EFW Partners: Investing in scarcity

May 29, 2013

Mangrove in parched land. French GuianaFor a century or two, people have argued about whether the world is running out of the things we need. So far, we’re not. (Well, unless you are a farmer in Kansas in need of water.)

Human ingenuity, new technology and market signals have increased supplies and helped us become more efficient. When the price of petroleum rises, for example, companies redouble their efforts to discover and recover oil from out-of-the-way places, like deep under the ocean or in the Arctic, for better or worse. When demand for food rises, so do commodity prices–and yields. When water is scarce, we use it more carefully.

But the fact that Thomas Malthus and Paul Ehrlich of Population Bomb fame have been wrong — so far — does not mean that the world has an endless supply of energy, food and water.

Scott Jacobs

Scott Jacobs

Scott Jacobs and his colleagues at EFW Partners, who manage investments for wealthy individuals and institutions, believe those resources are already becoming scarce–as evidenced by rising commodity prices. EFW Partners (the initials stand for energy, food and water) seeks to invest in a variety of companies that help the world use resources more efficiently and discover new ones, while respecting planetary limits. My latest story for Guardian Sustainable Business looks at EFW Partners.

Here’s how it begins:

Is the world running out of energy, food and water? Or not? The debate has raged since Thomas Malthus wrote “An essay on the principle of population” in 1798.

In 2011, McKinsey & Co, the esteemed consulting group, provided a modicum of support to modern-day Malthusians. It published Resource Revolution: meeting the world’s energy, materials, food and water needs, a voluminous and influential report. It acknowledged that, until recently, new technology had overcome any so-called limits to growth, but warned of big challenges ahead.

“During most of the 20th century, the prices of natural resources such as energy, food, water and materials such as steel all fell, supporting economic growth in the process,” the consultants wrote. “But that benign era appears to have come to an end.” If current trends continue, governments and companies will face high and volatile commodity prices, unpredictable climate impacts and the threat of political instability if the needs of the world’s poor are not met. “Nothing less than a resource revolution is needed,” said McKinsey, and it will not be cheap: “Meeting future demand for steel, water agricultural products and energy would require roughly $3tn (about £2tn) average capital investment per year [which is] $1tn more than spent in recent history.”

Scott Jacobs, a leader of McKinsey’s global cleantech practice, sensed an opportunity. He decided to help raise some of that capital and to help save the planet in the process. Last year, Jacobs, who is 35, left McKinsey, and joined veteran investors Tom Cain, 58, and Charlie Finnie, 54, to form EFW Partners, an investment fund that focuses on environmentally-friendly ways to produce energy, food and water, as well as opportunities to use resources more efficiently.

You can read the rest here.

Filed Under: Climate Change, Economics, Energy, Environment, Food, Investing, Sustainability, Water Tagged With: , , ,

Meat lovers, rejoice! Cattle could be a climate-change solution.

March 13, 2013

cattle-ranch-sierra-nevada-mountainsIt’s become a truism of the environmental movement. Eating meat is bad for the planet. A few years back, a couple of researchers published a study claiming that livestock is responsible for 51 percent — 51 percent! — of the world’s greenhouse gas emissions. The FAO says it’s closer to 18 percent, but still…

Jim Howell, a lifelong rancher and the CEO of a company called Grasslands LLC, says this conventional wisdom is ill-informed and misleading. More important, he has set out to disprove it. Grasslands owns four cattle ranches in South Dakota and Montana, where the company is monitoring the environmental impacts of its unconventional approach to ranching — called holistic management – and forging relationships with nonprofits like The Nature Conservancy and the Natural Resources Defense Council, hoping to turn them into allies. Last month, Howell’s partner, mentor and friend, Allan Savory, who is a Zimbabwean farmer, politician and environmentalist, delivered a TED talk called “How to Green the World’s Deserts and Reverse Climate Change” that rapidly attracted about half a million views. Their argument, in brief, is that traditional ranching methods can degrade land and threaten biodiversity but that, when managed well, cows can actually be restorative.

What’s most interesting (to me, anyway) is that Howell, Allan Savory and their investor-partners in Grasslands believe that they can use markets to drive their unorthodox ideas about ranching to a much, much larger scale. They argue that holistic management is better for business, better for the land, better for the climate and, not incidentally, a way to raise more cattle on less land than conventional methods and thus help feed a hungry, growing planet.

