaller investors. For example, because of their larger holdings, larger investors do not usually need to file shareholder proposals in order to gain access to corporate management. Although comprehensive data on the engagements of larger investors are not available, research does suggest that their experience is similar. A 2014 survey of investors and issuers by the Investor Responsibility Research Center Institute3 examined the frequency and perceptions of effectiveness of shareholder dialogue among companies and shareholders, including both large and small investors. The study found engagement between companies and shareholders is “firmly rooted in the corporate governance landscape” that the number of engagements between companies and shareholders has risen, and that the subject matter included financial, governance, social and

2 “Understanding Voice: Mechamisms of Influence in Shareholder Engagements,” Fabrizio Ferraro and Daniel Beunza, 2013 3 “Defining Engagement: An Update on the Evolving Relationship Between Shareholders, Directors, and Executives,” IRRC Institute, April 2014


environmental concerns. Approximately half of investors agreed that engagement was always or usually successful. Finally, there is emerging research that associates successful engagement with improved financial performance. Previously in these pages, we noted two studies that demonstrate economic value related to successful engagement. The first4 demonstrated that successful engagements are followed on average by a one-year abnormal return of 4.4%, which persists over time and which was supported by improved operating performance. (Unsuccessful engagements yielded no abnormal returns.) Successful engagements were documented across environmental, social and governance issues and yielded similar performance benefits. A second study5 examined shareholder proposals on environmental and social issues which narrowly passed or failed. The study finds that companies where proposals are fully adopted experience a .7-.8% increase in return on assets, a 1.1-1.2% increase of profit margins and a positive market reaction of 1.9% as compared to proposals that fail. This study also notes that this effect is reduced for firms with higher social and environmental performance, indicating a diminishing marginal returns to engagement. Though more research is needed to confirm and expand upon these results, these studies suggest that the market is increasingly recognizing and responding to the contribution of shareholder engagement to firm performance. In evaluating companies, investors may wish to consider how shareholder engagement by issuers may be a sign of quality of management. Investors may also consider the specific issues being raised in these engagements as a signal of areas of corporate risk and opportunity.

4 “Active Ownership,” Elroy Dimson, Oguzhan Karakas, and Xi Li, December 17, 2012 5 “Does Corporate Social Responsibility Lead to Superior Financial Performance? A Regression Discontinuity Approach,” Carol Flammer, January 2013


Enhanced Analytics

Confirmation Bias in the Investment Process

By Michael Shavel, CFA is the Research & Business Analyst at Cornerstone Capital Inc. The ancient Greek historian, Thucydides, wrote, “It is a habit of mankind…to use sovereign reason to thrust aside what they do not fancy.” The phenomenon to which he speaks manifests itself in all walks of life, from politics to religion and investing. Today, this concept is termed “confirmation bias” and refers to the tendency of people to favor information that confirms their beliefs or hypotheses. Research “suggests physiological explanations…that the evolutionary development of the human brain has facilitated the ability to use heuristics which provide good judgments quickly, but which can also lead to systematic biases.”1 As financial market participants, we must acknowledge the presence of this bias in order to improve investment performance and avoid unforeseen risks. To this end, it’s worth considering instances of confirmation bias at the investor, banking, and corporate levels. We submit that confirmation bias is particularly visible at the investor level. The advent and penetration of 24/7 financial news, online investing platforms and stock discussion forums creates a new set of challenges – especially for the individual investor. An academic study examined stock message boards and concluded that confirmation bias not only exists, but is more pronounced for investors with positive and strong beliefs about a stock. Moreover, the study indicates that confirmation bias increases as volatility rises. 2 Said another way, investors look to others for comfort and confirmation when their beliefs are challenged by the market. While institutional investors may not spend as much time on message boards (as they have greater access to institutional-caliber research), they are not immune to confirmation bias. One of the more

1 Sabourian, H. and Sibert, Anne C., Banker Compensation and Confirmation Bias (April 2009), CEPR Discussion Paper No. DP7263, 2 Park, J., Prabhudev, K., Gu, B., Kumar, A., Raghunathan, R., Confirmation Bias, Overconfidence, and Investment Performance: Evidence from Stock Message Boards (July 2010), McCombs Research Paper Series No. IROM-07-10

©mkabakov/Crystal Graphics obvious sources of confirmation bias is simply in seeking out facts or surrounding oneself with others that support a pre-conceived conclusion. In recognition of this tendency, Warren Buffet invites critics and short-sellers of Berkshire Hathaway to the company’s annual meeting to challenge assumptions and test beliefs. But there may also be a more worrisome, stealth source of confirmation bias. Author and online organizer Eli Pariser argues that large and influential websites, such as Google and Facebook, use algorithms that utilize unique user data that tend to reinforce a specific user’s current thinking and filters out new ideas. In doing so, Pariser suggests that users are trapped in a “filter bubble” and aren’t exposed to information that could potentially challenge or broaden their viewpoint. As institutional investors utilize online search engines and social media more heavily, they should be cognizant of this potentially insidious problem and take action to avoid falling


victim to the filter bubble. According to Eli Pariser, there are “10 Ways to Pop Your Filter Bubble.” Investors are not the only financial market participants that exhibit confirmation bias. Indeed, the same tendencies are discernible at investment banks, a point that is illustrated when examining the roots of the Global Financial Crisis (GFC). As concluded in a study on confirmation bias and banker compensation, “a desire to appear competent may explain what appear to be the cognitive errors that are known as confirmation bias.” The study also states, “In addition to contributing to the recent excess in financial markets, it is possible that a reward structure that leads to confirmation bias can also cause asset price anomalies.”3 Let us be clear - this is not to say that confirmation bias was the sole cause of the GFC. However, an investor that was conscious of the connection between confirmation bias and compensation structure perhaps would have challenged the bankers’ avoidance of investigating the details of the underlying assets. In evaluating potential investments, the importance of being able to recognize confirmation bias within corporations, management teams, and board rooms cannot be understated. There have been several high profile corporate miscues in recent years that now serve as case studies in behavioral finance. For instance, Hersh Shefrin, Professor of Finance at Santa Clara University, cites Merrill Lynch’s decisions prior

to the GFC as the firm continued to take on more risk in the mortgage market, despite AIG’s refusal to provide insurance due to concerns about the very same market.4 In addition, a study on the behavioral analysis of BP suggests that confirmation bias, among other pitfalls, “exerted strong influences during the Deepwater Horizon explosion.”5 To be sure, identifying confirmation bias at the corporate level is not easy as investors aren’t privy to the daily conversations among employees, executives, and board members, and few investors are able to meet senior management in person. However, investors can improve the prospect of identifying confirmation bias by evaluating ESG factors. Envisage a company in which earnings revisions, price momentum, and management commentary are universally positive, but a poor corporate governance record is uncovered. All else equal, poor governance raises a red flag and highlights the need for further research. While such analysis does not eliminate the potential for confirmation bias, it can reduce the impact of it. Michael Shavel, CFA is the Research & Business Analyst at Cornerstone Capital Inc. and a former Research Analyst on AllianceBernstein’s Global Growth & Thematic team.

3 Sabourian, H. and Sibert, Anne C., Banker Compensation and Confirmation Bias, pg. 25-26 4 Shefrin, Hersh, 2008. Ending the Management Illusion. New York: McGraw-Hill. 5 Shefrin, Hersh and Cervellati, Enrico Maria, BP's Failure to Debias: Underscoring the Importance of Behavioral Corporate Finance (March 29, 2011). SCU Leavey School of Business Research Paper No. 11-05


http://www.thefilterbubble.com/10-things-you-can-do

Enhanced Analytics

Learning from Diapers – Life Cycle Assessment as an Investment Risk Mitigation Tool

By James Fava, Chief Sustainability Strategist, PE INTERNATIONAL Remember the garbage barge? Back in 1987, the Mobro 4000, a barge carrying more than 3,000 tons of garbage from Islip, Long Island, famously departed from New York harbor bound for a landfill site in North Carolina because Islip’s own landfill site was nearly full. The aim was to use the garbage as part of a landfill gas project to generate clean energy. But the barge wasn’t allowed to unload due to fears that its load was dangerous. It ended up sailing for months from port to port, traveling as far as Belize looking for somewhere that would accept the consignment while becoming a symbol of a country that was running out of landfill sites. Eventually, the garbage was incinerated close to where it had all started, in Brooklyn and the resulting ash buried in Islip. According to the Waste360 website on the 20th anniversary of the unexpectedly eventful trip, “within three years, most states passed laws requiring some kind of municipal recycling. The United States went from about 600 cities with curbside recycling programs to almost 10,000. Our recycling rate is three times higher now than it was in 1987.” The barge attracted a huge amount of attention and inevitably, enterprising businesses started to jump on the bandwagon. One such group was the makers of cloth diapers, who were quick to claim that their reusable products were much more environmentally friendly than disposables. At first sight, it seems an uncontroversial claim – cloth diapers are made from natural products, and they and their contents don’t get sent to landfills. But it’s not quite that simple and the makers of disposables hit back. While disposable diapers take natural resources to make and produce more solid

