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Journal of Sustainable Finance & BankingSM

October 2015

Volume II Issue 9

© McCarthy’s PhotoWorks / Crystal Graphics

“COGNITION”

Global Market Strategy

Regional and Sector Strategy: Monthly Update

Michael Geraghty … p. 13

Sustainable Investing: Addressing the Myth of Underperformance

Sebastian Vanderzeil, Craig Metrick & Andy Zheng … p.14

Global Sector Research

Antibiotics and Animal Health:

Value-Chain Implications … p.15

California Raises the Bar … p.16

Michael Shavel, S. Vanderzeil & A. Zheng

Corporate Governance

Alibaba: Uniquely Conflicted

John K.S. Wilson … p. 17

The Paradox of Incentive Insensitivity

Vivienne Ming, Socos … p. 19

VW: A Case Study in Failed Governance

John K.S. Wilson … p. 21

Corporate Sustainability Is Corporate Excellence

Stephen Freedman, PhD, CFA, UBS and Erika Karp … p. 23

Enhanced Analytics

Cognitive Computing + Big Data = Better ESG / Sustainability Analytics

Hendrik Bartel & Isaac Khurgel, TruValue Labs, Inc … p. 25

What Can the Painkiller Overdose Epidemic Teach Us About Health Care Redesign?

Dr. Alex Cahana, Center for Lawful Access and Abuse Deterrence … p. 28

Accelerating Impact

The Future of Foundations: Impact at Scale?

Sebastian Vanderzeil, Andy Zheng … p. 31

Open Source Excellence

Thinking Differently About Weather-Related Catastrophes

Laural Warren, Swiss Re … p. 32

Reimagining STEM Education

Kathryn Nash, Cognizant … p. 37

Featured Domain

PoeticInvesting.com

Erika Karp … p. 39

Sustainable Editorial

Midlife Wasteland

Cindy Motz, Equity Research Consultant … p. 40

Intergenerational Transfer: Not Just About the Money Anne Weisberg, Families and Work Institute … p. 43

Bringing Humanity Back to Finance

Vincent Neate, KPMG LLP (UK) … p. 45

2 / October 2015 / Cornerstone Journal of Sustainable Finance & BankingSM

CEO’s Letter on Sustainable Finance & Banking

This month in the Cornerstone Journal of Sustainable Finance &

Banking (JSFB), we observe the resilience in global markets in the midst of a

muted earnings season, prospects of further monetary stimulus for the

Eurozone, and some sense of macro stability in China. That said, as beer

companies consolidate, banks retrench, and sovereign debt markets evolve,

there is an awful lot to process . . . an awful lot to learn. At Google Zeitgeist,

one could get a sense for what people have been searching for over the course

of the year. And in this edition of the JSFB, we turn to the theme of

“Cognition” and search for enhanced and inclusive analytical perspectives on

the shifting dynamics of the capital markets.

In particular, we consider the process of learning, thinking and

understanding—looking beyond the headlines in conjunction with

Cornerstone’s recently appointed Senior Science Advisor, Vivienne Ming.

As a theoretical neuroscientist, technologist and entrepreneur, Vivienne

discusses her use of machine learning and cognitive neuroscience to maximize

students’ life outcomes—essentially fostering “incentive insensitivity,” or more

simply stated, drive and self-motivation.

Other fascinating case studies in cognition can be found in our Open Source

Excellence section, where Laural Warren of Swiss Re explains how computer

modeling can help us better anticipate and mitigate the impacts of weather-

related natural disasters, and where Kathryn Nash of Cognizant highlights

the work of their “Making the Future” initiative, which inspires and transforms

children into life-long learners ready to embrace a tsunami of technological

advances.

Indeed, transformation is inherent to the pursuit of knowledge and

understanding. In the Enhanced Analytics section, we learn about the promise

of cognitive computing and big data to vastly improve ESG/sustainability

analytics, and how evolving digital technologies can be used to transform

health care from its current “overtreat/undertreat” dilemma to a more holistic

“correctly treat” approach.

Here at Cornerstone Capital Group, our Corporate Governance and Global

Sector Research professionals have also been working to transform knowledge

into understanding. John Wilson, our Head of Corporate Governance,

Engagement and Research, provides insight into how corporate organization

and governance play into both Volkswagen’s emissions scandal and Alibaba’s

share price slide in the first nine months of 2015. Analysts Michael Shavel and

Sebastian Vanderzeil thoughtfully question current consensus on antibiotic

use trends in animal health. We pick apart lingering perceptions that

sustainable investment implies underperformance. We further the dialogue on

the fiduciary duty of foundations to align their investments with their

missions. And we share the text of a recent interview in which we restate our

certainty that corporate sustainability is synonymous with corporate

excellence.

Erika Karp

Founder & Chief Executive Officer Cornerstone Capital Inc.

Cornerstone Journal of Sustainable Finance & BankingSM / October 2015 / 3

Sometimes, the translation of knowledge and understanding into action is a

matter of changing deeply entrenched perceptions and practices. Two of our

Sustainable Editorial authors offer persuasive essays on the challenges we face

in most developed nations as our populations age, whether it’s the challenge

of finding and retaining meaningful work in midlife and beyond, or the

challenge of an orderly transfer of skills and knowledge to younger

generations—both imperative to a sustainable society. And in the section’s

closing essay, we’re reminded of the existential angst of adolescence, as our

author skillfully deconstructs a youthful claim that “humanity is a failure

because we think we know the difference between failure and success,”

steering us away from questions of good versus evil, true versus false, and

toward a focus on “what is useful.”

My sincere regards,

Erika

Erika Karp

Founder and Chief Executive Officer


Table of Contents

CEO’s Letter on Sustainable Finance and Banking 2

Market Summary

Overview 5

Market & Global Sector Performance, Monetary Policy & ESG Data 6


Regional and Sector Strategy: Monthly Update Michael Geraghty, Global Markets Strategist Cornerstone Capital Group

13


Sebastian Vanderzeil, Research Analyst, Craig Metrick, Director, Manager Due Diligence & Thematic Research, Andy Zheng, Research Associate, Cornerstone Capital Group

14


Antibiotics and Animal Health: Value-Chain Implications in the US

Michael Shavel, Global Thematic Analyst, Sebastian Vanderzeil, Research Analyst, Andy Zheng, Research Associate, Cornerstone Capital Group

15

Antibiotics and Animal Health: California Raises the Bar Michael Shavel, Sebastian Vanderzeil, Andy Zheng Cornerstone Capital Group

16


Alibaba: Uniquely Conflicted John K.S. Wilson, Head of Corporate Governance, Engagement, and Research, Cornerstone Capital Group

17

The Paradox of Incentive Insensitivity Vivienne Ming, Co-founder, Socos 19

VW: A Case Study in Failed Governance John K.S. Wilson, Cornerstone Capital Group 21

Corporate Sustainability Is Corporate Excellence Stephen Freedman, PhD, CFA, Head of Thematic and Sustainable Investing Strategy, UBS; Erika Karp, Founder and CEO, Cornerstone Capital Group

23

Enhanced Analytics

Cognitive Computing + Big Data = Better ESG/Sustainability Analytics

Hendrik Bartel, CEO, Isaac Khurgel, Head of Marketing and Communications, TruValue Labs, Inc.

25


Dr. Alex Cahana, Director of Medical Affairs, Center for Lawful Access and Abuse Deterrence and Theme Developer, ARK Investment Management

28

Accelerating Impact

The Future of Foundations: Impact at Scale? Sebastian Vanderzeil, Andy Zheng, Cornerstone Capital Group 31


Thinking Differently About Weather-Related Catastrophes Laural Warren, Vice President, Swiss Re 32

Reimagining STEM Education Kathryn Nash, Associate Director of Educational Affairs, Cognizant

37

Featured Domain

PoeticInvesting.com Erika Karp, Founder and CEO, Cornerstone Capital Group 39


Midlife Wasteland — Recognizing the New Reality Cindy Motz, Equity Research Consultant, former Institutional Investor, Wall Street Journal “All-Star” Research Analyst

40

Intergenerational Transfer: Not Just About the Money Anne Weisberg, Senior Vice President for Strategy, Families and Work Institute

43

Bringing Humanity Back to Finance Vincent Neate, Partner and Head of Sustainability Services, KPMG LLP (UK)

45

Upcoming Events: Global ESG Calendar 47 Articles 50 Important Disclosures 52

JSFB Subscription Form 48 Cornerstone Capital Team 51


Market Summary

Overview

After a volatile third quarter, global equity markets

are demonstrating a degree of resilience despite

weaker economic data. On balance, the US remains

the bright spot in the global economy, and investors

are squarely focused on the diverging trajectory of

growth and monetary policy among major economies.

As earnings season marches on, investors will be

parsing management commentary in order to refine

expectations for global growth.

US equity markets took weaker economic data in

stride, rebounding from September lows and

retracing most of the declines witnessed in the August

sell-off. The housing market continues to expand, as

the September NAHB Housing Market Index came in

at 64, a level not seen in a decade. The ISM

Manufacturing Index fell to 50.2 in September from

51.1 in August, barely remaining in expansionary

territory. The Labor Department’s September report

revealed that the economy added 142,000 jobs, well

below the consensus estimate of 215,000 jobs, and the

prior month’s figure was revised to 136,000 from

173,000. The unemployment rate held steady at 5.1%

but wages were stagnant. With the US consumer being

a key contributor to the global economy, weak retail

sales were a source of worry, growing only 0.1% versus

an expected increase of 0.2%. Slower jobs growth,

wage gains and retail sales, together with lack of

inflationary pressure (both producer prices and

consumer prices declined in September), increase the

odds for the Fed staying on hold in hiking rates.

Eurozone economic conditions continue to improve

though downside risks remain, particularly in relation

to the ongoing slowdown in China. Germany’s ifo

Business Climate Index edged up to 108.5 in

September from the revised reading of 108.4 in the

prior month. The Chinese slowdown, however, is a

threat to the outlook for German exports, which are

heavily dependent on capital goods and automobiles.

For the first time in six months, the Eurozone’s

inflation rate unexpectedly turned negative, adding

pressure on the ECB to step up its QE program.

Meanwhile, concerns about a possible “Grexit” from

the single currency union have once again subsided

(for now), as Greece received its third bailout from

international creditors.

Elsewhere in the developed markets, Japanese export

growth slowed sharply to 0.6% in September, a

disappointing figure relative to consensus

expectations of 3.4%. The weak yen boosted the value

of exports, but volumes fell 3.9%. Sluggish demand

from China has weighed on the country’s export

recovery, adding pressure on the Bank of Japan to

expand stimulus to drive growth.

In emerging markets, China reported annualized third

quarter GDP growth of 6.9% YoY, the slowest since

early 2009. Exports in the first nine months of the

year were down 1.9% from a year ago, highlighting the

threat to manufacturing and factory output in the

country. Despite the slowdown in the industrial

sector, consumer-oriented businesses in China

expanded rapidly, with retail sales growth increasing

to 10.9% in September, the highest so far in 2015.

Meanwhile, Russia’s economy shrank 4.3% in the

third quarter as sustained low oil prices (Brent traded

around $50 per barrel in October) and Western

sanctions over Ukraine continued to weigh on

economic activity.

On a one-month trailing basis, the MSCI World Index

(a developed market proxy) underperformed the

MSCI Emerging Markets Index by approximately

1.7%, resulting in a YTD relative outperformance of

8.0%. Large-cap equities outperformed their small-

cap counterparts by 4.0%, contributing to

outperformance of 3.9% on a YTD basis. From a sector

perspective, performance was mixed between

defensives and cyclicals. In the MSCI ACWI (a broad

index for both developed and emerging equities),

energy and utilities outperformed, while

telecommunication services and health care lagged.

Andy Zheng contributed to this article.


Market Summary

Market and Global Sector Performance

MARKET / INDEX PERFORMANCE

As of 10/19/2015 (local currency) T1M (%) T3M (%) YTD (%) 2015 P/E 2015 P/B Div. Yield

US Equity Indices

DJIA 5.23 -4.15 -1.49 15.6 2.9 2.5

S&P 500 4.00 -3.85 0.41 17.2 2.6 2.1

Nasdaq 1.68 -5.56 4.60 21.4 3.5 1.2

Russell 2000 0.21 -7.78 -2.35 25.7 1.9 1.4

MSCI KLD 400 Social 3.93 -3.64 -0.19 18.6 3.2 2.0

Developed International Indices

Euro STOXX 50 3.83 -10.60 7.15 14.5 1.5 3.7

in USD 3.42 -6.77 0.26

FTSE 100 4.15 -5.21 0.00 16.0 1.8 4.1

in USD 3.43 -6.15 -0.69

CAC 40 3.95 -7.99 13.22 15.2 1.4 3.5

in USD 3.54 -4.05 5.94

DAX 2.50 -12.93 3.66 13.1 1.6 3.1

in USD 2.10 -9.20 -3.46

Nikkei 225 1.50 -11.13 6.07 17.2 1.5 1.8

in USD 1.20 -8.29 5.42

ASX 200 1.64 -5.67 2.06 15.6 1.8 5.0

in USD 2.43 -6.67 -8.97

Emerging Market Indices

IBOVESPA 0.39 -9.35 -5.12 13.1 1.1 4.6

in USD 0.98 -25.81 -35.49

Shanghai Comp 9.39 -14.96 6.34 14.3 1.7 2.0

in USD 9.47 -16.27 3.78

KOSPI 1.66 -2.13 6.03 12.8 1.0 1.4

in USD 4.79 -0.61 2.80

SENSEX 4.48 -3.59 0.84 17.5 2.7 1.6

in USD 5.83 -5.75 -1.90

Bovespa Corp. Sustainability -0.59 -5.75 -3.85 18.5 1.1 4.0

in USD -0.01 -22.87 -34.63


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.

