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  • Edited by Cary Krosinsky and Nick Robins

    From sin stocks to cleantech, ESG to GHGs, portfolio tilt to the prudent man rule, Krosinsky and Robins guide the reader through a rapidly shifting landscape of risk and opportunity. Essential reading, whether you are an investor, a CEO or simply someone wanting to enjoy both a pension and a world fit for future life.John Elkington, co-founder of ENDS, SustainAbility and Volans, and co-author of The Power of Unreasonable People

    A significant contribution to a rapidly growing field; the editors have brought to the public important themes and thought-provoking arguments on topics that will dominate the 21st Century. This is a must-read book for practitioners and investment analysts alike.Gordon L. Clark, Oxford University

    As the roles of business and the capital markets shift to directly address global challenges, practitioners can no longer ignore the growing momentum in sustainable investing. This book fills an important gap, pulling together the best thinking from contemporary experts. An excellent overview of past notions, current best practice and future trends. Cheryl Hicks, World Business Council for Sustainable Development Krosinsky and Robins have managed to assemble a unified publication that brings to light the financial innovation occurring on a massive scale. This book puts forth an image of the world where capital markets have the potential to provide solutions to our most pressing environmental problems.Bryan Garcia, Yale University

    Sustainable investing is vital for the future of our planet. This book richly deserves to be read by everyone in the investment community and many beyond.Rob Lake, APG Investments, The Netherlands

    An excellent volume that puts sustainable investing front and centre in the debates about building a more equitable global economy and providing retirement security for working people.Michael Musuraca, Designated Trustee, NY City Employees Retirement System

    Edited

    by K

    rosinsky &

    Robins

    SustainableInvesting The Art of Long-Term Performance

    SustainableInvesting

    Buy and read this book. Without it, you are playing yesterdays game.Robert A. G. Monks

    Cary Krosinsky is a long-standing expert on the intersection of equity ownership and Sustainable and Responsible Investing, and is now Vice President, North America of Trucost Plc. Nick Robins, former Head of SRI research and SRI funds at Henderson Global Investors, is now Head of the HSBC Climate Change Centre of Excellence.

    Contributors include:Ray Cheung, World Resources Institute Sean Gilbert, Global Reporting Initiative Dr Julie Fox Gorte, Pax World Gordon Hagart, onValues Katherine Miles Hill, Global Reporting InitiativeEmma Hunt, Mercer Abyd Karmali, Merrill Lynch Ivo Knoepfel, onValuesMatthias Kopp, WWFRitu Kumar, Actis Valery Lucas Leclin, SGCIBSteve Lydenberg, DominiDr Paul McNamara, PRUPIM Sarbjit Nahal, SGCIB Professor Gary Pivo, University of ArizonaRod Schwartz, Catalyst Fund Management & Research Dan Siddy, Delsus Tessa Tennant, ICEBjrn Tore Urdal, SAM Stephen Viederman Dr Steve Waygood, Aviva Investors Rachel Whittaker, Mercer

    Environmental Market Insights Series

    Sustainable Investing is fast becoming the smart way of generating long-term returns. With conventional investors now scrambling to factor in issues such as climate change, this book captures a turning point in the evolution of global finance. Bringing together leading practitioners of Sustainable Investing from across the globe, this book charts how this agenda has evolved, what impact it has today, and what prospects are emerging for the years ahead. Sustainable Investing has already been outperforming the mainstream, and concerned investors need to know how best to position themselves for potentially radical market change.

    3mm

    100mm 159mm 25mm 159mm

    3mm

    100mm

    9 781844 075485

    ISBN 978-1-84407-548-5

    publ ishing for a sustainable future

    www.earthscan.co.ukBusiness / Finance

    Sustainable Investing FINAL.indd1 1 25/9/08 18:50:17

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    danhaTypewritten TextTo request an academic inspection copy, click here and fill in the form,or visit www.earthscan.co.uk

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  • Contents

    List of Figures, Tables and Boxes ixList of Contributors xiForeword by Steve Lydenberg xixIntroduction xxiAcknowledgements xxvi

