Must-Read Report On Sustainable Capital Markets
One of our good friends and advisors, Jed Emerson, has been on the front lines of the intersection of sustainable investing and traditional capital markets. For the past year, Jed was a partner at Uhuru, a hedge fund play with a sustainability bent, created by Peter Kellner, of Endeavor fame. Although the fund failed to reach its own sustainability, and shut the doors in the December, it provided Jed with the material for another chapter in his long-running experiment of transforming traditional finance.
In his new paper — Hedge Fund Investing, Capital Markets and The Sustainability Challenge (PDF download)– Jed sets out with this premise:
“As I learned more about how he approached hedge fund investing, I was struck by how many of the aspects of Fundamental investing (as described to me) were similar to investing practices of Sustainable finance. Not the same, mind you, yet quite similar nevertheless. Simultaneous to this internal dialogue, an external dialogue evolved with investors Uhuru was engaged with around our work. These investors raised a related question: While they appreciated the attributes of our core Fundamental strategy, they asked if we couldn’t create a truly “sustainable” fund of hedge funds product. What they sought was a “Long/Short” investment strategy pursued in a manner consistent with an investor’s commitment to Sustainability. Was such a thing possible?
These conversations became the genesis of this current paper—a basic exploration of that question.”
Jed’s intro alone is brilliant and entertaining, and puts to rest the simplistic “good vs. evil” frame of reference in this complicated issue. The rest of the paper is a unique view on the evolution of sustainable finance and the current equity and debt markets that will shed light on the issue for even the most sophisticated investor, while providing great grounding for those us who don’t live and die by the valuation of a group of securities.
You’ll laugh. You’ll cry. You’ll know more than you do today. What more could you want?
January 31st, 2010 at 5:32 pm
This is a great paper. Jed does a fantastic job at bringing together the many mindsets in this field with a focus on their shared values. For example, how good governance (social capital) is a foundation of sustainable investing and also critical to Fundamental investing. I like how the paper is written not for experts but for individuals with an interest and a basic understanding of investment principles (like myself, having only a CFA level 1 knowledge of investing).
While the paper is a personal reflection, in many ways it is also a call for a revolution within finance to spread “sustainable” practices across traditional capital markets. Jed writes, “our goal should not necessarily be to simply act as catalysts to create a larger investment community of ‘sustainable’ firms, but rather to act as revolutionaries within Traditional capital markets to embed sustainable instrument practices into the capital market mainstream.”
The paper is encouraging and motivating for anyone remotely interested in the subject, as Jed mentions “what was once a fad is now a trend, [and] how that trend evolves is a future we have the potential to create.”