Learnings from the 2016 Berkeley Sustainable Business & Investment Forum (BSBIF)

Berkeley Sustainable Business & Investment Forum 2016

Berkeley Sustainable Business & Investment Forum 2016

By Samantha Penabad, CRB Student Advisory Board & MBA ’18 Candidate, and David Cogswell, CRB Student Advisory Board & MBA ’18 Candidate

On October 27 and 28, business leaders and academics convened at UC Berkeley for the Berkeley Sustainable Business & Investment Forum (BSBIF). Originally launched in 2015, the BSBIF provides a forum for conversations and panels on sustainable business practices, risk mitigation, reporting, and capital allocation. This year’s event brought together leaders from companies like PepsiCo, Visa, and Patagonia as well as institutional investors such as CamberView Partners and CALPERS to share learnings on sustainable, long-term value creation. Among the many key takeaways from the two days, here are three highlights that particularly resonated with the attendees:

Sustainability investments enhance value for shareholders – if we can collect the right data, on material indicators

Focusing on material sustainability issues can achieve positive results for investors, according to Professor George Serafeim of Harvard Business School. In his recent research, “Corporate Sustainability: First Evidence on Materiality,” Serafeim evaluated the performance of firms by distinguishing between investments focused on material and immaterial sustainability issues. He found that firms rated highly on material sustainability dimensions perform better than firms with poor ratings, indicating that material sustainability investments can indeed create value. For investors, this can be an important consideration when weighing investment decisions.

Unfortunately, collecting the right data to inform these investment decisions can be challenging. In fact, about 80% of data currently collected is immaterial, so investors end up sifting through a lot of noise. Thus, the challenge is not the need for more data; rather, the sector needs structured, standardized data with consensus around what is material for a given industry. The first step in this process involves agreeing on a handful of material sustainability metrics, by industry, and disclosing firms’ performance on those metrics. 

Data is essential for speaking to investors – if we know how to look at it, and at what level to present it

The value of good ESG data cannot be overlooked – it can allow investors to assess a company’s performance relatively quickly “in their language”, and provides irrefutable evidence of a company’s ability to execute on their sustainability strategy.  Today, there exists tremendous appetite from investors to condense all factors into a simple score. And yet, ESG investing leaders cautioned against our reliance upon that disposition, warning that averaging too much data across dimensions can dilute important findings of where along environmental, social and governance factors companies are excelling and where they are under-performing.

Instead, attendees advocated for first beginning with the context of an industry, to know which data points carry most weight.  Organizations such as SASB have developed robust measurement frameworks that allow business leaders and investors to break out ESG performance into relevant metrics. And finally, the increasing prominence of integrated reporting, especially from European counterparts, provides a venue by which companies can discuss their ESG performance, not by the publishing of a single number, but rather by capturing their ESG data alongside their financial and other operational data, and translating the story

Sustainability deserves a special focus – but it also deserves to be integrated into all operations.

There is variability amongst companies regarding whether and how they represent sustainability across their organizations – from board of directors, to top leadership, and down through their operational structure. Research shows that of the Fortune 100/500, about a third have a specific CSR committee, and another third integrate it within another committee such as Nomination & Governance, Audit or Risk,  within organizations, attendees reporting having distinct Sustainability or CSR units, as well as developing matrix responsibilities that integrated sustainability strategy into each functional area or business unit*.

Even more striking than the diversity of approach, was the common realization that sustainability strategy and organizational structure was both an experiment to be tested in different forms, as well as a journey to be had – recognizing that as organizations mature, their need for separate versus integrated sustainability efforts shift.

“In order to focus on [sustainability], sometimes you need to separate it out, but ultimately the goal is to integrate it… and so that’s where the tension is. [Integrating sustainability]…is the ultimate goal, but it’s also risky, because you risk dilution of impact,” summed up one business leader.