As of 10/19/2015 (local currency) T1M (%) T3M (%) YTD (%) 2015 P/E 2015 P/B Div. Yield

Global Market Indices

MSCI World 3.20 -5.11 0.32 16.7 2.1 2.6

MSCI All-Country World 4.28 -5.15 -3.11 14.2 1.5 3.5

MSCI EAFE 2.59 -6.53 1.59 15.2 1.6 3.3

MSCI Emerging Markets 4.66 -7.29 -7.15 12.4 1.4 2.9

DJ Sustainability World Comp 2.93 -5.49 -2.03 15.0 1.8 3.2

FTSE4Good Global 3.31 -5.26 1.35 11.2 1.4 4.0

Fixed Income

Barclays US Aggregate 0.54 1.56 1.55

Commodities Levels

10/19/2015 4/20/2015 10/20/2014

WTI Crude 46.14 61.06 79.34

ICE Brent Crude 48.86 66.93 88.97

NYMEX Natural Gas 2.46 2.82 3.80

Spot Gold 1170.64 1195.89 1246.91

LME 3mth Copper 5206 6060 6639

CBOT Corn 372.25 401.25 395

ICE ECX Emission 8.35 6.88 6.23

Currencies Levels

10/19/2015 4/20/2015 10/20/2014

EUR/USD 1.13 1.07 1.28

USD/JPY 119.50 119.18 106.95

GBP/USD 1.55 1.49 1.62

AUD/JPY 86.74 92.06 93.94

DXY Index 94.94 97.94 84.95


MSCI ACWI SECTOR PERFORMANCE

1 Month Price Return (%) 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.

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.

US 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 Year to Date

Source: Bloomberg Source: Bloomberg

As of 10/19/2015

Energy

Utility

Cons Stpl

Info Tch

Financals

MSC ACWI

Cons Discr

Industials

Material

Tel Sv

Healthcare

-4 -2 0 2 4 6 8 10

Cons Stpl

Cons Discr

Healthcare

Info Tch

MSCI ACWI

Tel Sv

Industials

Financals

Utility

Material

Energy

-15 -10 -5 0 5 10

Value Blend Growth

Larg

e

3.6 2.8 1.0

Mid 2.1 0.6 -0.9

Smal

l

1.8 -1.3 -4.2

Value Blend Growth

Larg

e

-4.0 -0.3 3.1

Mid -3.2 -1.8 -0.6

Smal

l

-5.5 -4.0 -2.6


SECTOR SNAPSHOT – TOP 5 COMPANIES BY MARKET CAP

As of 10/19/2015

Company name Ticker Industry

Mkt Cap

(US$ Bn)

Price

(Local)

Total

Return

YTD %

(local)

P/E

2015E

EV/

EBITDA

2015E

Div

Yield %

2015E

ESG

Disclosure

Score

Consumer Disc.

Amazon.com AMZN Internet & Catalog

Retail

268.1 573.2 84.7 107.6 25.8 N/A 16.9

Toyota Motor Corp 7203.JP Automobiles 210.5 7356.0 -1.2 9.4 10.0 N/A 33.5

The Walt Disney Co DIS Media 184.8 109.5 16.9 21.5 12.6 1.2 35.5

Home Depot Inc HD Specialty Retail 158.1 123.1 19.1 23.2 12.9 1.9 27.3

Comcast Corp CMCSA Media 153.7 61.6 7.9 18.7 8.1 1.6 23.6

Consumer Staples

Nestle NESN.VX Food Products 245.0 73.5 3.7 22.1 14.7 3.0 55.0

The Procter &

Gamble Co

PG Household

Products

203.9 75.2 -15.5 19.9 12.9 3.5 46.7

Wal-Mart Stores WMT Food & Staples

Retailing

188.7 58.9 -30.2 13.1 6.9 3.3 37.8

Anheuser-Busch

Inbev

ABI.BB Beverages 186.5 102.5 11.2 22.7 13.5 2.9 54.1

The Coca-Cola Co KO Beverages 182.7 42.0 2.0 20.9 16.7 3.1 33.5

Energy

Exxon Mobil XOM Oil, Gas &

Consumable Fuels

337.7 81.0 -10.2 21.0 8.4 3.6 60.2

Petrochina Co 857.HK Oil, Gas &

Consumable Fuels

244.2 6.5 -22.5 19.3 7.9 3.0 32.0

Royal Dutch Shell RDSA.LN Oil, Gas &

Consumable Fuels

169.4 90.0 -17.1 27.3 6.7 4.8 58.1

Chevron CVX Oil, Gas &

Consumable Fuels

176.2 1774.5 -13.7 13.8 5.3 6.9 52.3

Total Sa FP.FP Oil, Gas &

Consumable Fuels

122.9 45.0 10.3 12.7 5.4 5.4 55.6

Financials

Berkshire Hathaw ay BRK/B Diversif ied

Financial Services

329.6 133.6 -11.0 18.4 N/A N/A 13.6

Wells Fargo & Co WFC Banks 269.8 52.6 -2.2 12.7 N/A 2.9 17.5

Ind & Comm Bank of

China

1398.HK Banks 246.9 5.1 -6.1 5.3 N/A 6.3 32.0

JPMorgan Chase JPM Banks 230.1 62.2 2.1 10.6 N/A 2.8 42.1

China Construction

Bank

939.HK Banks 186.9 5.8 -5.0 5.1 N/A 6.5 31.6


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

As of 10/19/2015


Mkt Cap

(US$ Bn)

Price

(Local)

Total

Return

YTD %

(local)

P/E

2015E

EV/

EBITDA

2015E

Div

Yield %

2015E

ESG

Disclosure

Score

Health Care

Johnson & Johnson JNJ Pharmaceuticals 271.2 97.9 -4.3 15.9 11.0 3.1 57.0

Novartis AG NOVN.VX Pharmaceuticals 253.0 90.4 0.6 18.2 17.5 2.9 64.0

Roche Holdings ROG.VX Pharmaceuticals 235.3 260.5 -0.5 18.5 12.4 3.1 50.0

Pfizer PFE Pharmaceuticals 212.8 34.5 13.5 16.5 10.8 3.2 42.6

Gilead Sciences GILD Biotechnology 152.1 103.6 10.8 8.9 6.6 1.7 14.0

Industrials

General Electric Co GE Industrial

Conglomerates

292.7 29.0 17.8 22.2 10.9 3.2 56.2

Boeing BA Aerospace &

Defense

94.1 138.4 8.5 17.2 9.2 2.6 35.1

United Parcel

Service

ups.us Air Freight &

Logistics

93.4 104.3 -4.2 19.8 10.3 2.8 59.9

3M MMM Industrial

Conglomerates

92.5 148.0 -8.2 19.0 11.4 2.8 55.8

Siemens SIE.GR Industrial

Conglomerates

84.0 84.2 -7.0 13.0 10.0 3.9 55.0

Info Tech

Apple AAPL Technology

Hardw are, Storage

637.2 111.7 2.5 12.2 6.0 1.9 45.9

Alphabet GOOGL Internet Softw are

& Services

468.8 700.0 31.9 24.2 13.4 N/A 15.3

Microsoft Corp MSFT Softw are 380.9 47.6 4.6 17.7 9.5 3.0 34.3

Facebook FB Internet Softw are

& Services

277.7 98.5 26.2 47.5 24.5 N/A 17.4

Visa V IT Services 187.3 77.0 18.1 29.5 18.7 0.6 19.0

Materials

BHP Billiton Ltd BHP.AU Metals & Mining 93.4 24.7 -4.2 30.5 7.7 9.8 58.7

BASF BAS.GY Chemicals 74.2 71.3 5.3 14.0 7.5 3.9 60.3

Saudi Basic Ind. SABIC.AB Chemicals 72.5 90.7 16.1 14.4 7.3 5.5 32.6

Rio Tinto RIO.AU Metals & Mining 69.1 53.4 -3.1 14.7 7.1 8.0 57.4

Dow Chemical DOW.US Chemicals 54.9 47.4 6.8 14.9 8.1 3.5 57.4


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

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.

MONETARY POLICY

Source: Federal Reserve Bank of St. Louis

As of 10/19/2015


Mkt Cap

(US$ Bn)

Price

(Local)

Total

Return

YTD %

(local)

P/E

2015E

EV/

EBITDA

2015E

Div

Yield %

2015E

ESG

Disclosure

Score

Telecom

China Mobile 941.HK Wireless

Telecommunication

253.5 96.0 9.3 14.2 4.6 3.0 43.2

AT&T T Diversif ied

Telecommunication

206.9 33.6 5.9 12.8 6.4 5.6 50.6

Verizon VZ Diversif ied

Telecommunication

181.7 44.7 0.2 11.4 6.3 5.0 36.6

Vodafone VOD.LN Wireless

Telecommunication

85.6 208.4 -3.4 44.3 7.0 6.0 52.7

Nippon Telegraph 9432.jp Diversif ied

Telecommunication

81.3 4273.0 40.9 14.0 5.1 2.3 44.6

Utilities

National Grid NG/ LN Multi-Utilities 53.6 925.7 4.1 15.8 10.5 5.1 30.6

Duke Energy DUK Electric Utilities 50.6 73.6 -9.1 15.9 9.8 4.5 50.2

Nextera Energy NEE.US Electric Utilities 47.8 103.8 -0.1 18.4 10.4 3.0 45.3

Iberdrola Sa ibe.sm Electric Utilities 44.7 6.2 14.1 16.5 8.9 2.5 70.2

Enel ENEL.IM Electric Utilities 43.8 4.1 14.9 12.8 6.7 3.4 64.5

Region/Countries 2014 2015E 2016E 2014 2015E 2016E 2014 2015E 2016E 2014 2015E 2016E

United States 2.4 2.5 2.6 1.6 0.2 1.9 0.3 0.4 1.3 2.2 2.3 2.9

Euro Area 0.9 1.5 1.6 0.4 0.1 1.2 0.1 0.1 0.1 - - -

Japan 0.2 0.7 1.2 2.7 0.8 1.0 0.1 0.1 0.1 0.4 0.4 0.7

UK 2.6 2.6 2.4 1.5 0.1 1.4 0.5 0.5 1.2 2.2 2.0 2.5

Australia 2.7 2.3 2.6 2.5 1.7 2.5 2.5 1.9 2.0 3.0 2.7 3.2

China 7.4 6.8 6.5 2.0 1.6 2.0 5.6 4.5 4.4 3.7 3.4 3.3

Brazil 0.1 -2.5 -0.8 6.3 8.8 6.4 11.6 14.3 12.7 - - -

**India 5.4 7.4 7.5 7.2 6.2 5.0 8.0 6.8 6.7 8.1 7.5 7.1

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

Oct-15 Apr-15 Oct-14

Monetary Base grow th (YoY) -0.2% 4.6% 13.5%

M-2 grow th (YoY) 6.4% 6.3% 5.1%

Money multiplier (M-2/mon base) 3.0 3.0 2.8

2Q15 2Q14 2Q13

Velocity of money (GDP/M-2) 1.50 1.53 1.56


KEY ECONOMIC CHARTS

C&I Loan Growth (%) University of Michigan Survey of Consumer Sentiment


Source: Bloomberg

NFIM Small Business Optimism Index ISM Manufacturing Purchasing Managers Index

Source: Bloomberg

Source: Bloomberg

US Treasury Yield Curve US Initial Jobless Claims

Source: Bloomberg

Source: Bloomberg

Production Employees Average Hourly Earnings


-30

-20

-10

0

10

20

301960

1963

1966

1969

1972

1975

1979

1982

1985

1988

1991

1994

1998

2001

2004

2007

2010

2013

% Y

oY

50

60

70

80

90

100

110

120

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

70

75

80

85

90

95

100

105

110

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

2000

2002

2004

2006

2008

2010

2012

2014

0.0

2.0

4.0

6.0

8.0

10.0

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

% Y

oY

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 30Y

%

10/20/2015

4/20/2015

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Regional and Sector Strategy: Monthly Update

By Michael Geraghty, Global Markets Strategist, Cornerstone Capital Group

Cyclical Weakness — The weakness in global equity markets in September

(MSCI ACWI -3.8%) was particularly evident in Materials (-8.5%) and

Energy (-7.8%), likely reflecting continued downward earnings estimate

revisions in these two cyclical sectors. Not surprisingly, commodity-oriented

regions also performed poorly: Latin America (-7.9%), South Africa (-7.3%),

Australia (-5.3%).