If it sounds too good to be true….well, their arguments have been controversial for decades, and certainly since 1988, when Savory described his methods in a 564-page book called Holistic Resource Management,  In a book review[PDF, download] in the Journal of Soil & Water Conservation, a Berkeley range ecologist named James Bartolome wrote: “Holistic resource management itself is a model for a management system with little novelty and severe technical problems…Those who apply Savory’s approach do so at their peril.” The Savory Institute has compiled a portfolio of supporting evidence, including peer-reviewed papers, but the debate rages on.

Jim Howell

Jim Howell

Howell, 44, comes from a family that has been ranching in Colorado since the late 1800s. He intends to bring further science and economics to bear on the question of whether ranching, done right, can help regenerate the planet, improve the farm economy and, as one of his investors, John Fullerton, puts it, “harness the power of capital and markets to shift the course of capitalism onto a more just and sustainable path.” A former managing director at JP Morgan, Fullerton is now president of the Capital Institute and an investor in Grasslands LLC, along with Larry Lunt, a private investor and environmentalist who runs a family office called Armonia. The Savory Institute, a for-profit company that carries out Savory’s work–Howell’s wife is CEO–is also an owner of Grasslands. Other investors will be brought on as Grasslands grows, as its owners expect it to. [click to continue...]

Filed Under: Climate Change, Consumption, Environment, Food, Investing, Sustainability Tagged With: , , , , , , , , , , ,

Why sustainability has to be a team sport

February 21, 2013

imagesOne of the great virtues of market capitalism is that power is widely dispersed–among consumers, corporate executives, investors and regulators. Lots of people get lots of votes that collectively shape business, and that’s good. But decentralization creates a daunting problem for anyone who cares about corporate sustainability: It’s hard to get things done.

In conversations today at the GreenBiz Forum in New York, people who could be described as powerful—executives with big titles (vice chairman, vice president, CEO) at big institutions (NASDAQ, McDonald’s and Ingram Barge, America’s biggest barge company)–all lamented the limits on their influence over what their companies do, let along how industries can change.

This is why sustainability has to be a team sport. Very few people–or companies–can do much on their own.

Take Bob Langert, vice president for corporate responsibility at McDonald’s, who is one of the most respected sustainability executives in the US. He’s got credibility inside the company and with NGO partners. But to get anything done, he’s got to win over thousands of owner-operators of McDonald’s stores, as well as a a diverse set of suppliers and, in some instances, the tens of millions of people who eat at Mickey D’s every day.

“We are the world’s largest small business,” Langert said. The overwhelming majority of McDonald’s outlets are “owned and operated by independent business people. They have a lot of power in our system. That means we can’t dictate from on high. I challenge people to show me a company that’s more democratic than McDonald’s.” [click to continue...]

Filed Under: Consumption, CSR, Environment, Investing, Sustainability, Water Tagged With: , , , , , , ,

Turning JP Morgan green from the inside out

February 18, 2013
Matthew Arnold

Matthew Arnold

Can Wall Street become a friend of the earth? For nearly a decade now, most of the big investment and commercial banks have had chief sustainability officers, but it’s never been clear to me what they can and cannot do.

To find out, I spoke recently with Matt Arnold, the head of environmental affairs for JP Morgan Chase, who I’ve known for years. Matt, a lifelong environmentalist, was refreshingly honest.

In my latest column for the Guardian Sustainable Business website, I report on what I learned. Here’s how the story begins:

Deep inside the belly of the beast known as JPMorgan Chase toils a lifelong environmentalist and former Eagle Scout named Matthew Arnold who is trying to help turn the bank, if not green, well, a bit greener. It’s a daunting job.

Arnold, 51, joined the company in autumn 2011 as head of the office of environmental affairs because, he says, of the sheer scale of the opportunity; last year, the bank booked $99.9bn (£64bn) in revenue and $21.3bn (£14bn) in profits, providing credit and raising capital of more than $1.8tn, for everything from home mortgages to credit cards to corporate bonds and IPOs. The bank manages another $1.4bn in assets (as of September 2012) for clients. If Arnold can help steer even a slice of that towards more sustainable ventures – for example, towards wind and solar energy and away from coal – he will be doing his part to make Wall Street a friend of the earth. But can he?