Looking Ahead

Participants across the various panels expressed optimism about the progress made in institutionalizing sustainable investment practices. Moving forward, we can expect investments to be more tightly integrated with the United Nations Sustainability Development Goals, the Principles for Responsible Investment, and guidance from the Sustainability Accounting Standards Board. While continued progress will require a long-term perspective in overcoming key challenges, the energy in the room at BSBIF showed that these investors, academics, and business leaders are certainly up to the task.

*Further Reading:
Board Oversight of Environmental and Social Issues: An Analysis of Current North American Practice
View From the Top: How Corporate Boards can Engage on Sustainability Performance

About the Berkeley Sustainable Business and Investment Forum
Inaugurated in 2015, the Berkeley Sustainable Business & Investment Forum focuses on the evolving concepts of risk management, capital allocation, and sustainable business practices with a focus on long-term value creation. It is a collaboration among the Berkeley-Haas Center for Responsible Business, the Center for Law, Business and the Economy at Berkeley Law School, and our corporate partners. The 2016 corporate partners include:BNY Mellon, PepsiCo, Intel, Visa, and PwC.

Post-Election Call to Action For Business

Flag, Back-lit

by Robert Strand
Executive Director, Berkeley-Haas Center for Responsible Business

As the dust begins to settle after a rather unusual – and frankly troubling – U.S. presidential election it is time for us to assess where we are and what to do.  I believe two issues demand our most urgent attention and consideration for action:  Social Inclusion and Climate Change.

As citizens, so many of us are looking for meaningful and impactful action we can take.  As members of the business community, I would argue we have a unique opportunity (and dare I say – a responsibility) to do just that.

I contend Social Inclusion and Climate Change are issues for which the business community has an incredible opportunity to assume a leadership position to drive positive change.  I do not pretend to have the definitive answers so I warmly welcome your input in the comments below.  I am particularly interested to hear what our students think.

First, let us consider Social Inclusion.  We heard remarkably dangerous and divisive rhetoric during the campaign.  This rhetoric has already incited some rather disgusting displays of hate.  We cannot accept this as the new normal.  This divisive rhetoric tears at the fabric of America and represents a call to ask the important question “What makes America great?”  (As Jon Stewart recently pointed out during a post-election interview – why wasn’t this question asked during the election?)

I believe that America is greatest when all of us have the freedom to fulfill our potentials and are supported in these pursuits.  This is an inclusive ideal that is not reserved for a particular religion, a particular race, a particular gender, a particular sexual orientation, or any other classification invoked to divide us.  Want to make America great?  Fight to ensure the ideal of inclusion applies to everyone.

In the face of efforts to enact discriminatory policies, the business community must step up to leverage its influence to oppose them.  Business wields a great deal influence in the political realm.  Moreover, business must step up to further enact voluntary policies and practices that make it more likely to engage and hire groups of people who have been traditionally disenfranchised and left out.  This may mean new forms of recruiting and hiring practices, talent development, and a suite of new approaches to encourage and celebrate a diverse working force.

I recently learned about the Adobe Digital Academy that serves to attract and develop low-income, underrepresented candidates who otherwise would not have likely had the chance to join the tech industry.  There is great opportunity for innovation in this space to further develop and scale such initiatives as a means to realize untapped potential, build more inclusive organizations and, ultimately, a more inclusive society.

Second, let us consider Climate Change.  This represents an entirely different challenge because great harm will be done by doing nothing.  Time is of the essence and we appear to be heading toward a dangerous era of denial and stall tactics.

Here, we need incredible leadership on the part of the business community to relentlessly lobby for smart policy while also voluntarily stepping up to build collective action in the absence of such policy.  We need to see the list of Low-Carbon USA companies grow while at the same time we need new forms of voluntary policies and practices at companies to combat climate change in a significant way.  This will likely take the form of industry collaborations where so-called “competitors” instead see themselves as peers.