Courtesy of PE INTERNATIONAL waste than washables, it does not mean that the latter are impact free. Cloth diapers use water and detergents – and energy to treat, transport and heat that water while washing – and they produce water-borne emissions in the use stage that disposables do not. It is possible to come to different and equally valid interpretations depending on the impact you are examining and where it occurs. To get a true picture, you need to take a life cycle perspective, looking at multiple life cycle stages (e.g. material sourcing, manufacturing, distribution, use and disposal) to ensure that unanticipated impacts are not transferred from one stage to another. This ‘duelling diaper’ debate laid the foundation for the modern development and application of life cycle assessment (LCA). The battle between the two types of diapers highlighted one of the key benefits of LCA. By increasing awareness of the impacts of the two products, LCA has enabled both categories to reduce their environmental impacts. For example, a study by the UK’s Environment Agency in 2008 (an update of the original in 2005), found that reusable diapers can be 40% better for the environment than their disposable counterparts – but only if parents take


Courtesy of PE INTERNATIONAL particular steps to minimize the impact of washing and drying them. If you wash the diapers at high temperature and dry them in a conventional dryer this significantly increases the amount of energy involved and reduces the environmental benefits. But if you use an energy-efficient washing machine and dry the diapers on a clothesline, you use much less energy. The impact is reduced still further if you buy your washable diapers second-hand and if you have some form of renewable energy, such as solar panels, on your home. But the makers of disposables can also point to measures to make their products more sustainable. Between the 2005 and 2008 studies, the average diaper became 13.5% lighter and its global warming potential fell. During this time, a company called Knowaste started recycling disposables into plastic and cardboard products with claims to save up to 70% of the greenhouse gas emissions associated with

landfill or incineration. Other companies use diapers as fuel for waste facilities, just as was planned for the garbage on the Mobro 4000. How is this relevant to investors? Well, the diaper debate shows that when it comes to evaluating the environmental risks and opportunities in product systems the answers are rarely simple and often are counter intuitive. LCA provides a logical, structured approach to a form of due diligence on environmental issues that can highlight risks and opportunities that companies and their investors might otherwise not be aware of. These insights are critical when considering and managing likely risks and opportunities that arise from environmental, social and governance issues, for example. By looking not just at a company’s own operations but also at its supply chain, use and disposal of its products, LCA can provide insights that will help companies to better manage their key product risks and continually innovate to improve their products. Companies that have embedded the use of life cycle information as a significant input into their enterprise risk management system can help investors to ensure stable, sustainable returns on their investments over the long term. James Fava is the Chief Sustainability Strategist at PE INTERNATIONAL.


Enhanced Analytics

The Customer Knows Best: Wall Street Needs to Prioritize Consumer Research

By John Hoeppner, Head of Investment Research at Mission Measurement For consumer-facing businesses like restaurants, grocery stores, and automotive manufacturers, competition on price, quality, and convenience is fierce and leaves little space for differentiation. Yet, even in this parity market, companies such as Chipotle, Whole Foods, and Tesla have achieved spectacular growth. Are these companies positioning themselves in a significantly different way than rivals? Mission Measurement research has shown that these companies have capitalized on emerging consumer demand that financial analysts have largely overlooked. To date, Wall Street’s use of deep consumer research has been limited. Most analysts use observable metrics like historical sales trends, demographic data, and business cycles to inform their sales forecasts. Still, direct consumer research is rare because extracting meaningful information from consumers is challenging. But consumer data is increasingly valuable, and for industries with largely undifferentiated products, understanding consumer decision-making is essential to forecasting sales growth. If we could quantify the nuances of consumer preferences we could better predict shifts in consumer demand. This was our goal in a recent study of consumers in the quick-service restaurant category in which we applied a research methodology designed to uncover what consumers do (rather than what they say) when deciding where to buy a fast lunch or dinner. Our representative sample consisted of 1,200 U.S. consumers aged 16-64 who had purchased fast food at least four times in the past four weeks. We tested an exhaustive list of traditional benefits (such as low prices, good taste, and convenient location) and what we termed “social benefits” (including healthy options, community improvement and environmental impact) to examine their effect on consumer choice.

©ARZTSAMUI/Shutterstock The results revealed which product attributes really matter, which companies deliver them well, and how much monetary impact delivering these attributes will have on business growth. Perhaps surprisingly, the results challenge conventional wisdom about consumer behavior. For instance, we found that fresh ingredients were 42% more important to consumers than value and 57% more important than restaurant location. Interestingly, high performance on traditional benefits did not predict sales growth. In fact, almost all restaurants were rated similarly for traditional benefits. On the other hand, there was wide variation in how consumers rated restaurants for social benefits. Clearly, the battle to differentiate and win customers’ hearts as well as their wallets has shifted away from providing traditional benefits to delivering social benefits. This is especially apparent when analyzing how consumers rate brands on their delivery of social benefits. In our research, the top performing quartile of restaurant brands that delivered social benefits


averaged 14% U.S. sales growth over the past three years, while the rest of the restaurants averaged only 2% growth. While some of this difference can be attributed to restaurant size and other factors – as much as 15% of this difference can be explained by Mission Measurement’s consumer-driven ratings. This relationship between growth and delivering social benefits to consumers underscores the importance of consumer preference research in equity analysis.

Moreover, the research findings provide insights into unexpected growth successes. For instance, though Chick-fil-A has generated controversial social headlines, it has succeeded, while chains such as Burger King have stagnated. Both Chick-fil-A and Burger King perform within 5% of industry averages on traditional benefits such as offering a broad product variety. However, on using natural ingredients, Burger King performs 15% beneath the industry average while Chick-fil-A is rated almost 15% above the industry average. While these perceptions may not reflect the actual restaurant characteristics, it is these perspectives that are the driving force behind a growing portion of the market’s purchasing decisions. At the brand level: Chick-fil-A (rated a 1st quartile social leader by the consumers) had 14% U.S. sales growth in 2013, while Burger King (rated in the 3rd quartile on social benefit delivery) had 2% U.S. sales growth.

Data provides a clear understanding of why different companies thrive. In the case of Chick-fil-A, studying

the nuances of U.S. consumer preferences demonstrates that some social issues affect sales more than others. For restaurant consumers, “uses ingredients free of additives” is 89% more influential in purchase decisions than “is an ethical and transparent brand.” The data also compares different social benefits to each other and reports how consumer preference for certain social issues evolves over time rather than prioritizing social issues individually. As an example, “food safety” may have been a key issue for U.S. consumers in the past. But as all companies began delivering this benefit, the key concern today is “uses natural ingredients”. With recent media attention about income inequality gaining traction, maybe “fair wages” will emerge as an increasingly relevant purchase driver.

Companies are bombarded with many conflicting voices – shareholders, employees, and activists – each with their own values and perspectives on social issues. We think that now is the time to return focus to the preferences of the modern consumer. Uncovering latent demand among consumers has the potential to unlock tremendous business and investment opportunities and ultimately predict the next Chipotle, Whole Foods and Tesla.

John Hoeppner is Head of Investment Research at Mission Measurement, a consultancy and data firm which uses measurement of social impact to improve business and investment results.


http://www.mmsocialcapital.com/%23!partners/c2414

http://missionmeasurement.com/

Featured Editorial

Green ‘Em Up, Up, Up! Teaching Sustainability Through Story, Song & Stomach

By Cindy Motz, Global Advisory Council Cornerstone Capital, Financial Services Consultant and former II & WSJ All Star Analyst

©dolgachov/Crystal Graphics

Ever wonder if that machine in the doctor’s office testing your child’s “perfect” hearing is an empty box? It’s not always easy to get kids to listen, much less learn, what we want them to. But amidst the cacophony of green messages, companies are finding creative ways to teach sustainability through product offerings, and likely building a young customer base in the process.