Maintain a Defensive Sector Strategy — With stock prices falling as fast

as earnings estimates in many cyclical sectors, we maintain a defensive sector

strategy. We are Underweight Energy, Materials, and Industrials. Our only

Overweight is in Financials.

Regional Strategy Largely Unchanged — Japan remains our sole

Overweight; Latin America, Europe and India remain Underweight. Largely

reflecting modest improvements in relative valuations, we upgrade China and

Russia to Neutral from Underweight.

Figure 1: Regional Over- and Underweights Figure 2: Sector Over- and Underweights

Source: Cornerstone Capital Group

This article is an excerpt from a Cornerstone Capital Group research report October 5, 2015.

Michael Geraghty is the Global Markets Strategist for Cornerstone Capital Group. He has over three decades

of experience in the financial services industry including working as an investment strategist at UBS and Citi.

©Grapestock/Crystal Graphics




By Sebastian Vanderzeil, Research Analyst, Craig Metrick, Director, Manager Due Diligence and Thematic Research and Andy Zheng, Research Associate, Cornerstone Capital Group

Public debate persists about the performance and best method of

integrating Environmental, Social and Governance (ESG) factors

into investment decisions. Despite growing demand for sustainable and

impact investment solutions and a body of evidence to support the

effectiveness of sustainable investing from a strictly financial perspective,

many investors are still unclear about the relationship between ESG factors

and financial performance.

No financial return trade-off between investing for profit or

purpose. Evidence shows that aligning investments with ESG factors can

create financial value for investors, particularly investors who are seeking to

invest for impact. The literature review conducted by Cornerstone suggests

that there is no reduction in investor returns for investment strategies that

appropriately and consistently apply ESG factors.

Understanding the range of potential approaches is critical. The

ability to develop and implement an investment strategy that effectively

integrates ESG factors to drive value creation requires careful planning as well

as an understanding of the variety and effectiveness of approaches. We provide

an overview of those styles.

Investments do have an impact on broader society, and sustainable

investing allows investors to more effectively target and enhance

this impact in the context of long-term financial goals. Investors

should consult with their trustees, constituents and advisors to construct a

long-term investment strategy compatible with long-term financial and

mission-related goals.

This is an excerpt from our report published September 24, 2015.

Sebastian Vanderzeil is a Research Analyst at Cornerstone Capital Group. He holds an MBA from New York University’s Stern School of Business. Previously, Sebastian was an economic consultant with global technical services group AECOM, where he advised on the development and finance of major infrastructure across Asia and Australia.

Craig Metrick is Director, Manager Due Diligence and Thematic Research at Cornerstone Capital

Group. Previously, Craig was Principal and US Head of Responsible Investment at Mercer, working

with a variety of public and private clients.

Andy Zheng is a Research Associate at Cornerstone Capital Group. Andy graduated from Bowdoin College

with an interdisciplinary major in Mathematics and Economics and a minor in Visual Arts.

©bestdesign36 / Crystal Graphics

http://cornerstonecapinc.com/2015/09/sustainable-investing-addressing-the-myth-of-underperformance-2/



Antibiotics and Animal Health: Value-Chain Implications in the US

By Michael Shavel, Global Thematic Analyst, Sebastian Vanderzeil, Research Analyst and Andy Zheng,

Research Associate, Cornerstone Capital Group

Antibiotic resistance a growing concern. The proliferation of antibiotic

resistance is primarily attributed to the misuse and overuse of the drugs in

human medicine and animal agriculture. With respect to the latter, a

confluence of regulatory action and heightened consumer awareness is

exerting pressure on livestock producers to reassess their usage of antibiotics.

In this report we aim to provide transparency on trends in antibiotic use as

well as on other nutritional feed additives.

What’s currently used to maintain animal health and promote

growth? Antibiotics are a simple and cost-effective way for meat and poultry

producers to increase production and manage animal health. But there are a

number of other specialty and nutritional feed additives that are utilized for

similar purposes. We review the range of feed additives that are currently used

and in development.

Investment implications. In offering a framework for further inquiry, we

assess the impact of curbing antibiotic usage in livestock and poultry

production across several parts of the animal nutrition value chain.

For animal health companies, we believe regulation in its current form

presents limited near-term risk to earnings, though shifting consumer

demand and more stringent regulation could have a more significant

impact longer term.

Specialty and nutritional feed additives are generally produced by major

chemical companies and represent a small portion of overall revenues.

However, for companies with more concentrated exposure, prebiotic and

probiotic feed additives appear to offer the greatest growth potential.

From a producer standpoint, poultry processors that are proactive and

innovative in reducing antibiotics use are well-positioned to meet

consumer-driven demand.

Key public companies highlighted in this report: Animal health –

Phibro Animal Health, Zoetis; specialty and nutritional feed additives –

BASF, DSM, DuPont, Novozymes; processors – Tyson Foods, Pilgrim’s Pride,

Sanderson Farms.

This article is an excerpt from a Cornerstone Capital Group research report dated October 5, 2015.

©Christin Lola/Crystal Graphics



Antibiotics and Animal Health: California Raises the Bar

By Michael Shavel, Global Thematic Analyst, Sebastian Vanderzeil, Research Analyst and Andy Zheng,

Research Associate, Cornerstone Capital Group

California legislation (SB 27) more restrictive than GFI 213. On

October 10, 2015, California Governor Jerry Brown signed into law SB 27, a

bill limiting the use of medically important antibiotics (MIA) in animal

agriculture. In addition to prohibiting antibiotics for growth promotion, SB

27 prohibits the use of MIAs in a “regular pattern” (i.e., for growth promotion

and disease prevention), thus going beyond federal policy outlined in the

FDA’s Guidance for Industry (GFI) 213. This addresses concerns that animal

producers may use antibiotics for growth promotion under the guise of disease

prevention.

Data collection is also a focus. SB 27 also requires the California

Department of Food and Agriculture (CDFA) to develop a monitoring program

to gather information on antibiotic sales and usage in meat production. While

the FDA is exploring approaches for enhancing data collection efforts at the

federal level, it’s still in the process of seeking public input.

Potential ripple effect? As we discussed in our October 5 report Antibiotics

and Animal Health: Value-Chain Implications in the US, consensus believes

GFI 213 has little chance of decreasing overall quantities of antibiotics used in

livestock production due to the significant overlap between antibiotics used

for growth promotion and those used for disease prevention. This outlook

could be at risk should other states (or the FDA) follow California’s lead.

Increasing confidence in our thesis. We believe the potential for more

restrictive regulation (as seen with SB 27) and shifting consumer demand

poses a risk to antibiotics sales for animal health companies. Specialty and

nutritional feed additives, typically produced by major chemical companies,

could benefit as meat and poultry producers seek out antibiotic alternatives.

Poultry processors that are proactive and innovative in reducing antibiotics

use are well-positioned to meet consumer-driven demand.

This article is an excerpt from a Cornerstone Capital Group research report dated October 13, 2015.

Michael Shavel is a Global Thematic Analyst at Cornerstone Capital Group. Prior to joining the firm, Michael

was a Research Analyst on the Global Growth and Thematic team at Alliance Bernstein.

Sebastian Vanderzeil is a Research Analyst at Cornerstone Capital Group. He holds an MBA from New

York University’s Stern School of Business. Previously, Sebastian was an economic consultant with global

technical services group AECOM.

Andy Zheng is a Research Associate at Cornerstone Capital Group. Andy graduated from Bowdoin College

with an interdisciplinary major in Mathematics and Economics and a minor in Visual Arts.

©Niyazz/Crystal Graphics

http://cornerstonecapinc.com/2015/10/flagship-report-antibiotics-and-animal-health-value-chain-implications-in-the-us/

http://cornerstonecapinc.com/2015/10/flagship-report-antibiotics-and-animal-health-value-chain-implications-in-the-us/



Alibaba: Uniquely Conflicted

By John K.S. Wilson, Head of Corporate Governance, Engagement & Research, Cornerstone Capital Group

With Alibaba’s first annual meeting scheduled for

October 8, we conducted an examination of its

corporate governance structure. At the time of its IPO

last year, we wrote that what the company calls its

“hybrid” corporate governance structure maintains

insider control not through a dual-class voting

structure but through the director nomination

process. Under the company’s bylaws, the Alibaba

Partnership, an insider group chosen by founder Jack

Ma, retains the right to elect a majority of board seats.

The company’s 2015 annual report includes the

following among dozens of Risk Factors:

The Alibaba Partnership and related voting

agreements limit the ability of our shareholders to

nominate and elect directors.

The interests of the Alibaba

Partnership may conflict with

the interests of our shareholders.

Our articles of association

contain anti-takeover provisions

that could adversely affect the

rights of holders of our ordinary

shares and ADSs.

We are not aware of another

corporation that lists its corporate governance

structure as a risk to shareholders. In fact, numerous

concerns about the company’s corporate governance

have been widely cited:

The board is majority non-independent;

The board is classified;

The company lacks independent audit or

compensation committees;

The company provides little information about

executive compensation;

The company has only one woman on its board;

The company discloses little about sustainability,

and lacks robust sustainability oversight at the

board or management level.

Moreover, the company discloses numerous related-

party transactions, particularly regarding Jack Ma.

For example, regarding Alipay, the company’s online

payment platform, the annual report notes:

We do not control Alipay or its parent entity,

Ant Financial Services, over which Jack Ma

effectively controls a majority of the voting interests.

Accordingly, if conflicts arise between us and

Alipay or Ant Financial Services, including conflicts

that could threaten our ability to continue to receive

payment services on preferential terms or conflicts

relating to commercial opportunities that we or

Alipay or Ant Financial Services wish to pursue,

such conflicts may not be resolved in our favor and

could have a negative effect on our ecosystem and

materially and adversely affect

our business, financial condition,

results of operations and

prospects. Moreover, conflicts of

interest may arise due to Jack

Ma’s role as executive chairman of

our company and through his

voting control over and his

economic interest in Ant Financial

Services, and he may not act to

resolve such conflicts in our favor.

We are particularly concerned that the chairman of

the company may have conflicting interests with

regard to another entity that provides a key part of the

company’s service.

Controlled companies commonly employ governance

structures designed to entrench insider control.

However, as the annual report acknowledges, trust is

critical to the success of “sharing economy” and

e-commerce companies such as Alibaba. The first

Risk Factor identified observes that:

Maintaining the trusted status of our ecosystem is

critical to our success, and any failure to do so could

severely damage our reputation and brand, which

would have a material adverse effect on our business,

financial condition and results of operations.

©agawa288/ Crystal Graphics

http://cornerstonecapinc.com/2014/05/alibabas-hybrid-corporate-governance-structure/


In fact, Alibaba’s integrity has been challenged

multiple times in the first year of its existence as a

public company. As we reported earlier this year, the

Chinese State Administration for Industry and

Commerce (SAIC) published a “white paper” alleging

that counterfeiting was common on Taobao, the

company’s peer-to-peer website. After discussions

with Jack Ma, SAIC removed the “white paper” from

its website without a detailed account of how the issue

was resolved.

More recently, an article in Barron’s1 argued that the

share price of the company was likely to fall

substantially. Among other arguments, the article

challenged the plausibility of the company’s growth

figures. Following this article, the shares of the

company fell more than 10% and currently trade at

38% below the IPO price. The company has published

its own report that seeks to refute the arguments

made in the Barron’s piece.

We have no insights into the factual merit of these or

any other allegations. However, the company’s lack of

independent oversight raises questions about whether

shareholders can have confidence in the company’s

reported figures, or in its responses to other questions

about the integrity of its businesses.

Shareholders may also ask a more troubling question.

If the company’s own disclosures raise concerns about

its corporate governance structure; if these

disclosures also acknowledge that the company’s

chairman has multiple conflicts; and if no disclosures

are made about the incentive structure provided by its

executive compensation scheme, then the company is

implicitly acknowledging that it is not designed to be

managed for shareholder benefit. Jack Ma has

explicitly asserted that the company exists first for the

benefit of customers, then employees, and finally

shareholders. But it is hard to understand how a lack

of transparency and accountability promotes the

interests of these non-financial stakeholders either.

And so, the question remains: if not shareholders,

customers or employees, then whom?

John K.S. Wilson is the Head of Corporate

Governance, Engagement & Research at

Cornerstone Capital Group. John has over 18 years

of experience in socially responsible investing and

corporate governance.