“The position I’m in now has the greatest potential for impact of anything I’ve done,” Arnold says. “Yet there’s no manual for this. There’s not a clear roadmap.”

You can read the rest of the column here.

On Wednesday, by coincidence, at the GreenBiz Forum in New York, I’ll be interviewing Matt and Erika Karp, who is head of global sector research at UBS, to talk about the role of Wall Street in promoting sustainability. Matt and Erika will also be joining us this spring at Fortune Brainstorm Green.

 

 

Filed Under: Climate Change, CSR, Economics, Energy, Environment, Investing, Leadership, Sustainability Tagged With: , , , ,

RSF Social Finance: Making money, making change

February 17, 2013
Happy customers of Revolution Foods

Happy customers of Revolution Foods

If you have a few extra dollars in savings, and you’d like to earn more than 0.00001% interest or whatever it is your bank or money market fund is paying, and you’d like to support socially-conscious businesses, you’ll want to take a look at RSF Social Finance.

RSF Social Finance is a financial services organization of modest means (about $145 million in assets under management) that is bursting with big ideas and bold rhetoric. It calls itself “a leader in building the next economy.” It seeks to generate “social and spiritual renewal through investing, lending and giving,” Its mission is to “transform the way the world works with money.”

Whew. What’s going on here?

To find out, I visited RSF Social Finance’s offices in the Presidio complex in San Francisco last week to talk with Don Shaffer, the organization’s president and CEO.

At the simplest level, RSF looks and acts very much like a bank: Its flagship product, the Social Investment Fund, takes deposits and makes loans to so-called social enterprises, a term that’s widely (and often carelessly) thrown around to describe businesses or nonprofits whose intention is to improve society and the environment.

Deciding what qualifies as a social enterprise is subjective, at best. That said, the RSF Social Investment Fund supports companies and nonprofits that, by all appearances, do great work. Among them: [click to continue...]

Filed Under: Consumption, CSR, Environment, Food, Investing, Social Entrepreneurs, Socially Responsible Investing, SRI, Sustainability, Transparency Tagged With: , , , , , , , , , ,

A puzzling list of sustainable companies

January 23, 2013
Canada's oil sands: Sustainable?

Canada’s oil sands: Sustainable?

Here comes a new list of the “most sustainable corporations in the world,” and it’s a doozy.

Two of the top five companies on the 2013 Global 100 list are oil and gas companies:

3. Norway’s Statoil ASA

4. Finland’s Neste Oil.

Read farther down and you find:

No. 81. Suncor Energy,

which was the first company to develop Canada’s oil sands, source of some of the dirtiest fossil fuels on the planet.

A notch below is:

No. 82. Unilever

the consumer products giant whose sustainable living plan embodies the broadest and deepest commitment to corporate responsibility of any big, global company.

This is….er….puzzling.

So what’s going here? And what does this tell us about corporate sustainability rankings and their meaning, a topic that never seems to go away? [See my blogpost Corporate sustainability: Who's up, who's down, who cares?] [click to continue...]

Filed Under: CSR, Environment, Investing, Media, Sustainability Tagged With: , , , , , , , , ,

In Israel, clean tech is not the new new thing

January 13, 2013
David Ben-Gurion, a clean tech pioneer

David Ben-Gurion, clean tech pioneer

Sounding more like a clean tech venture capitalist than a head of state, David Ben Gurion, the first prime minister of Israel, once said that Israel requires “the study of desalination, massive utilization of solar energy, preventing waste of useful rainwater and maximization of power from wind turbines.”

Ben Gurion, who was born in 1886, said this in 1955. This was a man ahead of his time.

Since then, an Israeli company called Netafim pioneered the idea of drip irrigation in agriculture to save water, another called Luz built the first solar thermal power plants, still another called IDE Technologies became a global leader in desalination and Chromagen developed solar thermal water heaters that can be found on most rooftops in Israel, and elsewhere.

Today, Israel, which has been dubbed Startup Nation, remains a seedbed of clean tech innovation–last year it ranked second in the world (behind Denmark) in a report called Coming Clean: The Cleantech Global Innovation Index 2012 [PDF, download] by CleanTech Group and WWF.  I visited Israel last week, and had a chance to talk with a founder of Israel Cleantech Ventures, the chairman of a company called Miya Water and executives at electric-car company Better Place. I’ll report this week on my findings.