Of Mice & Maids…and Björk? Move over John Steinbeck. From Mickey Mouse’s teaching of the three “Rs” (i.e., “Reduce, Reuse, Recycle”), to Dora’s saving the mermaids from a garbage-polluted ocean, companies are spreading the word on the environment and sustainability through books, music, apps, and more. And it’s not required to have the multi-billion dollar valuations of a Disney or Viacom to make an impact with younger generations. Even after a withdrawn Kickstarter campaign, alternative rocker, Björk, has managed to get her “Biophilia” curriculum, a technology, music-based, science/environmental program, in schools throughout Europe and the U.S.1 So, don’t be surprised if your 8-15 year old suddenly has more experience with a Tesla (at least with its coils) than you do!

“…great collaboration with Bjork and her team. Together, we gave 60 middle schoolers from Queens and Manhattan…a behind the scenes look at Tesla coils, pendulum harps, and other instruments….”2

But Does It Really Sink In—Teaching Sustainability on That Not So Indifferent Curve? Fast forward a few years from the primary and middle school set. Now, imagine your freshmen Economics class, multiply it by 40 or 50 times, and then, make it a classroom—only it’s a concert at Jones Beach— where 15,000 teenagers, young adults (and the rest of us) are gathered. And they still may not listen to you—not just because the music is so loud—but they do listen to bands like Fall Out Boy. And when Pete Wentz, lead singer, tells them “It’s so rad that the entire concert tour is carbon neutral thanks to companies like LiveNation and Just Energy,” it does, indeed,

1 Priscilla Frank, “Bjork’s ‘Biophilia’ Curriculum Will be Adopted by European Schools,” Huffington Post, 6/19/14. 2 Dan Wempe, New York Hall of Science, http://biophiliaeducational.org/press-section/quotes/


Cindy Motz CFA is a Global Advisory Council of Cornerstone Capital Inc., Financial Services Consultant and former II & WSJ All Star Analyst.

“Light ‘Em Up,” and promote awareness about the companies making sustainability happen at a very impressionable time in their lives.

Serving Up Sustainability Along the Supply Chain Measure, Manage, and Mitigate. “When LiveNation wanted to do more with sustainable touring logistics, they came to UPS.”3 In May 2011, LiveNation teamed up with UPS to reach out to millions of concert goers by offsetting CO2 impacts from shipping concert tickets, as well as reducing emissions associated with band concert transport logistics.4 In March 2013, LiveNation expanded its commitment, agreeing to have 85 concert venues audited by JustGreen Lifestyle, a subsidiary of Just Energy, a diversified energy company, who recently acquired Terrapass. With the goal of offsetting carbon footprints at 4,000 concerts, the companies estimate this is equivalent to eliminating 55,000 tons of carbon, or removing 11,000 vehicles from the road, annually. And their goal continues to be to educate the fan base: "We are collaborating on environmental education and promotions for fans, including a calculator to green concert commutes, enabling fans to… and offset carbon footprint."5

The Way to Millions of Fans’ Hearts and Wallets via Their Stomachs? With teenagers spending 14x what adults spend on food, and more than double on entertainment, concerts and video games, the answer seems to be YES.6 Although good food is not typically paired with concert venues, LiveNation is committed to providing and educating customers about sustainable choices as it serves up 800,000 meals every summer. In August 2013, LiveNation announced it would introduce locally grown produce and vegetarian meals, and have all meat products certified by the U.S. Humane Society regarding animal welfare in 38 of its concert theatres.7 “I know in my own home it's important… We know from working closely with the artist community and from fans that it's important to many of them as well.”— Michael Rapino, CEO of LiveNation

No More Pencils, No More Books. School’s Not Out for the Summer When it Comes to Sustainability! And while it may be hard to teach old dogs new tricks, some companies are having good luck with the puppies who—whether by stories, songs, or their stomachs—are being educated about sustainability, and becoming leading indicators of what the future holds in terms of people, planet, and profits.

3 Sunny Nastase, UPS Customer Solutions, http://pressroom.ups.com, accessed July 6, 2014. 4 Jonathan Bardelline, “UPS Rocks Fuel Efficiency with Live Nation Partnership,” Green Biz.com, May 25, 2011. 5 PRNewswire, LiveNation, March 16, 2013, 6 Derek Thompson, “How Teenagers Spend Money,” The Atlantic, April 12, 2013. 7 Phil Lempert, “Live Music and Local Food: LiveNation,” Supermarket Guru, August 6, 2013.


http://pressroom.ups.com/

http://www.greenbiz.com/news/2011/05/25/ups-rocks-fuel-efficiency-live-nation-partnership

http://www.prnewswire.com/news-releases/live-nation-entertainment--justgreen-lifestyle-partner-to-neutralize-concert-venues-carbon-emissions-195636011.html

http://www.theatlantic.com/business/archive/2013/04/how-teenagers-spend-money/274949/

http://www.supermarketguru.com/articles/live-music-and-local-food-live-nation.html

Featured Editorial

Boosting Impact: Why Foundations Should Invest in Education Venture Funds

By Matt Greenfield, Managing Partner of Rethink Education and Tom Vander Ark, Founder of Getting Smart

©AndreyPopov/Crystal Graphics

This is an abstract from the white paper “Boosting Impact: Why Foundations Should Invest in Education Venture Funds,” March 2014

About three of seven billion people on planet earth have some internet access and are taking advantage of new learning and market opportunities. Entrepreneurs are taking advantage of digital networks—platforms, application and content ecosystems—to deliver healthcare, learning opportunities, agricultural productivity and access to markets. The reduction in the cost of computing devices, increased access to broadband, and creation of new tools and school models suggests that (where politics allow) it will be possible to offer a cost effective education to every young person on the planet by the end of the decade. The expanded learning opportunity resulting from developments in EdTech ranks with biotech, clean tech and the spread of democracy as a world-shaping force. The learning opportunity is driven by three critical digital shifts in education toward being:

• Self-directed: the shift from rigid age cohorts to individualized instruction that enables students to advance at their own speed in schools that blend online and onsite learning and where learning professionals work in teams;

• Adaptive: the shift from print textbooks and paper testing to digital tools enabling adaptive learning that is customized to the needs of the learners and provides instant performance feedback and motivational reward mechanisms; and

• Networked: the shift away from schools based solely on physical facilities and print products with centralized acquisition, distribution and production systems for learning products toward networks of teachers and learners in educational models that blend the best of online and face-to-face learning with decentralized acquisition of learning products.1 Knowledge is no longer best stored in hardcover textbooks or file cabinets, but in the new filing system—the Cloud, a new paradigm where applications running on a

1 Cohen, J., Daves, J. and Vander Ark, T. “Learning Returns: Impact Investing at the Education Turning Point.” Getting Smart. July 2012.


http://cdno.gettingsmart.com/wp-content/uploads/2014/03/Boosting-Impact-Final.pdf



http://cdno4.gettingsmart.com/wp-content/uploads/2012/07/Learning-Returns-7-8-12.pdf

Matt Greenfield is the Managing Partner of Rethink Education, a venture capital partnership focused on education technology. He serves as an advisor to University Ventures, the NewSchool Ventures Seed Fund and the College Board. Tom Vander Ark is the author of ‘Getting Smart: How Digital Learning is Changing the World’ and founder of Getting Smart, advocates for innovations that customize and motivate learning and extend access. Tom is also a partner in Learn Capital, an education venture capital firm investing in EdTech startups.

network can be accessed by any device, anywhere in the world at negligible cost.2

Boosting achievement and completion rates in america and extending access to quality learning worldwide will take entrepreneurship, massive investment and updated government policies. The Role of Private Capital and Profit-Seeking Organizations Government agencies can deliver public services with equity but often lack quality, efficiency and innovation. While government agencies suffer from political oscillations, non-profit organizations have the opportunity to sustain a mission over time. However, non-profits lack the ability to raise capital to produce and scale innovations. Compared to public and private sector organizations, foundations can take a long-term perspective and are particularly well-suited to promote equitable outcomes. Private capital is particularly useful in producing and scaling innovative products and services. Venture capital firms seek high returns by making risky investments in start-up and early-stage companies. Private equity investments allow revenue- producing companies at or near break-even profitability to achieve scale and produce attractive returns. These investments in innovation and scaling bring new services to education institutions and students.3 The table below compares the relative benefits and limitations of public, non- profit and for-profit organization structures.