1 “Alibaba: Why It Could Fall 50% Further,” Jonathan R. Laing, Barron’s September 12, 2015


Accelerating Impact

The Paradox of Incentive Insensitivity

By Vivienne Ming, Co-Founder, Socos and Chief Science Advisor, Cornerstone Capital Group

“Fanatic.” Just having read that word, I can probably

guess the unflattering image going through your

minds. Winston Churchill offered a slightly more

benign portrait, “A fanatic is one who can’t change his

mind and won’t change the subject.” If that’s our

working definition then anyone who's ever been

trapped in a conversation with me has learned the

hard way that I’m a fanatic. And I am. Proudly. For 15

years as a neuroscientist, inventor, entrepreneur and

mom, I have been driven to understand how to

maximize human potential, and my research has

returned again and again to the power of the fanatic.

I was once invited to visit RedBull’s US headquarters

in Santa Monica to meet their athletes, and had lunch

with a fellow named Rodney Mullen. Charismatic and

kinetic, Rodney is arguably the best skateboarder of

all time. He and Tony Hawk dominated the sport for

years, winning dozens of world championships. Over

lunch, rather than asking directly about the skating, I

asked Rodney what he did after defending his titles.

“Well,” he said, “Tony and I would go to the after-

party and drink some champagne . . . then 20 or 30

minutes later we’d be out back practicing new moves.”

He had already won. He was at his own party. And he

didn’t care. He is a fanatic.

When I talk about fanatics, I’m not talking about

religious mania. Rather, I'm talking about

endogenous motivation, the drive that comes from

within. Where exogenous motivation—sensitivity to

praise and bonuses and punishment—fails,

endogenous motivation brings about the intrinsic

curiosity and personal drive that powers the fanatic.

In 2014, I was developing machine learning

algorithms to remove bias from hiring. Could we

process massive amounts of data to identify the

predictors of career success? For this, I analyzed a

database of 122 million working professionals looking

for the commonalities that predicted a great hire

across different job verticals, like software developer,

salesperson, or designer. Grades, test scores, skill sets

—none of these classic hiring factors were robustly

predictive. (For that matter, neither were race,

gender, or age, but that’s another story.) The best

predictor across professions was “what did they do

when they didn’t have to do anything.” Which

salespeople regularly booked sales the day after the

end of the sales cycle? Which developers are most

likely to push code to repository immediately after a

product release? All of the incentives of the business

say, “Take a break. No one cares.” But they do. They

are incentive insensitive. They are fanatics.

What’s fascinating, though, is that incentive

insensitivity doesn’t simply describe “the best.”

Applying a simple computational algorithm, a Fourier

analysis, to the work behavior of hundreds of

thousands of people over time revealed that as

incentive insensitivity increased, so did performance

and productivity across the workforce. Further,

workers’ sensitivity to exogenous motivators

correlated with worse long-term career outcomes in

terms of performance and progression.

Endogenous motivation appears to provide the drive

necessary to engage and persevere by finding meaning

in every task, every job and every obstacle. Fanatics

not only “won’t change the subject,” as Winston said,

they see that subject in all they do. Endogenous

motivation is not about “what” you are doing, but

“why” you’re doing it.

Although our findings about the crucial importance of

incentive insensitivity appear to fly in the face of so

much of how we structure our businesses and

©Creatista / Crystal Graphics


classrooms, research has supported again and again

the importance of endogenous motivation in student

outcomes, job performance, career progression and

even predicting the life outcomes of young children.

For example, across 10,000 West Point cadets who

were tracked for over a decade, endogenous

motivation predicted rank attainment and awards

during their Army careers.1 Exogenous motivation

actually appeared to undermine these outcomes. All

of the incentives we hold so dear—punishment,

rewards . . . emotional blackmail—are all negative

predictors of success. (Sorry, Tiger Moms.)

But that doesn't mean these are innately fixed

qualities. Research shows that family-level programs

designed to increase socio-emotional parenting

behavior appear to drive the development of

endogenous motivation, creating a belief in those

children that their hard work will pay off. One such

study showed these children earning 25% percent

more as adults, decades after the interventions.2

Another found substantially lower cortisol levels years

later in at-risk children receiving the interventions.3

In a review of this research, we found that

implementing these known interventions at scale

across US children would add $1.3-1.8 trillion per year

to the US GDP.4

My own research with young learners shows that

targeted interventions delivered by nothing more

than text messages can foster endogenous motivation

in the classroom and at home. We built an SMS-based

system where parents can snap pictures of children's

artwork and record conversations, such as reading a

book together, which are then analyzed by deep neural

networks. Results of these models are combined with

the results of an active learning system that asks a

single, high-value question each day by constantly

predicting the answers to a database of literally

thousands of questions. Using this deep cognitive

model we can actually predict the children's life

outcomes: income, health, education, happiness. And

we share these predictions with . . . no one. Ever.

Instead, we use the predictions to select a single text

message to send to parents each day, “Here is the one

thing you can do today to have the biggest impact on

your child's life.” It is all automatically generated on

the fly via machine learning. Our purpose is to deliver

these messages for free, for millions of families

around the world, requiring nothing more than a flip

phone.

Simple, targeted intervention can move the needle in

endogenous motivation for school-aged children and

have long-lasting impacts on improving their lives

and how they interact with the world around them.

Having spent the last two decades dissecting and

analyzing all of the systems that engage and unlock

human potential, I have discovered that with a little

coaching and the correct interventions, fanatics are

not just born: They can be created.

Vivienne Ming is a theoretical neuroscientist,

technologist and entrepreneur. She co-founded

Socos, where machine learning and cognitive

neuroscience combine to maximize students’ life

outcomes. Vivienne is also a visiting scholar at UC

Berkeley’s Redwood Center for Theoretical

Neuroscience, where she pursues her research in

neuroprosthetics.

1 Wrzesniewski, A., Schwartz, B., Cong, X. , Kane, M. , Omar, A. , & Kolditz, T. (2014). “Multiple types of motives don’t multiply the motivation of West Point cadets,” Proceedings of National Academy of Sciences, 111(30), 10990-10995. 2 Gertler, P., Heckman, J., Pinto, R., Zanolini, A., Vermersch, C., Walker, S., Chang, S.M., & Grantham-McGregor, S. (2014). “Labor market returns to an early childhood stimulation intervention in Jamaica,” Science, 344 (6187), 998-1001.

3 Miller, G.E., Brody, G.H., Yu, T., & Chen, E, (2014). “A family-oriented psychosocial intervention reduces inflammation in low-SES African American youth.” Proceedings of the National Academy of Sciences, 111(31), 11287-11292. 4 Ming, N., Bumbacher, E., & Ming, V., (2015). “Aligning Learning with Life Outcomes through Naturalistic Assessment.” http://about.socoslearning.com/socoswhitepaper.pdf

http://about.socoslearning.com/socoswhitepaper.pdf



VW: A Case Study in Failed Governance

By John K.S. Wilson, Head of Corporate Governance, Engagement & Research, Cornerstone Capital Group

The emerging allegations that Volkswagen installed “defeat devices” on its cars

to evade emissions requirements highlights the importance of good corporate

governance during periods of industry disruption. Such periods challenge

companies to respond to emerging market trends without losing focus on

longstanding and well-established social concerns and expectations. It seems

clear that VW failed to do so.

We consider the automotive industry poised for disruption for the following

reasons:

The industry has been subject to long-running, growing and often

conflicting social and environmental pressures;

The boards and management teams, especially in the United States, have

not always successfully navigated these challenges, as evidenced by recent

bankruptcies and safety failures; and

Emerging technologies offer potential solutions to many transportation

challenges, offering new entrants opportunities to compete with or

complement industry incumbents.

The markets have unfortunately become accustomed to shocks to the auto

industry, but the emerging revelations about Volkswagen are different. Safety

issues at Toyota (decelerators), GM (ignition switches and airbags), and

Honda/Takata (airbags) were sins of omission—primarily, these were failures

of safety and quality oversight from the board level down. Volkswagen’s was

a sin of commission—a deliberate decision to program each car sold to lie on

emissions tests. The “defeat device” is not just a violation of the Clean Air Act;

it is a deception of customers, dealers, employees and the public about the

nature of the product being sold.

No one outside the company yet knows who made this decision or why. A key

question will be whether top management or board members actively

approved or even directed the deception, or if they merely failed to prevent it.

Moreover, because the company firmly denied the allegations for months after

they surfaced, shareholders will want to know at what point board members

or management became aware of the deception. As of this writing, rumors

linking management to the decision are being reported by European news

agencies, but no definitive evidence has yet emerged.

Even if top management had no specific knowledge of the decision, the

incident suggests a culture and set of incentives within the company that

enabled or encouraged cheating. Either way, the incident raises significant

governance concerns.

©stigmatize/Crystal Graphics


A flawed analysis

One can infer that someone within the company studied the risks and benefits

and concluded that installing the defeat device was the right business decision.

The rationale may have been related to concerns about reduction in fuel

efficiency and performance caused by the required pollution controls. In all

likelihood, the company’s engineers could not meet expectations for price,

performance, and environmental compliance, and the defeat device was the

chosen solution.

Although a full understanding of the decision-makers’ thought process will

await the outcome of outside investigations, any analysis that took place

implicitly underestimated the likelihood and/or significance of detection.

Both U.S. and European regulatory systems rely heavily on company

participation in safety and emissions testing. As The New York Times and

others have reported, companies have sometimes used this as an opportunity

to exaggerate test results. In this case, VW seems to have underestimated the

likelihood that a non-governmental research organization would have the

resources that government regulators lack to perform more detailed testing.

The company also apparently miscalculated the costs of exposure. Perhaps

VW did not consider how public and regulatory concern about corporate

malfeasance in general and environmental compliance in particular has grown

over the past several years. Indeed, the current EPA seems to be particularly

aggressive in pursuing corporate malfeasance.

More importantly, we believe that this method of thinking—risk analysis that

excludes ethical analysis—is inherently flawed from a business perspective. As

we observe in our Shareholder Alignment FrontierTM analysis, social and

environmental issues evolve through a “lifecycle” as awareness of the issue

grows and social norms emerge that demand attention from companies.

This is an excerpt from our report dated September 25, 2015.

John K.S. Wilson

is the Head of

Corporate

Governance,

Engagement &

Research at

Cornerstone Capital

Group. John has over

18 years of experience

in socially responsible

investing and

corporate governance.



Corporate Sustainability Is Corporate Excellence

By Stephen Freedman, PhD, CFA, Head of Thematic and Sustainable Investing Strategy, UBS and Erika Karp, Founder and CEO, Cornerstone Capital Group

This transcript of a recent interview first appeared on UBS Wealth Management’s Intellectual Capital Blog. Reprinted with permission.

Many of you may remember Erika Karp, a long-term

UBS veteran, who was head of Global Sector

Research at UBS Investment Bank until 2013.

Already back then, she was a very vocal and

influential proponent of sustainable

investing. Meanwhile, she has raised the stakes even

more by founding Cornerstone Capital Group, a firm

with the mission “to apply the principles of

sustainable finance across the capital markets

enhancing transparency and collaboration”. We

continue our interview series with this leading voice

in the field of sustainable investing.

Stephen Freedman: Erika, how would you define

corporate sustainability?

Erika Karp: At Cornerstone, we have an explicit

definition of corporate sustainability. And by the way,

we prefer talking about “corporate excellence,” which

we think is synonymous. To us, corporate excellence

is defined as “the relentless pursuit of material

progress towards a more regenerative and inclusive

economy.” This is a systems-level and

inclusive definition. When we find companies that

truly embrace that, then we’ve found something that

is really constructive for capitalism.

Why should investors focus on sustainability today?

Seeking corporate excellence (or the lack thereof) is

the focus of investors. When you take a broad

definition of sustainability, you are doing a systematic

analysis of environmental, social and governance

(ESG) factors in the business context. You’re bringing

transparency to the investment process, and you’re

seeking consistency and accountability across an

organization. Every investor should be thinking about

the most pivotal, structural, economic and business

drivers that touch an industry, a company, and

ultimately affect corporate profitability. I simply don’t

believe that good risk-adjusted-return analysis can be

done without systematically looking at ESG factors. In

the end, I would argue that sustainable

investing should simply be called investing.

Sustainable finance is simply finance. It is the next

iteration of finance, it represents an enhanced

analytical process because, when examining a

company, understanding which stakeholders are

affected and what major trends are going to influence

the company is an absolute economic imperative.

You mentioned the E, S and G factors. Can you

expand on Governance and its importance?

Sure. In fact, I would actually argue that it should be

the G first; and then the E and the S. If you get the

governance right, then you can get the environmental,

the social and—of course—the economics right. Good

governance comes first. It implies being very

conscious of both risks and opportunities in the long

run; being very conscious of conflicts that may exist

and dealing with them; understanding everything

from top to bottom in terms of organizations and the

challenges they face; and creating organizations that

have a culture of trust, innovation, respect, creativity

and accountability.

Can you tell us a bit about your role in the sustainable

investing community?

© UBS AG


In founding Cornerstone, we believe that a systems-

level approach to sustainable capitalism is critical. We

look for all kinds of collaborations and partnerships

so we can grow the pie together. In figuring out how

to truly serve the needs of asset owners, you have to

touch multiple pieces of the capital markets and find

appropriate synergies. Notwithstanding the

challenges and distortions that capitalism has faced, it

is still the best system the world has ever known for

creating prosperity. So we just have to fix it.