First, some context. As Ben-Gurion saw more than half a century ago, Israel is short on natural resources–water, land, oil–and thus needs to use what it has efficiently. This is the biggest, but not the only, explanation for the growth of Israeli clean tech. Most everyone serves in the military, exposing them to advanced technology. Ariella Grinberg, a young associate with Israel Cleantech Ventures, told me she did her service in the Israeli equivalent of the US’s super-secret NSA (National Security Agency), overseeing a multimillion dollar budget and sophisticated software, when she was just 19. The country also benefits from its world-class colleges and universities, among the Israel Institute of Technology, aka the Technion, the nation’s oldest university. (Here’s a fun example of what their students can do.) A strong entrepreneurial spirit pervades the culture, which may also have its roots in universal military service. “People come out of the army, they’re tired of taking orders, they want to be their own boss,” one executive told me. Finally, targeted government support for basic research has helped underwrite the sector. [click to continue...]

Filed Under: Climate Change, Energy, Environment, Investing, Socially Responsible Investing, SRI, Sustainability, Water Tagged With: , , , , , , , ,

Should “green” funds invest in fossil fuels?

December 2, 2012

Bill McKibben’s groundbreaking Rolling Stone story (Global Warming’s Terrifying New Math) and 350.org’s “Do the Math” divestment campaign raise important and difficult questions about fossil fuels. One that is starting to roil the world of socially-responsibly investing is this: How should mutual funds that strive to be “green” or “sustainable” or “socially responsible” deal with the fossil fuel companies in their portfolios? Should they divest, as McKibben argues?

That was the topic of a column I wrote last week for the Guardian Sustainable Business, which generated some noteworthy responses. It’s part of the British newspaper The Guardian, which has one of the most popular English language media websites in the world. Here’s how the column begins:

“We’re going after the fossil fuel industry,” Bill McKibben tells about 1,800 cheering fans in a Washington, DC, theatre. “They’re trying to wreck the future, so we’re going after some of their money.”

Al Gore notwithstanding, McKibben – an author, academic and founder of the grassroots climate group 350.org – is America’s leading environmental activist. His 21-city Do The Math tour begins a campaign to persuade colleges, churches, foundations and governments to divest their holdings in coal, oil and natural gas companies.

“It does not make sense,” McKibben tells the Washington audience, “to invest my retirement money in a company whose business plan means that there won’t be an earth to retire on.”

He’s right about that, but the divestment campaign raises a thorny question: where can investors who worry about climate change put their money?

Divest for our Future, 350.org’s divestment website, recommends “environmentally and socially responsible funds“. The trouble is, the biggest and best-known mutual funds that call themselves environmentally and socially responsible also invest in fossil fuel companies. They evidently haven’t heard McKibben’s message.

Is this green?

The column–you can read the rest here–goes on to report that the Parnassus Equity Income Fund  holds about 14% of its assets in oil, natural gas companies and electric utilities that burn fossil fuels, that the TIAA-CREF Social Choice Equity Fund owns shares in dozens of oil and gas firms including Hess, Marathon and Sunoco, and a pair of shale gas giants, Devon Energy and Range Resources, that the Calvert Equity Portfolio  has about 10% of its portfolio in fossil fuels, including  Suncor, which says on its website that it was “the first company to develop the oil sands, creating an industry that is now a key contributor to Canada’s prosperity,” and that the Domini Social Equity Fund has, among its top 10 holdings, Apache Corp, an oil and gas exploration and production company.

Are you surprised to learn that these funds invest in oil and gas companies, including those in the Canadian Tar Sands? Perhaps naively, I was. [click to continue...]

Filed Under: Climate Change, CSR, Energy, Environment, Investing, Socially Responsible Investing, SRI Tagged With: , , , , , , , , , ,

Chevron. Sustainable. Really?

November 28, 2012

It’s not every day that one of the world’s biggest corporations files an ethics complaint against a little-known government official–in fact, if it’s happened before, I missed it–but that’s exactly what Chevron did last week in the state of New York.

The company accused Thomas DiNapoli, the state comptroller, who oversees the state’s pension fund, of accepting about $60,000 in campaign contributions from lawyers and supporters of people who are suing Chevron in Ecuador. The campaign donations, it is alleged, influenced DiNapoli to use his power as the trustee of  the pension fund, which owns Chevron stock, to push Chevron to settle the long-running, bitterly-fought lawsuit.