In an efficient market, money flows to good ideas. The inefficiency of the U.S. K-12 education sector has hampered investment and

2 Moe, M., Hanson, M., Jiang, L., and Pampoulov, L. “American Revolution 2.0: How Education Innovation is Going to Revitalize America and Transform the U.S. Economy.” July 2012. 3 Vander Ark, T. “Private Capital and Public Education: Toward Quality at Scale.” Revolution Learning. February 2009.


http://rteducation.com/matt-greenfield/

http://rteducation.com/

http://gettingsmart.com/about/tom-vander-ark/

http://gettingsmart.com/

http://gsvadvisors.com/wordpress/wp-content/themes/gsvadvisors/American%20Revolution%202.0.pdf

http://gsvadvisors.com/wordpress/wp-content/themes/gsvadvisors/American%20Revolution%202.0.pdf

http://www.educationindustry.org/assets/2009%20%20privatecapitalandpubliceducation2009.pdf

innovation. Purchasing is done by about 15,000 districts and more than 100,000 schools, leading to diffused and protracted sales efforts. A web of interlocking employment agreements and local policies is compounded by 50 different complex education codes that deter interest from the private sector.4 Foundations have a hard time developing products and strategies that scale rapidly and become self-sustaining. And foundations have another key weakness: once the design of a program is locked into place, it becomes difficult for program officers to consider ideas that do not fit into the framework, no matter how powerful those new ideas might be. Venture capital firms, on the other hand, are finely-tuned mechanisms for detecting new ideas and new business models. Venture capital firms have the potential to serve as a kind of innovation radar for foundations. Until the mobile inflection point of 2010, private investors largely avoided investment in new tools to serve the K-12 market. Now, more powerful application development platforms and the explosion of tablets and smartphones make it much easier to develop and deliver new applications directly to students and classroom teachers. the mobile revolution led to a dramatic increase in private investment in U.S. K-12 venture funding from negligible in 2008 (when learn capital was formed) to $452 million in 2013.5 The market continues, though, to suffer from strange inefficiencies. Investors avoid certain vitally important sectors within education. For example, most venture capitalists will not consider an early-stage technology company that sells products to K-12 school districts. There are only five venture capital firms in the entire country that have demonstrated a liking for and understanding of early-stage businesses that sell to K-12 school districts. Larger companies do not face this prejudice. Once a company has scaled to $15 million in revenue or more, there are hundreds of potential investors, in other words, once a company no longer needs capital urgently, there are many venture capitalists prepared to provide it. But when an innovative K-12 business desperately needs venture capital (series a and B rounds) to survive and grow, the list of funders is short: Birchmere, Catamount/Owl Partners, Learn Capital, new Markets Venture Partners, and Rethink Education. These firms have raised funds that vary in size between $28 million and $82 million. That is a slender base of support for the start-ups targeting the urgent needs of the second-largest sector of the U.S. economy.

4 For an extended discussion see Smart Series Guide to EdTech Procurement. 5 Carolan, J. “Edtech K-12 Investments Up 6% This Year.” EdSurge. December 2013.


https://www.edsurge.com/n/2013-12-23-jennifer-carolan-edtech-k-12-investments-up-6-this-year

The Innovation Agenda The U.S. education sector is similar to the automobile industry of the 1970s—batch-processing and manual labor. It is one of the only sectors that has not experienced significant productivity improvement as a result of information technology. Despite an increase in inflation-adjusted expenditures per student and a reduction in class sizes, achievement has flatlined for 40 years.6 The basic building blocks have not changed—individual students struggling with text or a difficult math problem and schools filled with teachers in 900 square foot classrooms with rows of about 25 students. The students are grouped by age rather than level of understanding. Often, students are missing key precursor skills and the current lessons are thus incomprehensible to them. There are students sitting in algebra who do not know how to multiply fractions or what happens when a number is multiplied by zero. Current assessment tools deliver too little information and deliver it too late to affect instruction. Productivity breakthroughs will reshape the basic building blocks and result in improvements in productivity in learning, staffing and facilities. Computers will finally pay off when they become core rather than supplementary, when content is more adaptable to student learning needs and interests than current textbooks, when engaging content supports higher student-to-teacher ratios, and when online learning comfortably supports better facilities utilization. The most important productivity breakthroughs will come in the form of learning tools for the language and mathematics skills critical to accessing college and careers, as academic success is heavily dependent both on making the third grade transition from “learning to read” to “reading to learn” and building the problem-solving skills to be successful in higher level math and post-secondary eligibility. 7Adaptive content has “game changing” potential in both areas. Private capital is playing a particularly important role in eight categories:8

1. Digital content, particularly curriculum that adapts to individual learning needs, learning games, simulations and virtual environments.

2. Online learning where curriculum and instruction are provided online in both synchronous and asynchronous modes. An expanding category of online learning will be distributed

6 Tucker, M. “Why Has US Education Performance Flatlined?” Education Week blog. December 2013. 7 Achieve, Inc. “Closing the Expectations Gap.” February 2008. 8 Cohen, J., Daves, J. and Vander Ark, T. “Learning Returns: Impact Investing at the Education Turning Point.” Getting Smart. July 2012.


http://blogs.edweek.org/edweek/top_performers/2013/12/why_has_us_education_performance_%20flatlined.html

http://achieve.org/files/50-state-2008-final02-25-08.pdf

http://cdno4.gettingsmart.com/wp-content/uploads/2012/07/Learning-Returns-7-8-12.pdf

workforce models in categories including speech therapy and other special needs; world languages, Advanced Placement and other college credit courses; and higher level math, science, engineering and technology (STEM) courses.

3. Blended learning, school development and improvement. Innovative school models that incorporate the best of online and onsite learning will expand as new school networks will be adopted by struggling schools. Private sector participants will operate schools and provide services to non-profit and public school operators.

4. Learning platforms that help customize pathways through digital content libraries based on assessment data collected in a comprehensive student profiles. Teachers will benefit from instructional and management tools, and students will appreciate social learning features.

5. Learning apps, particularly those that are focused on the mobile consumer. More than 100,000 of the million apps in the Apple Store are learning-focused.

6. Aligned Services, particularly those that are focused on the mobile consumer. More than 100,000 of the million apps in the Apple Store are learning-focused.

7. Learning certification and skills verification services, including low cost post-secondary options, as well as training in emerging job clusters.

8. School operations by for-profit companies. This trend is quietly emerging as a multi-billion-dollar subsector and follows successful introduction at the post-secondary level with a number of scaled participants operating online and onsite programs, including Apollo (University of Phoenix), DeVry, Grand Canyon, Strayer, Capella, and Corinthian. About 100 for-profit education management organizations like Academica, National Heritage Academies, Mosaica, and Leona serve more than a half a million students and are collectively larger than non-profit charter management organizations, with over $1 billion in combined revenue. For-profit private school networks like Meritas and American Education Group are acquiring individual schools and building substantial networks.

There is some public activity in these areas, but it is private investment that is pushing these frontiers as the sector shifts to digital personal learning. These areas represent new entry points and business models for private capital.


Featured Editorial

“Measuring Impact in Ed Tech:” How Smart Education Investing Can Prepare K-12 Students for the 21st Century

By Michele Demers, Founder & CEO, Boundless Impact Investing

When Jason Lange was at NewSchools Venture Fund, he was tasked with assessing the education technology market and determining who was doing the best work. “I talked to every superintendent, every principal. I called every charter school operator,” said Lange. “I was just trying to look at content and school models and blended learning.” Across the education sector, he found one common concern: how to train and scale high quality instruction. He also learned that teachers needed access to a more diverse marketplace of tools and instructional materials. In 2010, he and educational services engineer Eric Dunn co-founded Bloomboard, a web-based assessment platform that increases accessibility and reduces the expense of feedback and training for educators. Through its clean, user-friendly interface, Bloomboard allows teachers and administrators to set goals and assess their progress, and then identify which learning tools are successful with students. The platform also features a marketplace of third-party educational resources to guide and train educators according to their specific needs. A research team hired by Boundless Impact Investing discovered Bloomboard when they were seeking to better understand U.S. K-12 Education Technology and the best potential investment opportunities. Boundless enables private investors to maximize the social value of their investments by providing access to an inexpensive and faster way of learning about investing in their sector of choice, be it education, clean water or solar technology. Led by education expert Alexa Cortes Culwell, the team spent the first half of 2014 interviewing the top investors, product developers, and product consumers (teachers, schools, districts) in the sector. They developed social impact metrics for three distinct product categories: student learning, teacher training and development, and school and district operations. Not surprisingly, the research showed that assessing the impact of products in the U.S. K-12 education system is a significant challenge. But getting the metrics right can make that easier. With American schools so far behind in incorporating technology into daily instruction and learning, the status quo isn’t acceptable anymore.


