Workers' Pensions Mobilizing for Good

Sustainatopia is John Rosser's baby. Starting as a green doorway between Miami and the Southern Hemisphere, it was convened in LA, then Boston and next May will launch in San Francisco, the hub for all things green, including money. Recently I attended the 9th Sustainatopia in Boston where everyone is successful, good looking and leading one of the mind-boggling array of panels. Everyone seems to be a speaker, whether a celebrity like Tom Chappell, the founder of Tom's of Maine, who is now leading Rambler's Way Farm, producing itchless organic wool clothing (http://www.ramblersway.com ), or any unknown start-up entrepreneur looking for money . Jeffrey Gitterman, a billion dollar wealth manager (http://www.gittermanwealth.com/)set a deep context by sharing a trailer for his film: Planetary (https://www.youtube.com/watch?v=58SddjKGkiw ).

Not only does Rosser believe we are planetary stewards, and all have something to say; but, we need such gatherings to make a difference. No food is served and time is given for networking off campus. This smart model helps the local economy and exposes the participants to more than generic hotel interiors. There's time to talk and form new initiatives. Stuff happens.

My charge in returning home was to review a book called The Responsible Investor Handbook by Thomas Croft and Annie Malhotra (https://www.amazon.com/Responsible-Investor-Handbook-Mobilizing-Sustainable/dp/1783535628 ) and I was struck by the synergy: Trillions in workers retirement funds are positioned to make this Sustainable Utopia happen! The insiders at Sustainatopia, may know how to do well by doing good on a relatively small scale, like the Garden Tower on display (http://www.gardentowerproject.shopgate.com ), but have yet to develop the infrastructure to go BIG. On the other hand, the retirement funds of the workers of the world need exposure to this kind of education to unite and make a BIG difference with trillions of dollars.

The Handbook is a great start, giving credit for all the good already done, and urging the workers to do more, because it is Our Money and Our World! Yet, there is a dis-connect between the world of pension management and the sophisticated but quiet revolution that is going on in terms of scalable and investable positive impact solutions. Not only do worker trustees need to know that the intellectual argument is dead that Doing Well financially and Doing Good environmentally and socially are at odds, like oil and water ...in fact they are congruent, like fire and fuel. They also need to know what is out there that can be done without too much costly due diligence per investment. They need to know about scalable projects and platforms for positive impact.

A meta study at Deutsche Bank analyzed a hundred Environmental, Social and Governance (ESG) reports on public fund managers and found that only 2% of the studies concluded that ESG concerns hamper returns (http://www.DeutscheAWM.com ), while 40+% say it makes no difference and more than 50% say it may improve performance. This is standard fare. The logical conclusion is that well governed companies that manage energy efficiently and manage community and employee relations harmoniously are also likely to manage their whole business as well as or better than those who don't. There is not enough data yet on the financial impact of investing in companies whose products, services and projects are inherently beneficial in the real economy. Studies in general are focused on processes. A questionable product in terms of impact may look better in terms of ESG while a high impact company may not yet have their ESG act together...so they wouldn't score so high in this spectrum.

The 2% naysayers may be comparing purely quantitative models with purely qualitative ESG models, but the devil is in the details: Is the ESG manager also a top tier financial manager or just a nice guy? Is the quant manager aware of black swans like the coming divestment from all things fossil, or the risk of bad press from mismanagement of the supply chain etc.? Even big bad private equity managers save millions in their portfolios by demanding energy efficiency, recycling and the like. Workers as trustees can promote this common sense perspective and push further for more impact.

The Responsible Investor Handbook is a wake-up call to those workers who have not yet developed their voice and sit passively among sophisticated bankers who focus on the short term earnings and speak a language they don't understand. There are thousands of these worker reps with untapped power to make a difference and many have already realized: "THIS IS OUR MONEY/OUR FUTURE!"

The Handbook's history of this worker movement is fascinating in and of itself. For example, the financing of worker housing has been a mainstay for decades and was the best performing investment of the California Public Employees' Retirement System (CalPERS) during a ten year period going into the start of the millennium and again through the 2008 downturn. This group alone represents hundreds of billions of dollars for under 2 million workers. They know they already have clout, but worker trustees of the world could sustain a future utopia if they were to unite!