Occasionally there needs to be business model

innovation for transformation. That’s what we intend

to help do … re-orient capitalism towards its best and

highest purposes.

What trends are you seeing in the sustainable

investing landscape?

There are lots of things shifting at the same time and

in the same direction, which is huge and dramatic.

Take big data—for example—the ability to turn

massive amounts of noise into insight. Social media

now provides an unprecedented amount of

transparency of information around the world.

Transparency can be transformational. The

regulatory scrutiny under which corporations have

been, post-crisis, is another thing that is

unprecedented. And critically, we are finally starting

to see standards for disclosure of ESG factors by

corporations. Standards are a form of infrastructure

that has not existed before. Finally, in the capital

markets, asset owners are beginning to take back the

ability to act like owners as opposed to delegating

their responsibilities. The confluence of all these

factors is making me believe that it’s the absolute

right time to embrace sustainability.

Stephen Freedman, PhD, CFA, is Head of Thematic

and Sustainable Investing Strategy at UBS Wealth

Management Americas. He joined UBS as an

Economist in 1998.


Enhanced Analytics


By Hendrik Bartel, CEO, and Isaac Khurgel, Head of Marketing and Communications, TruValue Labs, Inc.

It goes without saying that today we live in an information-rich and

interconnected world. Many of us own a smartphone, tablet, and computer—

all of which are used daily to consume vast quantities of data. The fact that at

any time the sum of human knowledge is available in the palm of our hands is

often taken for granted.

The ability to communicate novel and disparate issues across the globe

instantaneously, the growth of content available through the internet, and our

daily interactions with this content—every digital inquiry, web search, and

social media post—are illustrative of being in the age of “big data”. Data

availability has been growing at an exponential pace, with estimates

suggesting that over 90% of the data created in the history of humanity has

been generated in the past two years.1

Massive sets of data can provide a lot of value; they can be analyzed to reveal

patterns and trends that provide new insights. However, too much of a good

thing can also be problematic: the majority of the information in big data sets

can be classified as irrelevant “noise”. With such huge amounts of information,

analysts are increasingly finding it difficult to access the relevant data that

matters. One solution to cutting through this noise and extracting meaningful

signals lies with the new computational paradigm known as “cognitive

computing”.

Cognitive computing

Cognitive computing refers to self-learning systems that can adapt, learn, and

think—in essence imitating how the human brain works. The benefits of these

new computational systems is their ability to bring together the strengths of

traditional computing systems (number crunching, calculations) with a more

human and cognitive approach (analysis), allowing them to unearth and

‘understand’ relationships in massive data sets no single human brain has the

capacity to grasp.

Unlike traditional computing systems, which are programmed by humans to

execute logical sequences of steps, cognitive systems learn from and draw

inferences from their interactions with both data and humans. They are in

essence able to program themselves to achieve their objectives, addressing

complex problems by establishing contexts and aggregating, analyzing, and

interpreting huge amounts of data. There are a number of key technological

developments which underlie cognitive computing systems, including:

1 http://www.ibm.com/smarterplanet/us/en/business_analytics/article/it_business_intelligence.html

©AlienCat/ Crystal Graphics

http://www.ibm.com/smarterplanet/us/en/business_analytics/article/it_business_intelligence.html


Natural language processing

Natural language processing (NLP) enables computers to derive meaning from

natural language just as a human would, allowing for the ingestion and

analysis of unstructured data. Unstructured data is typically text-heavy

semantic content that is not organized in a pre-defined manner, preventing it

from being effectively incorporated within analytics generated by traditional

computing systems.

Artificial intelligence and machine learning

Strictly speaking, artificial intelligence (AI) refers to the ability of a system to

understand contexts and adapt approaches to maximize success rates. From a

computational perspective, this is done by applying statistical learning

techniques to identify boundaries and delineate patterns within data. Machine

learning refers to the autonomous repetition of these techniques along with

regression analysis to improve results over time, producing increasingly

accurate outcomes.

Big data analytics

Big data refers to structured (numbers and tables) and unstructured (semantic

text) data sets that are too large or complex for traditional computing systems

to process. Big data encompasses both the huge volume of data now available

as well as the interactions that take place throughout these data sets. The

systematic computational analysis of this data can reveal new relationships

and insights.


Source: TruValue Labs, Inc.


The insights provided by cognitive computing systems have already begun to

disrupt industries: from healthcare, finance, and pharmaceuticals, to

consumer-focused sectors such as retail and travel, to software that makes

recommendations based on online behavior. Analyzing big data allows for the

discovery of new meaningful relationships within data sets: for example,

Google data (the analysis of web searches, social media posts, and location)

has been used in conjunction with Centers for Disease Control data to improve

influenza predictions.2

New analytics, new insights, new possibilities

TruValue Labs is at the intersection of the two most important trends in our

contemporary society: the continuing development of information technology,

and the increasing mainstream importance of sustainability issues. It’s our

mission to extract meaningful ESG and sustainability signals from big data, to

better understand the sustainability performance of publicly listed companies.

By using technology to aggregate data, extract meaningful signals, and analyze

content, an entirely new class of “real-time” sustainability analytics is now

available. The provision of these enhanced analytics gives our users a more

precise and higher-resolution understanding of corporate sustainability

performance: They can now look at the sustainability data and events that have

affected performance at a granular level, instead of being dependent on annual

or irregular reports. This new ability is allowing investors and decision-makers

to understand the performance implications of events for different

sustainability categories, different companies, and overall sectors with a

precision that was previously not possible.

While traditional sustainability data is dependent on the opinions of analysts

and is subject to ambiguity, subjective perspectives, and phenomenon such as

confirmation bias – all of which inherently prevent a completely objective and

consistent approach – technology-derived analytics are based on a consistent

set of rules. Since these rules determine how the analytics are generated, it is

possible to alter them: meaning that for the first time it is now possible to take

into consideration the variety of opinions regarding materiality, weighting,

and the overall effect of issues and their relation to particular performance

metrics, allowing analytics to be generated according to personal investment

beliefs and strategies.

We are only just beginning to see the implications of what cognitive computing

and the enhanced analytics from big data will be able to offer. In these exciting

times, we are witnessing a genuine paradigm shift as new technological

possibilities are leveraged by investors in a world increasingly recognizing the

material importance of ESG and sustainability issues.

2 http://www.nature.com/articles/srep08154

Hendrik Bartel is the

CEO and co-founder of

TruValue Labs, Inc., a

San Francisco-based

technology startup

leveraging advances in

natural language

processing, cognitive

computing and

machine learning to

provide actionable

sustainability insights.

Isaac Khurgel is Head

of Marketing and

Communications for

TruValue Labs, Inc. He

was previously based

in London with the

Principles for

Responsible

Investment.

http://www.nature.com/articles/srep08154


Enhanced Analytics


By Dr. Alex Cahana, Director of Medical Affairs, Center for Lawful Access and Abuse Deterrence and Theme Developer for ARK Investment Management

You probably know someone who has chronic pain, or perhaps you suffer

from it yourself. If you think it is a huge health problem, you are right.

According to the Institute of Medicine at the National Academy of

Sciences, in 2011 over 100 million Americans suffered from chronic pain

at a national economic cost of $560-635 billion, exceeding the costs of

cardiovascular disease, diabetes and cancer combined—not to mention the

incalculable personal cost of suffering and indignity1.

You also most probably know, or know of, someone who has died from an

unintentional overdose of painkillers and think it is a huge health problem

as well. What you may not know is that by the time you finish reading this

article, another American will have died from an opioid (painkiller)

overdose. According to the Centers for Disease Control and Prevention

(CDC), the amount of prescription painkillers dispensed in the US has

quadrupled since 1999, despite there being no overall change in the

amount of pain that Americans report. This dramatic increase is due to

changes in how doctors prescribe opioids2. Furthermore, there is wide

variation in painkiller prescribing among the states, which cannot be

explained by differences in health issues from state to state.

Prescription Painkiller Sales and Deaths in the US (1999- 2013)

Sources: a) Automation of Reports and Consolidated Orders Systems (ARCOS) of the Drug Enforcement Administration (DEA), 2012 data not available. b) Centers for Disease Control and Prevention, National Vital Statistics System mortality data (2015). Available from www.cdc.gov/nchs/deaths

©digitalista / Crystal Graphics


Number of Painkiller Prescriptions per 100 people (By US State)

Source: IMS National Prescription Audit (NPA™), 2012

So what is the problem? Are doctors prescribing too much or not enough?

Clearly there are many people with arthritis, back pain, or chronic pain from

surgery or an accident who need pain relief, and some of them would prefer to

die rather than to go one more day without opioids. But on the other hand, the

US consumes 80% of the world’s opioids and 46 people will die today from an

accidental overdose. What should we do? What does science tell us?

Outcome studies are equivocal. Randomized controlled trials evaluating the

benefits of prescribed opioids do show short-term pain relief in patients with

persistent pain; however, it is difficult to extrapolate these results to all

populations and assume a stable hazard-ratio with long-term treatment. Post-

eidetic evidence, especially with high-dose opioids, does not show that patients

achieve functional recovery and underlines the risk of morbidity such as

constipation, accidental falls, insomnia, loss of libido, cognitive decline and

addiction3. Nonetheless many prescribers confronted with patients who insist

that opioids help them, take the ‘calculated risk’ of continuing to prescribe

opioids. This has caused not only confusion within the medical community,

but also enmity between those who wish to protect patients by guaranteeing

lawful access to pain medication and those who wish to defend society by

abuse deterrence.

Reframing the Problem

In order to reverse, not just arrest, this epidemic, society needs to reformulate

the problem at hand. Instead of defining it as undertreatment (thus continuing

to add new and ‘better drugs’ to the market4) or overtreatment (thus creating

policies that unintentionally discourage treating individuals suffering from

pain5), we should redefine the problem as the inappropriate treatment of pain.

Therefore, we speak not of two epidemics of pain (under- or overtreatment),

but rather one syndemic caused by the inappropriate treatment of pain. This

syndemic approach means that medical and social solutions should be


designed to activate, incentivize and engage affected individuals, families,

workplaces and communities to achieve wellness, rather than concentrate on

ways to ‘medicalize’ or conversely ‘deprescribe’ the US6.

Treating the Syndemic

Here is where digital opportunity disrupts. Sensors and digital 24/7 tailored

services can enable personalized care and interactions with healthcare

professionals. A digital ecosystem that constantly monitors how much patients

move, how they sleep and what they eat can provide them feedback, as well as

allow remote monitoring by healthcare providers and confirm adherence to

treatment. The plethora of wearable technology and wireless sensors able to

capture biophysical signals and allow real-time alerts can provide actionable

information that will promote healthier choices, as a new “Culture of Health”

emerges. The Food and Drug Administration recognizes this opportunity,

having just recently accepted a new drug application for the first-ever “digital

medicine,” a medication tablet containing a sensor to measure treatment-plan

adherence and physiologic response. Mapping end-user preferences, life

moments, needs and social determinants of health not only creates a ‘dynamic

digital phenotype’, but also, more importantly, empowers individuals to live

better.

The syndemic of pain is no different than other burdens on Americans’ health

such as obesity, diabetes, heart disease or mental illness. Central to making

the US healthier is talking less about tests, pills and surgery and more about

self-management: how to quit smoking, drink less, eat better, sleep better,

exercise more, and manage stress through mindful and meaningful activities.

High-cost specialty care has less value, especially as deductibles and co-pays

increase, and is rapidly being replaced by digital engagement technologies.

Virtual care is here and patients are ready to interact with caregivers and other

patients, using secured portals via mobile phones, the Internet, apps and social

media. Anytime/anywhere care will become commonplace and the wealth of

patient-generated data will reveal the true value of ‘beyond the pill’

treatments, thus driving apt R&D, and will provide the necessary data-driven

insights for future market growth and sustainability.

1 IOM (Institute of Medicine) report. 2011, “Relieving Pain in America: A blueprint for transforming prevention, care, education and research.” Washington, DC: The National Academies Press. 2 http://www.cdc.gov/drugoverdose/data/index.html accessed Sept 23rd, 2015.

3 Von Korff MR. Long-term use of opioids for complex chronic pain. Best Pract Res Clin Rheumatol. 2013 Oct; 27(5):663-72.

4 In the last decade FDA has approved almost a dozen new, extended release, more potent, abuse deterrent drug formulations. http://www.fda.gov/Drugs/DrugSafety/InformationbyDrugClass/ucm338566.htm. Accessed 9.23.2015

5 The CDC has come out with practice guidelines for opioid prescriptions that many prescribers find hard to follow. http://www.cdc.gov/drugoverdose/pdf/common_elements_in_guidelines_for_prescribing_opioids-a.pdf. Accessed 9.23.2015

6 This approach was developed and implemented by the Vitality Institute. http://www.thevitalitygroup.com. Accessed 9.23.2015

Dr. Alex Cahana is

Director of Medical

Affairs at the Center for

Lawful Access and Abuse

Deterrence and theme

developer for ARK

Investment Management.