Imagine. Politicians being influenced by campaign donations.

Chevron would know about that. Last month, the company donated $2.5 million to the Congressional Leadership Fund, a super PAC that supported House Republican candidates. The donation “appears to be the largest contribution from a publicly traded corporation to a political group” since the Supreme Court’s Citizen United ruling, The Washington Post reported. Chevron also spent nearly $15 million on Washington lobbying since the start of 2011, the Post said.

So…evidently, it’s fine for Chevron to lavish money on politicians but unethical for its opponents to do so.

As it happens, Chevron’s complaint against DiNapoli was not even the most surprising news about the company to surface last week. Even more unexpected was the announcement that Chevron was being added to the holdings of the NASDAQ OMX CRD Global Sustainability Index, a “benchmark for stocks of companies that are taking a leadership role in sustainability performance reporting.”

The NASDAQ CRD Index helps guide investors seeking companies that are more sustainable.  Just a few months ago, at the Rio + 20 confab, NASDAQ  and several other stock exchanges promised, along with the UN Global Compact, to “promote long-term, sustainable investment in their markets.”

But what does that mean when an index includes Chevron, America’s second-biggest oil company? [click to continue...]

Filed Under: Climate Change, Economics, Energy, Environment, Investing, Socially Responsible Investing, SRI, Sustainability Tagged With: , , , , , , , , , , , ,

Will algae become a growth business?

October 15, 2012

Algae are fascinating little creatures. They’re easy to grow (as anyone with an outdoor swimming pool knows), they grow fast, they consume a waste product (CO2) and they make oil. It’s no wonder that for nearly half a century, scientists have tried to unlock the energy potential in algae.

They’re making progress. Sapphire Energy, a company backed by venture capitalists and, among others, Bill Gates, is building the world’s largest algae farm that is designed to make oil in the New Mexico desert. But commercialization of algal biofuels remains several years away, at the least, and perhaps much more.

In a story headlined Green Crude: The Quest to Unlock Algae’s Potential published today at YaleEnvironment360 (it’s an excellent website, check it out!), I took a look at the US algae industry. Here’s how the story begins:

Tiny Columbus, New Mexico (population, 1,678) is hot, flat and uncrowded — an ideal place to launch a new green revolution in agriculture. That, in essence, is what a well-funded startup company called Sapphire Energy wants to do: It is turning a 300-acre expanse of desert scrub into the world’s largest algae farm designed to produce crude oil. Sapphire began making oil there in May, and its goal is to produce about 100 barrels a day, or 1.5 million gallons a year, of oil, once construction of the “green crude farm” is completed next year.

“We take algae, CO2, water and sunlight, and then we refine it,” says Cynthia Warner, the chief executive of Sapphire, who joined the company after working for more than 20 years at oil-company giants Amoco and BP. Algae, she says, has the potential to change the world, by reducing carbon dioxide emissions and enabling almost any country to make its own oil. “This technology is so compelling — and it will make such a big difference — that, once it gets out of the gate, it will ramp up very quickly,” Warner says.

Sapphire is one of scores of companies worldwide that today are making biofuels from microalgae, albeit on a small scale, according to the Algae Biomass Organization, a trade group. Solazyme, which is arguably the industry leader, last year sold an algae-derived jet fuel to United Airlines, which used it to fly a Boeing 737-800 from Houston to Chicago — the first time a commercial jet flew using a biofuel made using algae. Synthetic Genomics, a company founded by geneticist J. Craig Venter and financed by ExxonMobil, is building an algae farm in the Imperial Valley of southern California. Other algae farms are under development in Hawaii, by Phycal, and in Karratha, Australia, by Aurora Algae, and in Florida, by Algenol. In Europe, the Swedish energy company Vattenfall and Italy’s Enel Group have been using algae, which is then made into fuel or food, to absorb greenhouse gas emissions from power plants, and Algae-Tec, an Australia-based company, has agreed to operate an algae-based biofuel plant in Europe to supply Lufthansa with jet fuel.

The story goes on to explain why, despite all these steps in the right direction, creating a real business out of algae is really, really hard. I admire these entrepreneurs and hope they succeed, but it’s not going to be easy. You can read the rest here.

Filed Under: Climate Change, Economics, Energy, Environment, Investing, Sustainability Tagged With: , , , , , ,
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