Michele Demers is the Founder and CEO of Boundless Impact Investing, an online community of private investors seeking to maximize returns through impact investing. .With 20 years of experience as a philanthropy executive, strategist, and social entrepreneur, she has been involved in the successful development of more than two-dozen for profit and nonprofit start-ups, including her own.

In spite of budget cuts and financial tension, schools and districts are directing more funding toward technology and teacher training for ed tech. But with so many new products flooding the market, how to choose? Ed tech products must be cost-effective and high quality, and investors – private and institutional – must seek out the new, disruptive models like Bloomboard that incorporate smart metrics into their business model. And those metrics need to be developed and agreed upon by all the key stakeholders. Bloomboard is one company that set out to disrupt the supply chain, and is allowing student growth and achievement to dictate the demand for teaching products. Many others are tuning into this impact-based approach, and our findings indicate companies employing more rigorous impact measurement to assure quality are performing better. Better metrics are generating better investments. It’s no secret, the education technology sector is growing exponentially. “In 2012, U.S. Congress appropriated $3.1 billion for teacher programs that are designed to improve the quality of teachers in the K-12 classroom. The programs include monies to support professional development in technology integration,” according to The Cooney Center. Ed tech funders are increasing the amount of capital invested in new products and services. So while capital is rising and opportunities abound, the problem for investors is a severe lack of complete, objective information about the companies and products out there. Trusted research sources like Boundless give investors information they can rely on to make smart investment choices. Only with independent research, led by experts who have demonstrated knowledge in the many integrated fields that make up Ed tech, are investors prepared to sift through the numerous investment opportunities in Ed tech companies and funds. And only with analysis that incorporates an understanding of the social and financial variables involved, can an investor determine what products will be attractive to teachers and schools in the long-term. In other words, products that will have staying power. Investors should clearly understand how a company is collecting and using data to improve its product(s) over time. This helps an investor understand the potential impact of an investment as well as the limits of the data enabling it. Investors should ask:

• What does the product’s data actually indicate in terms of meaningful, positive change?


• How do we know the measurement data is valid and rigorous? What are its limitations?

• What does the product developer hope to measure in the future? Why and when do they expect to do this?

Looking at a product like Bloomboard, its goal setting features take direct observations from administrators and teachers and assess best practices based on the correlating student achievement. The Bloomboard library creates access to an entirely new market of companies that are fundable and can serve as smarter social change models, providing teachers with appropriate tools for the new 21st century education environment. Their data is collected continuously, and generated firsthand by users. It is measuring student performance and professional development and assessing the effectiveness of different education resources. The metrics called upon to evaluate the total learning impact of Ed tech products and companies are not universal. They vary by product category, audience, how the data is collected, etc. It is important to determine which research methods, measures and level of independence are appropriate for measuring the impact of the unique product. Combining relevant measurements across a variety of populations will yield the highest level of confidence possible for both financial and social returns.


Featured Editorial

Investing in Prevention: A National Imperative Seen Through the Eyes of a Private Investor

By John Schaetzl, Independent Consultant & Adviser and Lead Director at SustainAbility

©Dudarev Mikhail/Crystal Graphics

The Vitality Institute has provided a persuasive and well documented call-to-action which should be read by everyone involved in health policy and the business of health well, come to think of it, that means every one of us. The policy experts at Vitality call for a new era of public-private investment in the greatest challenge to health in our time: prevention of non-communicable chronic diseases, such as heart disease, diabetes, respiratory disorders and cancer, which hamper economic productivity and require trillions in annual health expense. While the report may underplay the importance of continued investment in the treatment of infectious disease, the greatest and growing unmet need is preventing rather than treating metabolic and cardiovascular disease. Advice on diet, exercise and smoking cessation has been a part of every physician office visit for decades. Only smoking has seen significant change and that is likely the result of public policy campaigns and social pressure, not patient compliance. The report calls for research on ways to improve compliance with these and other healthy behaviors, and in particular translate those behaviors into the workplace. Chief among the steps advocated: developing standard metrics on workforce health reporting and integrating those factors into overall financial reports. At the same time we argue that policy must support improved health education, diet and exercise for children in school and at home (or via the internet and various media) intervening early when unhealthy habits start as well as attempting to improve fitness in the workplace. The call for public investment in disease prevention science and practice through fitness is persuasive, albeit the current appetite for government spending seems tempered at best. Prevention is, in the long run, cost effective. In the short term, however, it can be perceived as a substantial expense on top of the billions already spent annually on health care. Generations of Americans who were subjected to little more than good advice are now suffering epidemic levels of obesity, diabetes and cardio vascular disease. One can only hope that public policy makers will invest for long-term returns associated with these efforts, perhaps modeling the economic benefits as the better way of reducing national debt and seeking near-term spending cuts elsewhere. The authors rightly call for research in how to accomplish such behavioral change through expansion of prevention science and the use of personal technology. Is it found in gaming stocking up on reward points like frequent traveler programs?


http://thevitalityinstitute.org/commission/%23recommendations

John Schaetzl is an Independent Consultant & Adviser and Lead Director of SustainAbility, a think tank focused on sustainable business practices.

Or is it penalizing workers who do not work at achieving fitness with a higher co-pay requirement on their insurance premiums? Far too little is known at this point to risk the future of health costs on a national program. But we need to finance the research and experimentation to reinforce an understanding around prevention as a critical investment that could offer high-yield returns. Private investors face a similar dilemma on the merits of short vs. long-term thinking and putting near-term funds at risk given the likely long learning curve for the creation, adoption and uptake of such programs. Assuming those investments would be in technologies that assure incentives for healthy behavior, healthy food choices, prevention oriented workplaces or new fitness-focused insurance programs, investors could experience a long and risky path to returns. The private investor’s advantage is that they needn’t wait for that long term reward to arrive, but only for the market to see the possibility of that outcome and then re-price the asset. It is probably to the benefit of the investor that this re-pricing often occurs unexpectedly (even prematurely) and if so, allows some room for immediate action. Market skepticism for long payback initiatives (think of Jeff Immelt’s Ecomagination initiatives at GE or Indra Nooyi's healthy snacks bets at PepsiCo) seems universal and high quality assets may be bargain priced in the near term. That skepticism is too long lived and unpredictable to be played by the speculator who is experienced in going long or short over quarterly earnings misses and beats. The fundamental investor looks to longer term value creation, and can tolerate delayed value recognition. In that vein, a trove of so-called Healthy Tech products may be worthy of consideration. For instance, Apple’s forthcoming iWatch is rumored to be loaded with fitness features, and companies that support fitness would seem a great place for patient investors. Companies can be encouraged and markets cued by adding the right questions to investor management dialogues. There is a growing body of impirical research arguing that a more systematic understanding of broad “management quality” has contributed to competitive financial returns reflected in some SRI/sustainability indices. This approach might offer yet another incentive for private investors to follow this path.


http://www.sustainability.com/

Regional Imperatives

Learning to Feed a Nation

By Nasreen Awal, founding Chairperson of the Women Entrepreneurs Association of Bangladesh Bangladesh is a country of 165 million citizens crammed into a land area of 151,000 square kilometers about the size of Iowa. The seventh-largest country in the world, its population is increasing at a rate of 1.6% per annum, while its GNP has risen 5-7% annually for the past six years. At the same time, it faces a serious threat from the adverse effects of climate change because of its huge low-lying coastal area — roughly one foot above sea level. But our most daunting task is to ensure the food security and sustainability for the entire population. As an example, rice is the main staple of Bangladesh, central to the sustenance of its population. Rice production is an important source of livelihood for approximately 20 million rice-farming households, and for millions of the rural poor hired to work rice farms. Both economic growth and political stability of the country depend on an adequate, affordable and stable supply of rice. Despite the substantial increase in rice production in the wake of the Green Revolution, important challenges remain in ensuring an adequate and stable supply of this vital commodity that’s affordable to poor consumers. Despite a decline in per-capita consumption, major challenges are the need to produce more rice to meet the rising demand driven by population growth. These include deceleration in the growth of rice yields; environmental degradation associated with intensive rice production as well as a decline in rice biodiversity and loss of rice heritage. In addition to global climate change, increasing competition for land, labor and water from industrial and urban sectors and changes in dietary composition

Rice cultivation in Sylhet, Bangladesh ©Balaram Mahalder/Wikipedia with income growth and urbanization have added to the urgency. Although Bangladesh was once a food-deficit country, it is now almost completely self-reliant in rice and many other food items. Many factors contributed to this increased food production including education in the development of diversified crop varieties through R&D, as well as their adoption with the use of technological interventions to enhance crop yields. Modern scientific approaches and new technologies are making it possible to increase rice productivity in a sustainable manner by adding nutritive value to rice and other crops, and reducing losses from droughts and flood. These technologies are creating a positive impact on rice production and enhancing food security, reducing hunger, malnutrition and poverty. But Bangladesh falls far short in vegetables, meat, milk, eggs, spices and other food items that are the main source of protein and important nutrients necessary for human health and productivity. The country is dependent on imports for the majority of these staples (see Figure 1) including lentils (a good source of protein for the poor).