In sum, I propose we consider the issues of Social Inclusion and Climate Change each as a lens through which we consider everything.  At the Berkeley-Haas Center for Responsible Business, we previously identified focus areas that enable us to drive deeper impact through greater focus.  Social Inclusion and Climate Change can each represent a lens through which we consider everything we do within these focus areas – and all that we do in business.

What do you think?

 

 

Making the Case for Corporate Human Rights Management: Connecting Human Rights and Financial Performance

By Marissa Saretsky, Special Advisor, Human Rights & Business Initiative, Berkeley-Haas Center for Responsible Business

As an increasing number of companies grapple with integrating human rights considerations into their everyday business operations, the question that I hear time and time again is, “What is the business case for corporate human rights management?” Values to Valuation, an ambitious new academic research project, seeks to provide a clear answer.

The question often comes from senior sustainability leaders who need to make the case to their CEOs, but also from supply chain and sourcing managers, compliance officers, human resource directors, and beyond. In short, internal leaders want to know why they should be investing their time and resources in activities that to their eye, show no tangible bottom line benefit.

While respecting human rights is a basic responsibility and moral imperative for companies, one of the first places to look for an answer to the business case question is within the investor community. Some investors are increasingly using human rights and sustainability ratings and rankings, such as KnowTheChain Benchmark Reports, the Carbon Disclosure Project, and the forthcoming Corporate Human Rights Benchmark, to inform their investment decision-making.  This is because, as Investing the Rights Way: A Guide for Investors on Business & Human Rights points out, there is “growing evidence that, in addition to avoiding or diminishing certain risks, companies benefit financially when they uphold human rights.”

Closely examining this evidence is then key to answering the business case question. A new and ambitious academic research initiative, entitled Values to Valuation, is looking to do just that. Led by the Center for Responsible Business at UC Berkeley Haas School of Business, the Center for Law, Business, and the Economy at UC Berkeley School of Law, Alliance Manchester Business School – University of Manchester, and the UN-supported Principles for Responsible Investment, Values to Valuation seeks to produce a comprehensive, incisive, and credible academic study exploring financial risks and investment materiality related to human rights.

The study aims to take into account the impacts of corporate human rights policies and due diligence processes, as well as external human rights-related issues and events, on company valuations as well as on a range of quantitative and qualitative factors that could influence investment decisions and outcomes.

The initiative is in its beginning stages, currently drawing on investor, company, human rights, and NGO communities for input into the research methodology and data sources. At a recent stakeholder roundtable discussion at UC Berkeley, participants raised key questions regarding, for example, which industries to include in the research’s scope, the importance of distinguishing between the different types and levels of materiality, as well as the need to differentiate between company and share performance.

The results of the Values to Valuation project have the potential to answer the business case question distinctly and affirmatively. Many of us in the sustainability and human rights fields already understand that what is good for people is good for business in the long term, and empirical evidence should lay the groundwork for turning this hypothesis into common knowledge.

Second Patagonia Case Competition at UC Berkeley-Haas Focuses on Sustainable Food & Regenerative Organic Farming

Patagonia Provisions (Photo By: Amy Kumler)

Patagonia Provisions (Photo By: Amy Kumler)

By Kaycee Antosiak, Berkeley-Haas Center for Responsible Business, Student Editorial Writer

Patagonia, known for its high quality clothing and sustainable ways of production, encourages customers to be aware of their consumption and relationship with the planet. For instance, on ‘Black Friday’ in 2015, a day celebrated for buying many products at discount, Patagonia shut down their online store and provided guides on how to fix old clothes instead. Recently, they launched a new campaign “Vote Our Planet” encouraging people to vote for candidates with environmental agendas. Additionally, Patagonia’s environmental goals have manifested in another way: food. Patagonia Provisions, launched in 2012, is focused on ethically and sustainably producing food. Staying true to their motto, “Revolutions start from the bottom,” Patagonia Provisions products include options like wild  salmon and beer made with Kernza, a perennial grain that does not require annual tilling and, therefore, does not contribution to topsoil loss and environmental degradation. These agricultural passions inspired the topic for this year’s Patagonia’s Case Competition hosted by UC Berkeley Haas School of Business: Regenerative Organic Agriculture for Food.