He has over 15 years of

experience in policy and

healthcare redesign and

serve as a consultant for

the Department of

Defense and the Veterans

Health Administration.

http://www.cdc.gov/drugoverdose/data/index.html

http://www.fda.gov/Drugs/DrugSafety/InformationbyDrugClass/ucm338566.htm.

http://www.cdc.gov/drugoverdose/pdf/common_elements_in_guidelines_for_prescribing_opioids-a.pdf.

http://www.thevitalitygroup.com/


Accelerating Impact

The Future of Foundations: Impact at Scale?

By Sebastian Vanderzeil, Research Analyst and Andy Zheng, Research Associate, Cornerstone Capital Group

Increasing size of foundations and recent regulatory changes

makes mission-aligned investing more important and achievable

than ever. The most recent assessment of US-based foundation assets placed

the total at $715 billion in 2012, up from $662 billion in 2011. Increased focus

on transparency, improved data, and an evolving understanding of fiduciary

responsibility by foundation boards and the Internal Revenue Service (IRS)

means that foundations have more support to align their investments with

their missions. The IRS recently released a notice which supports mission-

aligned investing, stating that “foundation managers may consider all

relevant facts and circumstances, including the relationship between a

particular investment and the foundation’s charitable purposes.”

A look at the current landscape. Cornerstone Capital Group, in

conjunction with the Sustainability Business Lab (S-Lab) of MIT Sloan School

of Management, undertook an assessment of foundations’ public disclosures

on mission-aligned investing. The assessment focused on 25 large foundations

and examined their publicly available data, including foundation information

databases. In addition, we interviewed key experts in foundation investing,

including Bruce DeBoskey of The DeBoskey Group.

Broad interpretation of transparency, limited information publicly

available. Foundations are moving deliberately but slowly toward mission

alignment. Only 20% of the group explicitly mention mission alignment and

12% state they integrate ESG into their investment considerations. It is

possible that institutional barriers exist for foundations seeking to increase the

transparency and extent of mission-aligned investing.

Mission-aligned investing and transparency

Source: Cornerstone Capital Group

This is an excerpt from our report published September 30, 2015.

©digitalista/Crystal Graphics

http://cornerstonecapinc.com/2015/09/the-future-of-foundations-impact-at-scale/



Thinking Differently About Weather-Related Catastrophes

By Laural Warren, Vice President, Swiss Re

The number of severe weather-related natural catastrophes has risen

markedly since 1970, and is expected to be exacerbated by the effects of climate

change. Insurance losses, as well as uninsured losses, have also increased

significantly over recent years, reflecting increased property values,

population density, and development in exposed areas such as coastlines. This

trend is also expected to continue: In the US, the coastal population is expected

to grow 9% by 2020, to 134 million people from 123 million currently.

Global Number of Weather-Related Catastrophes, 1970-2014

Source: Swiss Re Economic Research & Consulting

While some communities have started to implement risk-mitigation

measures, more needs to be done. Extreme weather events increase the need

for community-based preparation. A well-considered plan would entail

modeling an event, determining potential damage, and identifying and

assessing risk mitigation measures. Damages for which protective measures

are too costly, or otherwise undesirable, could be covered by insurance.

The Economics of Climate Adaptation

Swiss Re is using its loss-modeling expertise to estimate the future financial

impacts of numerous climate change scenarios. Our methodology, called the

Economics of Climate Adaptation (ECA), enables cities, regions, and countries

to evaluate the cost effectiveness of measures that could be undertaken to

offset potential future losses. (Modeling of future climate conditions is largely

based on a range of estimates provided by the Intergovernmental Panel on

Climate Change.)

©Leonard Zhukovsky/ Crystal Graphics


Insured Catastrophe Losses, 1970-2014 (2014 USD Billions)


Natural Catastrophes and Man-made Disasters, Insured and Uninsured Losses, 1997-2014, (2014 USD Billions)



Following Hurricane Sandy in the US, the format was used to model the

historic storm surge and wind damage on New York City. It had previously

been used to assess similar risks in southern Florida. For the New York City

study, average annual losses due to weather-related events were evaluated

under future scenarios that incorporated climate change (sea level rise and

more frequent and severe storms).

The ECA methodology is also used to calculate the potential reduction in loss

from various preventive measures that cities and regions can undertake, and

creates a cost/benefit curve (cost of implementation and operation versus

amount of loss averted). The curve for southern Florida is provided below as

an example. Options below the dotted line are considered cost-effective, or "no

regrets” measures, because the cost of implementation is less than the

modeled benefit (averted losses) in the study area. Measures above the line

are not necessarily to be ignored, however. They may be cost-effective or

otherwise attractive when considering ancillary benefits. For Broward, Miami-

Dade and Palm Beach counties, despite a potential annual average cost of

hurricanes equating to 10% of local GDP by 2030, over 40% of the total

expected loss could be averted using cost-effective measures such as beach

nourishment, vegetation management, and elevation of new homes, among

others.

Source: Swiss Re


Examples of ancillary benefits could include a seawall that incorporates

walking or biking paths; bioswales (sloped drainage courses designed to trap

and filter storm-water and runoff) that provide wildlife habitat; or wetlands

restoration along with recreation or tourism value.

Bioswales installed in the Bushwick, East New York, and Edenwald sections of

New York City as part of a pilot project to capture storm water and reduce

flows of untreated sewage into the city's waterways performed above

expectations, according to a March 2015 report by the Department of

Environmental Protection. The standard for effective bioswales is the capture

of the first inch of rainfall over 10% of the city's impermeable surfaces. The

pilot-project swales, in addition to providing shade and a more attractive

streetscape, captured an inch of rain over 14% of the surfaces. Each swale is

designed to hold 2,244 gallons of rainwater.

Other potential protective measures could include improved building codes or

the inclusion of sea level rise projections in FEMA maps. Updated flood maps

would help determine where we build, i.e., will the area be in a flood zone in

the foreseeable future? Also, risk factors such as the degree of soil subsidence

(sinking) should also be considered when siting properties.

Developing Countries at Greater Risk

For various reasons, developing countries are more at risk for damage from

severe weather events. Many lack funding for adaptation investment; they

may have weaker building regulation or oversight; and often they have large

populations located in exposed areas subject to storm surge and flooding, such

as river deltas. It's also usually the case that developing economies have lower

insurance penetration rates, which may reduce funds available for repair and

reconstruction. Even though the world's economies have grown, weather-

related catastrophes are costing an increasing percentage of global GDP, as

shown in the below graph. Uninsured losses as a percentage of GDP are also

rising. Creative and thoughtful solutions are increasingly critical.

Global Losses and Insured Losses from Weather-Related Catastrophes as a Percentage of GDP, 1974-2014



Financial Tools for Risk Mitigation

As awareness of the need for crisis prevention and mitigation measures grow,

we could see a greater use of capital markets structures such as catastrophe

bonds, which spread funding of recovery among various investor groups, and

insurance-related products such as parametric cover, which provides initial

funding for emergency response costs (police and fire department, equipment

for road clearing, etc.) based upon weather-related triggers (wind speed, for

example).

Following the devastating earthquake in Haiti, parametric insurance

immediately paid out $8 million. In Tonga, participation in the Pacific

Catastrophe Risk Insurance pilot organized by the World Bank enabled the

island nation to swiftly receive emergency relief funds following Cyclone Ian

in early 2014. The Caribbean Climate Risk Insurance Fund was expanded in

June 2014, having proven its effectiveness. Cover has also been provided for

private companies, particularly in the energy sector, and for state

governments.

In Sum

Severe weather events such as Hurricane Katrina and Hurricane Sandy

illustrate how vulnerable even the most developed societies are to serious

storms. Regional planning decisions must increasingly recognize the

importance of redundancy (duplication of essential services such as phone

communication), and climate change considerations. Insurance companies

can assist by providing risk evaluation, quantification, and analysis, as well as

risk transfer.

Additional information can be found on Swiss Re's website.

Laural Warren joined Swiss Re's Financial Risk Management team in 2007

from ABN AMRO. At Swiss Re, she was responsible for assessing credit risk

to banks and financial institutions. In 2014 she transferred to Qualitative

Risk Management, evaluating potential reputational risk posed by new

transactions, sensitive business risk outreach in the Americas, support and

research for Swiss Re's Sustainability initiatives in the US, and analysis of

US emerging risks.

http://www.swissre.com/



Reimagining STEM Education

By Kathryn Nash, Associate Director of Educational Affairs, Cognizant

As a Fortune 500 global IT consulting and services

company with a diverse workforce of more than

218,000 people, Cognizant has a vested interest in

STEM (Science, Technology, Engineering, Math)

education around the world. We believe that

investing in the power of learning these technical

disciplines is not only a business imperative, but the

right thing to do as a corporate citizen. And, we view

access to education resources as one of the

fundamental sustainability issues of our time.

Finding and implementing creative solutions to

poverty, global health issues and climate change will

require a highly educated and STEM-literate

population. In the US today, it’s been widely

documented that there is a relative decline in STEM

proficiency, fewer young people interested in STEM

fields and—perhaps most alarming—a decline in

measured creativity. The future competitiveness and

innovative capacity of the US, the quality of our

workforce, and the prosperity of future generations

are at risk.

The pace of change is quickening every day as new

technologies transform how people live, work and

play. So, the question remains: How can we invest in

educational programs that inspire curiosity about

STEM subjects and transform individuals into life-

long learners ready to embrace and endure a tsunami

of technological advances?

Cognizant’s Making the Future education initiative in

the US, launched in 2011, is our first step in

addressing the education sustainability challenge.

Making the Future was created to unleash the passion

of young people in STEM disciplines by creating fun,

hands-on learning opportunities. It was inspired by

the Maker Movement, a broad-based community that

celebrates the art of designing and building really cool

things, either doing it yourself (DIY) or doing it with

others (DIWO).

Making brings STEM together with arts and crafts.

Participants play with technology to learn about it.

They figure out how things are made, how to fix them

or how to use them in a whole new way. Making

encourages a deep engagement with content, critical

thinking, problem solving, and collaboration—skills

necessary for 21st century work. As hands and mind

work in tandem, failures become opportunities, risks

become rewards and inspiration becomes motivation.

We believe this stimulation of intellectual curiosity

will serve as a lifelong motivator for continued

learning.

What steps can the broader education and business

communities take to harness the Maker Movement to

inspire the next generation of innovators in America?

First, we need to get more comfortable with the idea

of letting go of traditional academic norms that

emphasize only a small group of subjects, measure

outcomes by standardized tests, and constrain

teachers’ abilities to engage students in creative

processes. Making as a pedagogy has several

attributes, including:

Hands-on, project- and design-based learning

approaches are more consistent with the cognitive

processes and learning styles we attribute to the

millennial generation and younger learners.

These approaches spark creativity, critical

thinking and collaboration. They tend to “pull”

kids into STEM disciplines by generating interest

and confidence, rather than pushing them to “do

better in math and science.”

Bay Area Maker Faire 2014, Making an Electronic Keyboard workshop facilitated by Utah 4-H. Photo courtesy of author.


Making, with its emphasis on DIY and DIWO

projects, provides a strong community and

supporting philosophy that inspires this type of

creative learning and, importantly, appeals to

both girls and boys across a broad range of

socioeconomic backgrounds.

Second, by tapping into the expanding Maker

community, we can gain access to tools, resources and

mentors while embracing digital technologies to

create interactive real-time experiences. Sharing is

an integral part of, and is woven into, the fabric of the

Maker culture. Our digitized world allows individuals

everywhere to connect to the same resources and use

the same tools. Networks and hubs come together

physically and virtually, driven by the desire to learn

faster by working together. One great resource is the

virtual library provided by Maker Ed, a non-profit

organization that supports and empowers educators

and communities. Other Maker community resources

include: learnXdesign, a consortium of science

centers led by the New York Hall of Science (NYSCI)

to create and share resources for Making activities;

and MIT Media Lab’s Family Creative Learning, a

workshop series that engages children and their

parents to learn together—as designers and

inventors—through the use of creative technologies.

At Cognizant, we’ve created a whitepaper, A

Blueprint: Maker Programs for Youth, as well.

New partnerships and alliances among schools,

businesses, philanthropic and cultural entities are

another area that should be explored in order to

capitalize on existing resources. For example, with

the digitization of books, community libraries are

seeing a decline in visits and these public buildings are

increasingly underutilized. More and more,

Makerspaces are moving in. As reported in a recent

study, Makerspaces in Libraries, a survey of 143

librarians in 2013 showed that 41% of the respondents

currently provide Makerspaces in the library and 36%

planned to start a Makerspace in the near future.