Figure 1: Imported Dietary Staples

Ingredient % Sourced Abroad

Onions 50

Spices (ginger, turmeric) 60

Milk 80

Meat 82

Eggs 60

Lentils 75

Edible oils 90

Sugar 90

Under the World Health Organization guidelines, 400 grams of vegetables are required for an adult for a balanced diet. But recent statistics indicate that only 80 grams of vegetables are available per adult in Bangladesh. At the moment, food sustainability is manifested not only through government sectors alone but also simultaneous participation of private entrepreneurs playing a significant role in many challenging fields in agriculture involving cereals, vegetables, fish, poultry, cattle and other diversified agricultural products. Bangladesh also has one of the highest densities of ruminant animals in the world, but it is also the least productive in terms of meat and milk. Therefore, genetic improvement is essential to feed the nation with milk and meat by improving livestock in two ways: i) increasing the productivity of animals for milk, meat and fat and ii) improving the livelihood of farmers by way of increasing farmer’s income through increased production of milk and meat per animal. The sub continental environment is suitable for buffalo within the intensive household production system. Comparatively, buffalo milk is equivalent to double the output of cow milk and easy to use in preparation of a variety of milk products. Traditionally, Bangladeshi people are used to depending on cow’s milk, which is highly insufficient

(about 20% of demand is met with current production while the remainder consists of imported milk at a high cost). Whereas, demand for milk is rising fast with buying capacity of consumers and commercial users, the demand/supply gap is also growing at an alarming rate. To minimize this gap, there is a phenomenal opportunity to promote milk production through intensive buffalo production, both in household and commercial farming, along with cattle. Various technological and policy options are available to increase the supply of food items. Given the present scenario, we at WEAB urge that the following strategy be undertaken to enhance food security:

• Increase the productivity and nutrition value of rice

• Enhance the rice and high-value agricultural product value chain by improving food quality and reducing post-harvest losses

• Improve mitigation/adaptation of farming to climate change and improve farmers’ capacity to cope with risk

• Improve the policy efficiency and reliability of domestic markets to stabilize price and supply

• Ensure equitable access by the poor

• Enhance the well-being and livelihoods of smallholders and women

• Maximize water in agriculture production

• Enhance crop varieties and introduction of intensive cropping systems

All of these steps rely on education. The learning process — from researchers to producers — is the common ingredient to all. These include better management of crops and inputs and those that involve changes at the crop/farming systems level. To mitigate the effects of climate change we must develop crop varieties that are tolerant of multiple stresses such as drought, submergence, salinity, insects/diseases and high temperature. Water is a critically important resource for rice production, but water is becoming scarce, both physically and economically.


Finally, women provide a good of the labor force for rice farming, and take a far more important role in livestock farming. They also play a major role in consumption and conservation. Given the present scenario of food and nutrition sustainability in Bangladesh, ensuring that gender roles are well developed and integrated into food security is not just a matter of human rights, but central to the nation’s chances at survival. In sum, the future of food security in Bangladesh is dependent upon insuring that the learning curve is complete from top to bottom. These major factors are critical:

• Investment in R&D for inducing and supporting technological innovations in all crops and agricultural productivity and efficiency; these steps will contribute to better quality and nutritional value, greater resilience and environmental protection.

• Promotion of technology and knowledge transfer and Information and Communication Technologies (ICT).

• Policy and institutional innovations to promote rural income growth and to develop a food security system that is stable and accessible to all.

• Investment in rural infrastructure to facilitate the marketing of agricultural produce.

Nasreen Awal is the founding Chairperson of the Women Entrepreneurs Association of Bangladesh (WEAB), which develops support systems for women entrepreneurs to improve the quality of their products and find routes for distribution to meet demand. She is also a director at the family-held Multimode Group.

___________________________________________________ Tom Lawson Blue - Green Revolution could Boost Food Security in Bangladesh, April, 2013.

Tareque, A.M.M. and Chowdhury, S.M.Z.H. (2010) Agricultural Research Priority: Vision 2030 and beyond, sub-sector: Livestock Bangladesh Agricultural Research Council, Farm Gate, Dhaka

Saleque, M.A. (2010). "Livestock and Livelihood - The Role of BRAC in Livestock Development in Bangladesh, Presented in Review of Livestock Research Programs and Preparation of Future Research" organized by BARC.

Mintoo, A.A. (2011). Cultivation of Vegetables, Published by Milan Nath, Anupam Prakashani, Dhaka 1100, Bangladesh.


Open Source Excellence

How Purpose-Driven Programs Can Solve the Employee Engagement Problem

By Susan Hunt Stevens, Founder & CEO, WeSpire The ripple effect of Gallup’s recent research on the State of the Workplace continues to widen. Their report basically indicted companies globally for their inattention to criticality of an engaged and motivated employee base. Based on their research, only 13% of employees worldwide are actively engaged in their work. For the U.S. alone, they assert, that translates to between $450-550B in lost revenue. Those are huge numbers, and a wake-up call for executives to assess their organizations and look for ways to improve the engagement of their workforce. One powerful motivator of engagement is having a sense purpose and positive impact. In fact, Towers Watson found that the third-most important driver of engagement was a company’s reputation for social responsibility. A recent PwC study found that more than half of recent college graduates are seeking a company that has corporate social responsibility (CSR) values that align with their own, and 56% said they would consider leaving a company that didn’t have the values they expected. WeSpire – the Boston-based technology company that I founded – runs engagement program for global corporations that focus on positive impact. Our cloud-based platform is a pioneer in the persuasive technology space and leverages the power of social and game mechanics to engage people in sustainability, corporate social responsibility, volunteering, safety, well-being and other positive impact initiatives. We work with, and learn from, our global customers and help build awareness, motivate action and measure the impact of the actions their people take. Earlier this summer, we had the opportunity to take a broader look at trends and best practices in employee

©Wavebreak Media Ltd/Crystal Graphics engagement, specifically as it relates to sustainability. What works, what doesn’t? What’s the best use of people’s time and company resources to help ensure that result? How do people learn? And, does mission-based leadership play a role? It was the third time the study has been conducted so it is based on five years of trending data. One key takeaway from the research: sustainability and values-based initiatives are important components of effective employee engagement. People not only want to work for a company that supports positive actions outside of the organization, they want the opportunity to participate too. As one respondent succinctly put it: “I’d love for my company to be more focused on sustainability and to provide initiatives for employees.” Sadly, only 30% of people said their employers offered such a program. A second interesting takeaway was the way in which employees learn. The lines between work and home are increasingly blurring. A full 89% of respondents stated that they would try a sustainability tactic at home that they adopted at work. This represents a big


http://www.pwc.com/en_M1/m1/services/consulting/documents/millennials-at-work.pdf

opportunity for companies to have a more positive impact on society as a whole.

Employees also care passionately about what their company, and their colleagues, are doing: 65% of respondents (and 75% of Millennials) are interested in learning more about their colleagues’ actions as it relates to sustainability, which shows the power of the workplace social network to drive change.

Finally, the research showed employees want more communication, more interaction, and more opportunity to participate in sustainability-related initiatives. That offers a huge opportunity to reach employees on a topic that matters to them and enable them to find purpose at work. While there’s no silver bullet for engagement, it’s clear that the time has come for every company to ask how they can use purpose-based engagement programs to close the overall engagement gap and drive powerful business results. It’s not only good for their people, but extremely good for profits.