Patagonia, together with the Berkeley-Haas Center for Responsible Business, will be hosting the second Patagonia Case Competition calling upon teams of graduate students from universities around the country to solve some of Patagonia’s toughest environmental issues. Phil Graves, Director of Corporate Development at Patagonia, expressed that “Patagonia is thrilled to partner with UC Berkeley Haas and build upon the success of our first case competition. This year’s case deals with scaling regenerative organic agriculture, which could be the best shot we’ve got at fighting climate change as it relates to our food and fiber business.The goal is to find an accelerated way to incentivize farmers to switch to regenerative organic agriculture for food instead of industrialized practices. Robert Strand, Executive Director of Berkeley-Haas Center for Responsible Business, explains the importance of “harnessing the scale that modern technologies afford without compromising the environment and the essential nature of food to the human experience. Food represents much more than just calories. Food feeds the soul. Our methods of food production must honor this.”

Last year’s competition, about finding an eco-friendly water repellant, inspired many creative solutions and the same is expected to be seen this year. Andrew Seelaus, an MBA candidate at Duke University and one of last year’s participants said that he “was skeptical of Patagonia’s involvement at first and dismissed it as a marketing ploy. But on the actual competition day, it blew [him] away to see the company’s top leadership in the front row, asking good questions, for the entire day. Patagonia is a company that is really doing their best to walk the walk as a responsible business. After witnessing the genuine interest the leadership has in doing the right thing, they’ve won [him] over [as] a new advocate.” Seelaus, among others, shows the unique contribution that graduate students can provide in innovative problem solving. Seren Pendleton-Knoll, Berkeley-Haas Center for Responsible Business Program Director, explains that “there is an increasing demand from MBA students who want to engage in sustainable food. With the success of the 2016 Patagonia Case Competition, and its solutions currently being investigated for development into Patagonia, we are immensely looking forward to the innovative proposals presented during this year’s case.”

These interdisciplinary teams will have their submitted proposals reviewed by a team of Patagonia Executives and Senior Leadership, who will choose the top teams to advance onto the final round of the competition. Finalists will get the opportunity to present their solutions in-person to Patagonia executives at UC Berkeley-Haas. The top three winners will get cash prizes and will get to go the Patagonia headquarters, experience the company culture, and discuss how to implement their proposal. More details about the competition can be found here.

Moskowitz Research Prize Winners: Impact Investing “Supply” Failing to Meet Demand

2016-moskowitz-winners

Brad Barber, Adair Morse, Ayako Yasuda

The SRI Conference Announces Moskowitz Prize Winner: Study Shows Europe’s Demand for Impact Funds Over Traditional Investments Three Times Higher Than in North America

DENVER, CO. AND BERKELEY, CA (November 10, 2016) — The demand for impact investing alternatives is outstripping the available supply of such choices for investors, according to a new study awarded the 2016 Moskowitz Prize for Socially Responsible Investing during a special ceremony last night at the 27th annual SRI Conference in Denver. The study found the pinch is most acute in Europe where the demand for impact investing (versus traditional investments) is three times higher than in the U.S. and the rest of North America.

“Impact Investing” is a study of 3,500 limited partners, 5,000 funds, and 25,000 capital commitments results and was conducted by Brad Barber, University of California Davis, Adair Morse, University of California Berkeley and Ayako Yasuda, University of California Davis.

The study concludes: “(W)e find a 13.5 percent higher investment rate for impact funds compared to the benchmark investment rate of traditional venture funds. Our results imply that the supply of impact funds is incomplete, failing to meet demand.”