Another example, our partnership with

DonorsChoose.org, resulted in 86 Making projects in

classrooms across 22 states involving more than

13,000 students. Yet another example is TechShop

Chandler, located at Arizona State University. This is

a space for university students to connect and

collaborate with Chandler-area Makers and

entrepreneurs; it also offers professional development

to educators on Making.

It’s easy to try and fix the blame for our crisis in STEM

education on a lack of funding in public schools,

teacher shortages, socioeconomic factors, or the

challenge of constantly making transformative shifts

in the educational landscape to keep up with

technology. Cognizant is proud of how our Making the

Future initiative is being received by kids. They are

actually building things using electronics, open-

source micro-controllers like Arduino and Raspberry

Pi, digital fabrication tools like vinyl cutters, CNC

routers and 3-D printers, and programming

languages like Scratch. Other projects involve digital

music and hydroponics. For younger children, there

are Squishy Circuits. The Research Group at the

University of California, Berkeley’s Lawrence Hall of

Science partnered with Cognizant in summer 2013 to

evaluate the programs. The analyses of data from pre-

and post- surveys indicated that, overall, participants

demonstrate a modest, yet statistically significant,

increase in their levels of fascination, value,

competency belief, perceived autonomy, and

innovation. And, they also say it is fun!

Cognizant has played a modest but important

catalytic role in helping to evolve STEM education

through our investment in Maker education. We must

all keep challenging the status quo to bring about the

necessary transformative shifts that will cultivate and

endow future generations with the knowledge, skills

and intellectual curiosity to succeed and meet the

education sustainability challenge.

Kathryn Nash is Associate Director of Educational

Affairs at Cognizant. She oversees Cognizant’s

corporate social responsibility programs in North

America and leads the company’s “Making the

Future” education initiative.

1 Basken, Paul. 2006. ”Early Education Key to Scientific Career Choices.” The Boston Globe at http://www.boston.com/news/education/k_12/articles/2006/05/29/early_education_key_to_scientific_career_choice.

2 John Burke, director of the Gardner-Harvey Library located on the Middletown, OH campus of Miami University conducted surveys and released study Makerspaces in Libraries as part of a forthcoming book, Makerspaces: A Practical Guide for Librarians

http://www.boston.com/news/education/k_12/articles/2006/05/29/early_education_key_to_scientific_career_choice.


Featured Domain

PoeticInvesting.com

By Erika Karp, Founder and CEO, Cornerstone Capital Group

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.

Poetry seems to be rather

difficult to define.

Traditionally, the term refers to

literary works with distinctive

style and rhythm that somehow

evoke intense emotion;

therefore, what is considered to

be poetry is as varied as the

people who read it.

To me, Adam Smith’s The Wealth of Nations is poetry.

This work, the first reading for many new students in

the history of economic thought, fuses the wisdom of

human psychology and economics into a cohesive

vision for the potential for capitalism. It is beautiful

and poetic, particularly in our times of severe

economic and geopolitical turmoil.

I would suggest that the discipline of “sustainable

investing” is also poetry. Considering the definition of

poetry noted above, I’m reminded of “The Road Not

Taken,” written by Robert Frost in 1915. Just as Frost

urged us to wonder what would have happened had we

chosen an alternate direction, investors and analysts

should consider what would happen if they, too, took a

different path for the capital markets and started asking

the world’s business leaders different questions.

What if on Wall Street conference calls, instead of

inquiring about the most recent quarterly earnings

report and stock-price volatility, analysts asked

longer-term questions about the material impact of

the effective utilization of scarce resources, efforts

toward better labor relations and employee

engagement, and practices of good

corporate governance?

What if incentivization programs

within investment banks, asset

management groups and wealth

management companies, as well as all

the other components of the capital

markets ecosystem, were all aligned

toward optimizing long-term

performance outcomes? What if those in any role of

authority had the courage of conviction to hold

accountable, from top to bottom, those employed

toward stewarding the world’s financial capital?

In his famous poem, Frost wrote:

I shall be telling this with a sigh

Somewhere ages and ages hence:

Two roads diverged in a wood, and I—

I took the one less traveled by,

and that has made all the difference.

To me, this change in the course of investment inquiry

would be poetry. This would be the road less traveled.

This road could be the path for the future of

capitalism. This path could be the poetry of the most

powerful system for raising the world’s standard of

living that history has ever known.

This piece was originally published in Wharton

Magazine.

©EvaulPhoto/ Crystal Graphics

http://whartonmagazine.com/blogs/writing-the-verses-of-sustainable-investing/

http://whartonmagazine.com/blogs/writing-the-verses-of-sustainable-investing/



Midlife Wasteland — Recognizing the New Reality

By Cindy Motz, Equity Research Consultant, former Institutional Investor and Wall Street Journal “All-Star” Research Analyst

Although there is debate about the meaning of The Who’s classic song “Baba

O’Riley” (often referred to as “Teenage Wasteland”), for many of us the words

conjure up visions of disenchanted young people with altered mind states. But

while young people are often on the radar screen for signs of depression and

life imbalance, there is another group—with its own set of raging hormone and

changing-body issues—who needs watching. And just as they may have more

weight, wear, and wrinkles, “Midlifers” increasingly appear to have their own

anxiety, angst and job issues. Given the aging population, recognizing and

managing this new reality will be critical to maintaining a healthy society.

“Out here in the field…”

You’re going to have to fight for your meal if you’re a Midlifer.

If you Google “getting a job after 40,” you get 236,000,000 results; search

“getting a job after 50,” and that number rises to 536,000,0001. And in tech,

you might be looking at a Logan’s Run scenario:

If you work in Silicon Valley, you’ll be unemployed in middle age . . . What

used to be a meritocracy has become a don’t-hire-anyone-over-30 situation

(certainly not over 40).

— Columnist Ted Rall, “Don’t Hire Anyone Over 30: Ageism in Silicon Valley”

“Before We Get Much Older…”

We’re there. The average US worker is a midlifer:

As of 2012, the median age in the US was 37.3 years, and average life

expectancy reached a record high of 78.8 years, according to the Centers

for Disease Control (CDC).2

However, the Bureau of Labor Statistics (BLS) notes that in 2014, the

average US worker was 42.4 years old.

Further, with the aging of the Baby Boom generation, 25.6% of the

workforce is projected to be 55-plus by 2022, up from 20.9% in 2012 and

14.3% in 2002.3

And, if you reach 65 years of age, your average expected lifespan is 85.5

years for women and 82.9 years for men.

Hence, the reality is that if more than 50% of the working population is, or is

soon to be, among “midlife/older” contingent, all employers will likely need to

1 Google Search, October 6, 2015 2 http://www.usatoday.com/story/news/nation/2014/10/08/us-life-expectancy-hits-record-high/16874039/ 3 http://www.bls.gov/opub/mlr/2013/article/labor-force-projections-to-2022

© Prometeus / Crystal Graphics

http://www.usatoday.com/story/news/nation/2014/10/08/us-life-expectancy-hits-record-high/16874039/

http://www.bls.gov/opub/mlr/2013/article/labor-force-projections-to-2022


be involved in helping employees balance work and life challenges in a more

sustainable fashion.

“The Exodus Is Here…”?

Seems like it—especially if you’re 45-49.

In a 2014 AARP survey, 4 64% of respondents reported age discrimination,

and 25% had lost a job within the five years ending 2012. Job loss rates were

highest among those aged 45-49 years, at 31%, followed by 24% for ages 50-

59. Other noteworthy results were:

Ages 45-49 Ages 50-59 Ages 60-74

Caretaker responsibilities 75% 59% 43%

Real/expected absence or job departure to care for aging relative

27% 22% 12%

Need to work for income 92% 83% 69%

Rely on work for healthcare benefits 60% 64% 37%

“They’re All Wasted…”

According to the National Center for Health Statistics (NCHS), antidepressant use

among Americans was up 400% between 2005-08 from the six-year period

between 1988 and 1994. The NCHS also estimated that 10% of Americans are on

some kind of antidepressant (it’s the third most commonly prescribed

medication); and 23% of US women in their 40s and 50s take antidepressants.5

Further, the US suicide rate is the highest in 25 years,6 and according to the CDC,

suicide has been increasing dramatically in the middle-aged (ages 35-64 years) in

the US, up 28.4% between 1999 and 2010—27.3% for men; 31.5% for women.7

Interestingly, the BLS reports that 1999 was the point at which women reached

their peak labor force participation at 60%, a rate that has declined ever since.8

Despite women aged 55-64 having the highest growth rate in suicides (~52.5-

59.7%), the absolute number of suicides among men is more than three times

higher, with growth rates up 35.2% for men aged 45-49 years, and up 49.4%

and 47.8% for men aged 50-54 and 55-59, respectively.9

Given growth trends in the aging population, and the estimated $44.6 billion

annual cost in medical and work-related expenses due to suicides in 2013

alone,10 we need to reevaluate how we handle the well-being and productivity

of human capital.

4 http://www.aarp.org/content/dam/aarp/research/surveys_statistics/general/2014/Staying-Ahead-of-the-Curve-2013-The-Work-and- Career-Study-AARP-res-gen.pdf 5 http://www.health.harvard.edu/blog/astounding-increase-in-antidepressant-use-by-americans-201110203624 6 http://www.usnews.com/news/newsgram/articles/2014/10/08/us-suicides-hit-highest-rate-in-25-years 7 http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6217a1.htm#tab1 8 http://www.bls.gov/opub/reports/cps/womenlaborforce_2013.pdf 9 http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6217a1.htm#tab1 10 http://www.cdc.gov/violenceprevention/pdf/suicide_factsheet-a.pdf

http://www.aarp.org/content/dam/aarp/research/surveys_statistics/general/2014/Staying-Ahead-of-the-Curve-2013-The-Work-and-Career-Study-AARP-res-gen.pdf

http://www.aarp.org/content/dam/aarp/research/surveys_statistics/general/2014/Staying-Ahead-of-the-Curve-2013-The-Work-and-Career-Study-AARP-res-gen.pdf

http://www.health.harvard.edu/blog/astounding-increase-in-antidepressant-use-by-americans-201110203624

http://www.usnews.com/news/newsgram/articles/2014/10/08/us-suicides-hit-highest-rate-in-25-years

http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6217a1.htm#tab1

http://www.bls.gov/opub/reports/cps/womenlaborforce_2013.pdf

http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6217a1.htm#tab1

http://www.cdc.gov/violenceprevention/pdf/suicide_factsheet-a.pdf


“Take My Hand…”

Looking at the “top 100 Companies to Work for,” one has to ask—for whom?

It does not appear to be the “average employee,” who is likely almost 43 years

old.

If you’re 43 and work at Google—ranked by Forbes as the #1 company in the

U.S. to work for six years running—you’d be a “Greygler,” the company’s cute

name for workers over 40.11 Indeed, the criteria qualifying a business to be

labeled among “the best companies to work for” appear to be those more

attractive to the younger set. Several companies on the Fortune list do offer

things like compressed work weeks, paid sabbaticals or onsite medical

facilities, but there was only one company, Genentech, offering all seven of the

benefit metrics, as well as same-sex benefits, etc.12

But there is some light beginning to shine amongst all this gray!

Some contend that things are actually looking brighter for the grayer set.13

With companies like Goldman Sachs, Morgan Stanley, Barclays and

Encore.org offering older workers “returnship” or “fellowship” programs,

specifically designed to retrain and entice older workers back into the work

force, we should continue to see improvements here. And might not more

organizations be encouraged to start similar programs if we looked at average

employee age across a broader spectrum of companies? Why not tailor

company benefits more appropriately? If the average age of our population

and workforce is soon going to be 40-45 years, why reward companies only

employing people under 30, 40, or 50? It is not just about protecting older

workers, but about greater transparency into companies’ abilities to manage

resources, something investors want to know about. If we already watch “good

company” diversity/benefit metrics, shouldn’t we watch the one metric that

impacts all of us—age?

“Don’t Cry…”

But do open your eyes pretty soon…

Because the original members of The Who are now in their 70s or dead, and

nobody’s getting any younger. Whether it be through added time off, mental

health counseling, or hiring “De Niro-esque” older interns to save the day,

companies will have to shift attitudes in terms of how they treat older workers,

or be faced with an extremely costly “Midlife Wasteland.”

11 http://www.thewire.com/technology/2010/06/is-google-age-ist/19485/ 12 http://fortune.com/best-companies/genentech-9/ 13 http://time.com/money/3725034/jobs-older-workers-improved/

Cindy Motz has

more than 15 years’

equity research,

financial analysis

and investment

banking experience

in the wireless and

wireline telecoms,

utilities, energy/

cleantech and

biotech/healthcare

areas.

http://www.thewire.com/technology/2010/06/is-google-age-ist/19485/

http://fortune.com/best-companies/genentech-9/

http://time.com/money/3725034/jobs-older-workers-improved/



Intergenerational Transfer: Not Just About the Money By Anne Weisberg, Senior Vice President for Strategy, Families and Work Institute

When asset managers talk about intergenerational

transfer, they are typically referring to how wealth is

handed down from one generation to the next. But

given the fact that more and more people are working

longer, focusing on the intergenerational transfer of

skills within the context of the workplace is as

important—if not more—for long-term wealth

transfer and economic stability.