Susan Hunt Stevens is the CEO & Founder of WeSpire.


http://www.wespire.com/meet-the-team

Open Source Excellence

Open Hiring: A Culture of Training and Learning

By Mike Brady, President & CEO, Greyston Bakery Inc. Greyston celebrated its 32nd Anniversary this year and we are extremely proud of our heritage as a pioneering social enterprise. Over these past thirty-two years the concepts of social entrepreneurship, conscious capitalism and environmental sustainability have become common terminology in many business and political circles. What has not changed is the inability for individuals with a history of criminal behavior, substance abuse or homelessness to be able to overcome past indiscretions and find decent employment. This problem continues to plague many cities that have no solution for their citizens living in poverty. Our business, located in Yonkers, New York (on the border of New York City) supplies some of the world’s most innovative and socially conscious companies, among them Unilever’s Ben & Jerry’s. We also have a partnership with the Whole Planet Foundation which is creating jobs to help alleviate poverty. We were given the honor of contributing to this Journal because we bring a unique perspective to solving this problem. We are willing to hire anyone coming through the front door of our Bakery through a policy called “Open Hiring”. Greyston uses Open Hiring as a tool to address community renewal through hiring the most economically disadvantaged residents, as well as a mechanism for differentiating our business. It is difficult to stand out in a global supply chain, but because of our social justice commitment we get recognized and valued alongside multi-national suppliers much larger in size. Moreover, the benefits Open Hiring provides within our organization and the local economy are numerous:

• We pay $1,300,000 in salaries to Open Hire employees, which get reinvested in the local Yonkers community.

Courtesy of Greystone Bakery Inc.

• We focus the majority of our onboarding resources on employee training, versus interviews and background checks, enabling a cost effective means for growing the workforce.

• We train our community’s most economically disadvantaged residents and provide them with skills that can break the cycle of poverty in their family.

• We generate $2 million in savings to Westchester County through reduced recidivism.

Many of the people who come to Greyston Bakery have significant barriers to employment. These may include a history of incarceration, addiction, poor education and chronic, multi-generational unemployment. However, in most other ways, they are not very different from anyone seeking an entry-level job. The perception, based on a piece of information from their past, is that these individuals will not be effective team members and are not worthy of an opportunity.


It is important to note that we fully expect and require each employee to be contributing and productive employees when they are introduced to the plant floor. It is essential that for the safety of our team and the safety and quality of our customers’ products that each employee is performing his or her job and is aware of the food safety requirements for our facility. Once beginning their first shift there is zero tolerance for underperformance on the job. Not surprisingly, training sits at the forefront of our culture at Greyston. We have a three-pronged training strategy that focuses on worker readiness, food safety and quality, and hard skills in manufacturing. All of our employees begin training during their orientation and we have a continuous training program with each employee allowing them to further improve their skills. We have found that although many of our new employees arrive with some skills, they are often inexperienced and unsophisticated when it comes to basic work practices. Our worker readiness training may be unique to many employers as it introduces each team member to the basic expectations we have

for them to be successful employees. These include topics such as attendance, communication tools, teamwork and problem solving. During their apprenticeship the employees are evaluated weekly and their supervisors review with them any areas where further improvement is needed. Another critical program at Greyston is PathMaking, which reflects Greyston’s belief that individuals can be supported to achieve “wholeness” (self-sufficiency) that comes from having a well-balanced, satisfying and integrated personal, spiritual, and professional life. Through this program, Greyston provides training and guidance in continuing education, health and wellness, nutrition, mental health, literacy, personal finance education, budgeting and saving. PathMaking has a ripple effect to the greater community: as individuals become more self-sufficient and self-assured, they become stronger participating members of the community, and the community becomes stronger as a whole. Open Hiring is a manifestation of our core value of Transformation. By accepting others, where they are right now, without considering anything from their life history, we believe that we are creating positive change for individuals and in turn, their surrounding communities. While we apply Open Hiring to our food manufacturing facility it can be applied to entry level positions in any industry and we challenge business leaders to look more closely at their employment procedures to ensure they are not using outdated practices for hiring and training new employees that establish unnecessary barriers for individuals most in need of help that could be successful contributors to the entire firm’s workforce.

Mike Brady is the President & CEO of Greyston Bakery Inc.

“I was illegal since I was a teenager. Now to be legal and working on credit, bank accounts and stuff like that, it means a lot. It feels like I am part of society now. Before, I did not feel like that." -Dion Drew


http://greyston.com/about-greyston/

http://greyston.com/about-greyston/

Accelerating Impact

Corner Bookshop: Caretaker of Cultural Capital

By Maryann Calendrille, Owner of Canio’s Books

Courtesy of Canio’s Books

The government bailed out the car industry. Why not the book industry? So asked a bestselling author at the recent Book Expo in New York. Good question. Don’t books transport us, albeit through the imagination, to places we’d never reach no matter how efficient our automobile? Books represent what’s best about the human imagination: our ability to create, question and dream. Aren’t books as valuable as cars? Many think so. James Patterson, for one, is taking action. The celebrated author has pledged $1 million in grants to bookshops. He knows bookshops are the caretakers of a community’s cultural capital. And he knows bookshops are struggling. Patterson wants to ensure they continue to provide places for today’s young readers to wander, to discover and be inspired a generation from now, when tomorrow’s thought leaders might drive to their favorite bookshop in a solar-powered vehicle and be greeted by name when they walk through the bookshop’s door. While the French government has named books “an essential good,” we don’t expect a government bailout here. But we do count on community support. We at Canio’s Books in Sag Harbor, New York (www.caniosbooks.com) have applied for a Patterson grant, and we’re serious about what we do: We provide that neighborhood place to meet interesting creative people in the arts, sciences, literature, journalism, music and more. A place to learn about books that open doors to new ideas. Where vital community relationships are nurtured and where local money circulates in the local community. We’re asking our supporters and friends to log onto www.jamespatterson.com/booksellers, answer three simple questions, and recommend Canio’s Books for a $12,000 grant. What will we do if we win? To begin, we’ll update our antiquated website to better share our story with readers worldwide, expand our programming like “Grammar Garage” an after-school homework help for kids and “Poet’s Corner” for budding bards. Plus, help cover ever-mounting expenses while we work on creative expansion. Why support us? Canio’s Books has long been a gathering place for creative people, for curious readers, for those looking for something new, different and interesting to stimulate their imagination. Since

Recommend Canio’s Books by answering 3 simple questions.


http://www.caniosbooks.com/

http://www.jamespatterson.com/booksellers




Maryann Calendrille is the owner of Canio’s Books.

1980 we’ve hosted author events, art exhibitions, and concerts, discussions on the environment, workshops, panels on sustainability and more. We organize read-ins and partner with neighbors: local libraries and environmental groups like the South Fork Natural History Museum, Friends of the Long Pond Greenbelt, and Dock-to-Dish, a sustainable fishing program; Bay Street, our local theater; the Sag Harbor Whaling and Historical Museum, among others. These partnerships strengthen our community bonds through books. “Books change lives, and they’re beautiful objects, and they have a special place in our history and culture,” writes Peter Brown, children’s book author and illustrator. In a recent blog post, he lamented the strong-arm tactics of Amazon, holding books hostage in their bidding war with publisher Hachette. Many have questioned what our so-called culture of convenience is really costing us in terms of cultural capital. We’ve seen bookshops close across the country at an alarming rate. Less than 2,000 shops now serve the nation’s readers. In the 1990s there were twice as many. Many of New York’s most revered booksellers have shuttered their doors. What remains of our human endeavors? Anonymous chains and soul-less screens? Bookshops bring people together. A quick look at our recent line-up of speakers includes internationally acclaimed poets like Mark Doty, Edward Hirsch, Philip Schultz, Grace Schulman and Marie Ponsot. Thought leaders like world-renowned marine biologist Carl Safina, independent journalist Amy Goodman, and an “Introduction to Dante” workshop taught by our founding owner Canio Pavone. Internationally renowned jazz guitarist Jack Wilkins recently played a stunning set within the confines of our cramped space. But it’s not only about big names at Canio’s. We’ve hosted student writers from Rena’s Promise Creative Writing Camp for young people, open-mike nights gathering poets for peace and healing post 9/11. We celebrate our rich local history and promote “Read Local” books written by the many novelists and journalists who call the East End of Long Island their home. And we celebrate local artists. Canio’s Gallery features small works by painters, photographers and sculptors who’ve been attracted to the East End landscape and and whose gifts enrich our lives. It’s a privilege to serve this community that for decades has attracted scores of creative people. Meanwhile, we work hard to protect this little piece of Paradise and provide a quiet welcoming place in a fast-changing world where the human imagination is revered, encouraged and celebrated.