Barber and his co-authors developed an “investment choice model” to chart investor demand for impact funds over traditional options, matching characteristics between fund and investor, referred to as limited partner or LP in the framework. Another important finding shows that demand for impact is higher in countries that are United Nations Principles for Responsible Investment (UNPRI) signatories.

Steve Schueth, producer of The SRI Conference and president of First Affirmative Financial Network said: “Even though investing for impact in the United States has fallen behind the demand in Europe, there is no mistaking the growth trend here and around the world. Sustainable investing, responsible investing, impact investing is an investor-driven phenomenon; it is not an investment concept that was invented by Wall Street and then ‘sold’ to investors. Investing for positive impact is here… and it is here to stay.”

Lisa R. Goldberg, Co-Director of the Consortium for Data Analytics in Risk & Adjunct Professor of Economics and Statistics at UC Berkeley said: “The main empirical finding is that demand for impact funds greatly exceeds supply. This represents a huge incentive for innovation in impact investing funds that can do such things as mitigate climate change and elevate the standard of living around the world.”

Robert Strand, executive director, Berkeley-Haas Center for Responsible Business said: “This represents what is likely to become a landmark article in the budding research field exploring impact investing. The sheer quantity and quality of measurement represented by this study is impressive.”

The report’s authors include: Brad Barber, Gallagher Professor of Finance and Associate Dean of Academic Affairs in the UC Davis Graduate School of Management; Ayako Yasuda, Associate Professor of Finance at UC Davis and Visiting Associate Professor of Finance at the Haas School of Business, University of California Berkeley; and Adair Morse, Associate Professor at the Haas School of Business at the University of California at Berkeley, teaching New Venture Finance.

The Moskowitz Prize is determined and managed annually by the Center for Responsible Business at UC Berkeley’s Haas School of Business (Berkeley-Haas). The Prize is the only global award recognizing outstanding quantitative research in the field of sustainable, responsible, impact investing. This year marks the 21st year of this academic prize. The prize was named for Milton Moskowitz, one of the first investigators to publish comparisons of the financial performance of portfolios screened for social and environmental issues and impacts.

Since its inception in 1996, the Moskowitz Prize has been awarded annually at The SRI Conference, the longest running conference serving investors and investment professionals in the sustainable, responsible, impact (SRI) investment industry in North America. The SRI Conference is produced by First Affirmative Financial Network.

The 2016 Moskowitz Prize sponsors are Calvert Group, First Affirmative Financial Network, Nelson Capital Management, Neuberger Berman, and Trillium Asset Management.
More information about the Moskowitz Prize is available at: http://responsiblebusiness.redefiningbusiness.org/programs/moskowitzresearchprogram.html.

ABOUT THE SRI CONFERENCE
The 27th annual SRI Conference is being held November 9–11, 2016, at the Hyatt Regency Downtown Denver, Colorado. The SRI Conference is the premier annual forum for investors and investment professionals engaged in sustainable, responsible, impact (SRI) investing. Conference participation includes investment professionals, institutional investors, and related organizations. The SRI Conference features educational sessions and focused opportunities to network with hundreds of like-minded individuals, organizations, and leaders in the field of Sustainable, Responsible, Impact investing.

The SRI Conference is produced by First Affirmative Financial Network, LLC, a Registered Investment Advisor offering investment consulting and asset management services through a nationwide network of investment professionals who specialize in serving socially conscious, impact-oriented investors (SEC File #801-56587).

ABOUT THE CENTER FOR RESPONSIBLE BUSINESS AT THE HAAS SCHOOL OF BUSINESS, UC BERKELEY
Building upon over a decade of research, teaching, and industry engagement, the Center for Responsible Business brings together students, company leaders and faculty to develop leaders who redefine business for a sustainable future. The CRB, part of the Institute for Business and Social Impact at the Haas School of Business, inspires students to re-think traditional business practices, envision the roles that they can play in creating change, and obtain the skills to get there.