    PART I THE RISE OF SUSTAINABLE INVESTING

    1 The Emergence of Sustainable Investing 3Nick Robins

    2 Sustainable Equity Investing: The Market-Beating Strategy 19Cary Krosinsky

    3 Investors: A Force for Sustainability 31Julie Fox Gorte

    4 Sustainability Analysis 41Valery Lucas-Leclin and Sarbjit Nahal

    PART II CONFRONTING NEW RISKS AND OPPORTUNITIES

    5 Observations from the Carbon Emission Markets:Implications for Carbon Finance 59Abyd Karmali

    6 Carbon Exposure 75Matthias Kopp and Bjrn Tore Urdal

    7 Clean Energy Opportunities 85Emma Hunt and Rachel Whittaker

    8 Water 97Katherine Miles Hill and Sean Gilbert

  • PART III SUSTAINABILITY ACROSS THEOTHER ASSET CLASSES

    9 Fixed Income and Microfinance 107Ivo Knoepfel and Gordon Hagart

    10 Sustainable and Responsible Property Investing 117Gary Pivo and Paul McNamara

    11 Private Equity: Unlocking the Sustainability Potential 129Ritu Kumar

    12 Social Businesses 137Rod Schwartz

    PART IV FUTURE DIRECTIONS AND TRENDS

    13 China 149Ray Cheung

    14 India 165Dan Siddy

    15 Civil Society and Capital Markets 177Steve Waygood

    16 Fiduciary Duty 189Stephen Viederman

    17 The Global Agenda 201Tessa Tennant

    18 Conclusion: Sustainable Investing The Art of Long-Term Performance 205Nick Robins and Cary Krosinsky

    Glossary 211

    Appendix A: Sustainable and Responsible Initiatives and Resources 221

    Appendix B: Equity Returns Study Methodology Determination of Annualized Five-Year Return for the Period 31 December 2002 to 31 December 2007 229

    Index 233

    viii Sustainable Investing

  • 1

    The Emergence ofSustainable Investing

    Nick Robins

    THE ORIGIN OF THE SPECIES

    It is said that it takes a generation for a potent idea to become common practice.In the case of sustainable development, it is now two decades since theBrundtland Commission first launched the concept onto the global stage, callingfor a new pattern of growth that meets the needs of the present withoutcompromising the ability of future generations to meet their own needs(WCED, 1987). This poetically simple phrase contained within it three profoundimperatives that challenged the prevailing models of economic performance:first, the identification of ecological constraints that human activity must respect(ecology); second, the concept of needs, particularly those of the poorest, towhom utmost priority must be given in the commissions words (equity); and,third, the principle of intergenerational justice, adding a time dimension to thedelivery of development so that long-term durability is not compromised byshort-term speculation (futurity).

    Looking back, the birth of sustainability was timely, coming as it did in theyear that analysts believe that the global economy first entered a state of ecologi-cal debt whereby resource extraction and pollution exceeds the carryingcapacity of the planet, a deficit that has only deepened in succeeding years (WWF,2007). Just as significant was its coincidence with the collapse of state commu-nism, with the symbolic fall of the Berlin Wall, taking place just two years later.Critically, this meant that the realization of a sustainable economy would hence-forth take place within the context of market-based capitalism. And if globalcapitalism is to become sustainable, then it makes sense to start with capital.

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  • Yet, while some thought was given to the role that industry could play in thetransition to sustainable patterns of development, the role of finance and invest-ment was strangely absent, making investors the missing stakeholder in manysubsequent negotiations to translate theory into practice. Indeed, when the thenBusiness Council for Sustainable Development (BCSD) came to write itslandmark report, Changing Course, for the 1992 Earth Summit, it acknowledgedthat little is known about the constraints, the possibilities, and the interrelation-ships between capital markets, the environment, and the needs of futuregenerations (BCSD, 1992; see also WBCSD, 1997). At the time, ethical investingwas already practised by a growing number of individual and institutionalinvestors in Europe and the US. But only a handful of the worlds institutionalinvestors had begun to include considerations of sustainability within theirinvestment strategies. These included Bank Sarasin in Switzerla

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