Upcoming Events

Global ESG Calendar

Date/Time Event Location Information

8.10.14 – 8.13.14 11th Annual AREDAY Summit Hotel Jerome Aspen, CO U.S.A.

http://areday.net/index.html

8.13.14 – 8.14.14 FMI & GMA Global Sustainability Summit Seaport Hotel & World Trade Center Boston, MA U.S.A.

http://www.fmi.org/forms/meeting/Microsite/2014TPASustainabilitySum

8.21.14 – 8.23.14 5th World Renewable Energy Technology Congress

Manekshaw Centre, Delhi Cantonment, New Delhi, Haryana, India

http://wretc.in/Invitation.html

9.2.14 – 9.5.14 SOCAP 14 Conference San Francisco, CA U.S.A. http://socialcapitalmarkets.net/

9.10.14 – 9.11.14 TBLI Nordic 2014 Nydalsveien, Norway http://www.tbliconference.com/index.php/upcoming-conferences/tbli-nordic-2014#rt-showcase-panel

9.22.14 – 9.24.14 CGI Annual Meeting New York, NY U.S.A. http://www.clintonfoundation.org/clinton-global-initiative/meetings/annual-meetings/2014/

9.22.14 – 9.26.14 European PV Solar Energy Conference RAI Convention Centre Amsterdam, Netherlands

http://www.photovoltaic-conference.com/conference.html

9.23.14 Climate Summit 2014 – Catalyzing Action United Nations New York, NY U.S.A.

By invitation only.

9.24.14 – 9.26.14 PRI in Person Hilton Montréal Bonaventure 900 Rue de la Gauchetiére Ouest, Montreal, Quebec Canada

http://www.unpri.org/events/pri-in-person-2014/

9.24.14 United Nations Private Sector Forum United Nations New York, NY U.S.A.

http://summit.sites.unicnetwork.org/about/

10.2.14

10.15.14 – 10.17.14 Women’s Forum Global Meeting 2014 “Leading for a more equitable world” Cornerstone Speaking Event

La Villa Le Cercle Deauville, France

http://www.womens-forum.com/meetings/global-meeting-2014/15

10.20.14 – 10.21.14 2014 CEO Connection Mid-Market Convention Cornerstone Speaking Event

Wharton School of Business Philadelphia, PA U.S.A.

http://www.midmarketconvention.com/

11.9.14 – 11.11.14 SRI: The Conference on Sustainable, Responsible, Impact Investing – The Future of Investing

The Broadmoor Colorado Springs, CO U.S.A.

http://sriconference.com/index.jsp


http://areday.net/index.html



http://wretc.in/Invitation.html

http://socialcapitalmarkets.net/

http://www.tbliconference.com/index.php/upcoming-conferences/tbli-nordic-2014%23rt-showcase-panel



http://www.clintonfoundation.org/clinton-global-initiative/meetings/annual-meetings/2014/












http://www.midmarketconvention.com/

http://sriconference.com/index.jsp

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Recent Articles from Cornerstone Capital Group

Cornerstone Journal of Sustainable Finance & Banking – June 2014 Cornerstone Journal of Sustainable Finance & Banking – May 2014 Cornerstone Journal of Sustainable Finance & Banking – April 2014 Cornerstone Journal of Sustainable Finance & Banking – March 2014 Cornerstone Journal of Sustainable Finance & Banking – February 2014 Cornerstone Journal of Sustainable Finance & Banking – January 2014 Cornerstone Journal of Sustainable Finance & Banking – December 2013 Cornerstone Journal of Sustainable Finance & Banking – November 2013 Cornerstone Journal of Sustainable Finance & Banking – October 2013 Inaugural Edition Wall Street Week: “Embrace the Grey” by Erika Karp, Derek Yach – September 2013 www.wallstreetweek.com/guest-post-embrace-the-grey Forbes: “The Power to Convene” by Erika Karp – December 2012 http://www.forbes.com/sites/85broads/2012/12/10/the-power-to-convene/ Forbes: “Sustainable Capitalism…If Not Now, Then When?” by Erika Karp – November 2012 http://www.forbes.com/sites/85broads/2012/11/08/sustainable-capitalism-if-not-now-then-when/ Forbes: “Could Sustainability by Unsustainable?” by Erika Karp – September 2012 http://www.forbes.com/sites/85broads/2012/09/26/could-sustainability-be-unsustainable/?utmsource=allactivity&utm_medium=rss&utm_campaign=20120926 Wharton Magazine: “The Clients of my Clients....Sustainable Selling” by Erika Karp – July 2012 whartonmagazine.com/blog/sustaining-selling-success/ Wall Street Week: “Leaving Rio....and Going Towards Corporate Sustainability” by Erika Karp – June 2012 http://www.wallstreetweek.com/leaving-rio-and-going-towards-corporate-sustainability/ Harvard Business Review | HBR Blog Network "Why Go it Alone in Community Development?" by Andrew MacLeod – June 2012 http://blogs.hbr.org/2012/06/why-go-it-alone-in-community-d/ Forbes: “Sustainable Investing and Moments of Truth” by Erika Karp – March 2012 http://www.forbes.com/sites/85broads/2012/03/28/sustainable-investing-and-moments-of-truth/ Wall Street Week: “Investing in Diversity…Painful but Profitable” by Erika Karp – March 2012 http://www.wallstreetweek.com/guest-post-investing-in-diversity-painful-but-profitable/ Wall Street Week: “Noise Cancelling Investment Research - ESG Analysis and Sustainable Investing” by Erika Karp – February 2012 http://www.wallstreetweek.com/noise-cancelling-investment-research-esg-analysis-and-sustainable-investing/ Forbes: “Superheroes of Capitalism” by Erika Karp – January 2012 http://www.forbes.com/sites/85broads/2012/01/13/superheroes-of-capitalism/ Forbes: “Superheroes of Capitalism: Part II - The Women” by Erika Karp – January 2012 http://www.forbes.com/sites/85broads/2012/02/01/superheroes-of-capitalism-part-ii-the-women/


http://cornerstonecapinc.com/2014/06/june-edition-of-the-cornerstone-journal-of-sustainable-finance-banking/

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http://cornerstonecapinc.com/2014/05/jsfb-may-edition-investing-in-global-entrepreneurship/

http://cornerstonecapinc.com/wp-content/uploads/2014/04/CornerstoneJSFB_April2014.pdf

http://www.cornerstonecapinc.com/CornerstoneJournal_Jan2014.pdf

http://www.cornerstonecapinc.com/CornerstoneJournal_Dec2013.pdf

http://www.cornerstonecapinc.com/CornerstoneJournal_Nov2013.pdf

http://www.cornerstonecapinc.com/CornerstoneJSFB_October2013.pdf

http://www.wallstreetweek.com/guest-post-embrace-the-grey

http://www.forbes.com/sites/85broads/2012/12/10/the-power-to-convene/

http://www.forbes.com/sites/85broads/2012/11/08/sustainable-capitalism-if-not-now-then-when/

http://www.forbes.com/sites/85broads/2012/09/26/could-sustainability-be-unsustainable/?utmsource=allactivity&utm_medium=rss&utm_campaign=20120926

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http://www.wallstreetweek.com/leaving-rio-and-going-towards-corporate-sustainability/

http://blogs.hbr.org/2012/06/why-go-it-alone-in-community-d/

http://www.forbes.com/sites/85broads/2012/03/28/sustainable-investing-and-moments-of-truth/

http://www.wallstreetweek.com/guest-post-investing-in-diversity-painful-but-profitable/

http://www.wallstreetweek.com/noise-cancelling-investment-research-esg-analysis-and-sustainable-investing/

http://www.forbes.com/sites/85broads/2012/01/13/superheroes-of-capitalism/

http://www.forbes.com/sites/85broads/2012/02/01/superheroes-of-capitalism-part-ii-the-women/

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Policy & Sustainability Research

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Research & Business Analyst

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Volume I. Issue 10 Journal of Sustainable€¦ · Bristol Meyers Squibb, Eli Lilly, Novartis, Pfizer, Merck, GlaxoSmithkline, Apollo, ... managed through the systematic evaluation