Why is this the case? For one, many older people work

for family-owned or -controlled businesses. These

businesses are at the heart of the small business

sector, which in turn, is the economic engine for many

communities. According to an article in the April 2015

Harvard Business Review titled “Leadership Lessons

from Great Family Businesses,” family-owned or -

controlled businesses “account for an estimated 80%

of companies worldwide” and “employ 60% of

workers and create 78% of new jobs” in the US.

Family members own significant equity in a third of

the S&P 500. Yet, most family-owned or -controlled

businesses struggle to survive over the long term, in

large part because of “poor talent management,”

according to the article.

Issues of intergenerational dynamics are also a big

concern in the non-profit sector, which employs the

third largest workforce among U.S. industries, behind

only retail trade and manufacturing, according to the

John Hopkins University Center for Civil Society

Studies. Yet, two-thirds of non-profit leaders expect

to leave their jobs in the next few years and 66% of

nonprofits have no succession plan for senior

leadership.

All too often, employers are banking on their leaders

working longer. In part, this reflects the fact that

workers are indeed living and working longer than

ever before. For example, in New York City, 18% of the

workforce, or roughly 700,000 workers, are over the

age of 50. Research shows that employees,

businesses, and the economy all benefit by having

people stay in the workforce beyond the traditional

retirement years. On the other hand, the younger

generation (commonly called the Millennials or Gen

Y) already outnumber Baby Boomers in the

workforce, and are set to be the majority of all workers

by 2020. They are hungry for career development

experiences, and are less likely, as a group, to “pay

their dues.” While Generation X, which is sandwiched

between the two, is ready to take on leadership roles,

this generation is half the size of the Boomers, leaving

a demographic hole in the pipeline that the

Millennials could fill, if they are properly prepared.

To promote workplace practices that encourage older

workers to stay in the workforce and transfer their

knowledge to younger workers, the Columbia

University Robert N. Butler Aging Center runs The

Age Smart Employer initiative and awards program. I

serve as a judge for the Award.

The initiative is unique in several respects: it is local

(because the issues of aging are to a great extent

community-based); and it is not focused on one

generation alone but rather on intergenerational

dynamics.

The Age Smart Employer program has collected over

a hundred examples of employers, both big and small,

for profit and non-profit, across a variety of

industries, who are actively managing multiple

generations at work. As a result, the program has

learned a couple of key lessons:

©Rawpixel / Crystal Graphics


1. Age-smart employers have an inclusive mindset.

They see their employees as people first, and

value whatever they bring to the table. By

embracing their multigenerational workplace as

an opportunity, these leaders use innovation,

flexibility and creative talent management to stay

ahead. They also realize that hiring, retaining and

using older workers strategically can solve a

variety of pressing problems business owners

face.

2. Age-smart strategies directly support and utilize

the talents of older workers, but these strategies

benefit all workers. Age-smart strategies have

helped employers lower costs, boost productivity,

spark new business, and better align their

products and services with New York City’s

booming older adult consumer market.

Some businesses don’t realize they’re age smart. Age-

smart practices include:

Flexible work practices and policies, such as

telecommuting, allowing employees to swap

shifts and phased retirement

Skill building across teams, including cross-

training all workers and ensuring that training

and development opportunities are offered to

workers of all ages.

Creating new paths of advancement within a

business and enlisting older workers to

strategically retain and transfer a business’s

networks and knowledge across generations

Visit www.agesmartemployer.org to learn more about

the Age Smart Employer initiative and awards. Every

community should recognize those employers who

are getting this right, so that we can all grow older and

wiser together.

Anne Weisberg is the Senior Vice President for

Strategy at the Families and Work Institute. She is a

recognized thought leader who has designed

innovative practices to build effective, inclusive

work environments, including co-authoring the

best-selling “Mass Career Customization: Aligning

the Workplace with Today’s Nontraditional

Workforce” (HBS, 2007).



Bringing Humanity Back to Finance

By Vincent Neate, Partner and Head of Sustainability Services, KPMG LLP (UK) “Whoever fights monsters should see to it that in the process he does not

become a monster. And if you gaze long enough into the abyss, the abyss will

gaze back into you” —Friedrich Nietzsche

Business is a social construct. Like Church or Academia or the Military or

Government. We have needs and we come together in groups to meet those

needs. Needing security we construct the Military. Needing companionship

we construct Church. Needing to determine a social contract above all other

social contracts we construct Government. Needing shelter, food, transport,

means of exchange and entertainment, we construct Business. This doesn’t

mean that we do it well. It also does not mean that it is real.

Most of us will vaguely remember being 13 years old and the existential angst

that goes with a blossoming mind becoming aware of the uncertainties of

existence. By 23 we have mostly forgotten that this ever bothered us. By 73 or

80 or 93 we are just glad to still have existence. Imagine receiving an email

from a friend seeking help answering a question posed by her 13-year-old

daughter, Ruby: “Humanity is a failure because we think we know the

difference between failure and success. That’s a fatal flaw. But the fact that I

just thought of this, proves that what I just said is true. So what do I do?!”

Is there some lesson for business and finance in my reply?

First and foremost you should congratulate Ruby on recognizing what the

Buddha only discovered after years of searching—that enlightenment only

comes when you stop looking for it unless you find it.

The fact that she thought of this proves nothing more than that she has

experienced the phenomenon of thinking it. Let's turn it around and ask the

question, “Do I know the difference between failure and success?” I can

answer this three ways: affirmative, no and “what is ‘difference’?” Let's

assume that I say “no.” Do I now logically have to conclude that “I am a

failure?” Of course not.

Let's try some existential positioning.

Existence is everything.

Humanity is a linguistic construct—it is not something that exists. At best it

describes something that exists. But it is not very descriptive, and that is why

we always use it within a sentence structure of the form “humanity is.....” Or

“humanity [active verb].....” Such sentences are always ambiguous. How

can I possibly ascribe True or False to “humanity is good,” “humanity is bad”

or “humanity is a failure? “ Since the word doesn't name an existence but only

an idea, the question becomes not one of T or F but one of “useful” or “not

useful.”

©lolostock /Crystal Graphics


On this basis the linguistic construct “Humanity is a failure because we think

we know the difference between failure and success” is exactly the same as

“Humanity is a success because we think we know the difference between

failure and success.” What Ruby is picking up on is that we have an almost

overwhelming urge to ascribe T and F to our experiences. I think we do this

because we believe that if we can attach T to our experiences then others will

be more accepting of our experiences. That urge is one a good existentialist

(and Pyrrhonist) will try to resist. We resist because any attitude that

suggests my subjective experience of you as objective existence creates a

legitimate power relationship between us is bad faith.

In order to determine what “to do” and therefore your answer for Ruby we

need to find a way to step outside these linguistic shenanigans. To prepare

ourselves to do this a number of contemplative practices can be very helpful:

meditation, prayer, exercise, sleep, sex, music, and reading—we find our own

thing(s). It also helps to practice adopting certain attitudes—of self-control

and emotional calm, of self-forgiveness and forgiveness of others.

When we are ready there are two really obvious guides to what to do, a

primary and a secondary: Do what is loving and do what is useful.

Your heart will tell you what the first is, your head the second.

Nietzsche’s abyss is our need to stare directly into the face of our own

responsibility. What Ruby’s question tells me is that there is not some abstract

concept of business and finance separate from our social constructs. It is also

telling me that that social construct is only a linguistic construct and that a

question such as “is that business responsible?” or “is that business practice

responsible?” can only be genuinely answered existentially.

Such questions become infinitely practical when we admit that they can only

be answered by as grand a conception of usefulness as we can find. Usefulness

because it is a concept that has the possibility of stretching our imaginations

beyond the limits of our ability to conceive of right and wrong without self-

reference, and grand because if we are interested in doing what is loving we

will want our social constructs to embrace the many, not just the few.

Vincent Neate is a

Partner with KPMG LLP

(UK) and the Head of

Sustainability Services

where he is responsible

for the Sustainability

Services Practice. His

experience is in working

with international

businesses across a broad

range of issues

encompassing

governance, finance and

risk.

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Hyatt Regency Hotel Boston, MA

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http://events.sustainablebrands.com/sb15london

11.19.15 WED | Women’s™ Entrepreneurship Day Cornerstone Speaking Event

United Nations Plaza New York, NY

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11.26.15 – 11.27.15 World Forum on Natural Capital Edinburgh, Scotland http://naturalcapitalforum.com/about/


http://www.highwaterwomen.org/index.php/our-programs/impact-investing-education%23!impact2





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http://bsr15.org/

http://reffwest.com/











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http://www.sustainatopia.com/





http://naturalcapitalforum.com/about/


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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/

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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/

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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/

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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/


The Cornerstone Capital Group Team

Erika Karp*

Founder and Chief Executive Officer

[email protected]

Cornerstone Capital Investment Management

Phil Kirshman, CFA, CFP ® *

Chief Investment Officer

[email protected]

Ariane de Vienne

Managing Director

[email protected]

Margarita Pirovska, PhD

Policy & Sustainability Analyst

[email protected]

Urs Weber

Senior Portfolio Manager

[email protected]

Matthew Daly *

Director, Client Services

[email protected]

Cornerstone Capital Investment Research

John Wilson

Head of Corp Governance, Engagement, Research

[email protected]

Craig Metrick, CAIA

Director, Manager Due Diligence and Thematic Research

[email protected]

Michael Geraghty

Global Markets Strategist

[email protected]

Betsy Emerson

Head of Research Operations

[email protected]

Michael Shavel, CFA *

Global Thematic Analyst

[email protected]

Sebastian Vanderzeil

Research Analyst

[email protected]

Andy Zheng

Research Associate

[email protected]

Cornerstone Capital Institutional Business Development

Alice Petrofsky *

Executive Director, Institutional Business Development

[email protected]

Mauricio Barbeiro

Head of Latin America Business Development

[email protected]

Cornerstone Capital Group Management and Operations

Joel Beck *

Chief Operating Officer & Chief Compliance Officer (CCIM)

[email protected]

Nicola Shelbourne

Treasurer & Director of Executive Financial Services

[email protected]

Karen Benezra

Head of Strategic Marketing & Communications

[email protected]

Kara McGouran

Assistant to the CEO

[email protected]

*Registered representative of Strategic Marketing Solutions Ltd., LLC. Member FINRA/SIPC.


Cornerstone Capital Inc. doing business as Cornerstone Capital Group (“Cornerstone”) is a Delaware corporation with headquarters in New York, NY. The Cornerstone Journal of Sustainable Finance and Banking (“JSFB”) is a service mark of Cornerstone Capital Inc. All other marks referenced are the property of their respective owners. The JSFB is licensed for use by named individual Authorized Users, and may not be reproduced, distributed, forwarded, posted, published, transmitted, uploaded or otherwise made available to others for commercial purposes, including to individuals within an Institutional Subscriber without written authorization from Cornerstone.

The views expressed herein are the views of the individual authors and may not reflect the views of Cornerstone or any institution with which an author is affiliated. Such authors do not have any actual, implied or apparent authority to act on behalf of any issuer mentioned in this publication. This publication does not take into account the investment objectives, financial situation, restrictions, particular needs or financial, legal or tax situation of any particular person and should not be viewed as addressing the recipients’ particular investment needs. Recipients should consider the information contained in this publication as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. This is not an offer or solicitation for the purchase or sale of any security, investment, or other product and should not be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations to purchase or sell such securities. Investing in securities and other financial products entails certain risks, including the possible loss of the entire principal amount invested. You should obtain advice from your tax, financial, legal, and other advisors and only make investment decisions on the basis of your own objectives, experience, and resources. Information contained herein is current as of the date appearing herein and has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed and should not be relied upon as such. Cornerstone has no duty to update the information contained herein, and the opinions, estimates, projections, assessments and other views expressed in this publication (collectively “Statements”) may change without notice due to many factors including but not limited to fluctuating market conditions and economic factors. The Statements contained herein are based on a number of assumptions. Cornerstone makes no representations as to the reasonableness of such assumptions or the likelihood that such assumptions will coincide with actual events and this information should not be relied upon for that purpose. Changes in such assumptions could produce materially different results. Past performance is not a guarantee or indication of future results, and no representation or warranty, express or implied, is made regarding future performance of any security mentioned in this publication. Cornerstone accepts no liability for any loss (whether direct, indirect or consequential) occasioned to any person acting or refraining from action as a result of any material contained in or derived from this publication, except to the extent (but only to the extent) that such liability may not be waived, modified or limited under applicable law. This publication may provide addresses of, or contain hyperlinks to, Internet websites. Cornerstone has not reviewed the linked Internet website of any third party and takes no responsibility for the contents thereof. Each such address or hyperlink is provided solely for your convenience and information, and the content of linked third party websites is not in any way incorporated herein. Recipients who choose to access such third-party websites or follow such hyperlinks do so at their own risk.

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