Nigel Green

February 1, 2017: US President Donald Trump’s ban on visitors from seven Muslim-majority nations has spooked markets, but clued-up investors won’t be panicking, they’ll be seeking out bargains.

The American markets fell on Monday below 20k, taking their cue from weak European and Asian markets.

For the past few months, a Trump presidency has been widely regarded as positive for stocks. But it appears that the rose-tinted glasses have come off as the travel ban for seven Muslim-majority countries has indicated to investors that there are major geopolitical headwinds brewing as the controversy intensifies.

The markets have been reacting to the fact that last Friday, Trump put a 120-day hold on permitting refugees into the States, an indefinite ban on refugees from Syria, plus a 90-day ban on citizens from Iran, Iraq, Libya and four other nations. Many nations, including long-standing US allies, have called the measures divisive and discriminatory.

The markets are jittery, but this is more a bump in the road than a major obstacle – for the moment at least. Markets typically have a knee-jerk reaction to unexpected or controversial geopolitical events.

There is also the argument that markets were overvalued and investors might have been looking for an excuse to sell, and this measure by Trump provided them with that.

Despite Trump’s Muslim ban spooking markets, clued-up investors won’t be panicking, they’ll be seeking out bargains – and perhaps hoping that the sell-off continues.

They will be aware that the world is changing fast. Change means volatility.

Whilst some people are put off investing because of volatility, many of the most successful investors welcome it.  This is because profitable opportunities are found where there are fluctuations and portfolios can be topped- up and advantage can be taken of lower entry points.

Nigel Green is the founder and CEO of deVere Group

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Kamilia Lahrichi

February 17, 2015: Large financial institutions, such as Bank of America and Deutsche Bank, and private investors launched a $100 million fund to ease access to clean and efficient cookstoves and fuels at the Cookstove Future summit in New York on November 21, 2014.

The Global Alliance for Clean Cookstoves (GACC), a non-profit organisation based in Washington D.C. and supported by the United Nations Foundation, organised this event to support the scale-up of clean cooking enterprises.

Business leaders and policy-makers also invested $413 million for three years in this sector. Inefficient and highly polluting cookstoves are a key environmental and health issue. More than four million people die from indoor air pollution every year.

“With 2.7 billion people relying on open fires and traditional biomass stoves to cook their food, the market potential for change is huge and the impact we can have on people’s lives is just as big,” said Baroness Lindsay Northover, Parliamentary Undersecretary of State for International Development in the United Kingdom.

GACC aims to provide clean and more efficient cookstoves and fuel to 100 million households by 2020. Since its inception in 2010, GACC and its 1,000 partners raised $50 million to boost the clean cookstoves sector.

“We need to keep developing the right technology: it has to be available, readily accessible and attractive enough so that people want it in their home,” said former Secretary of State Hillary Rodham Clinton who co-hosted the two-day summit.

Market opportunities

The clean cookstoves sector, in developing countries in particular, offers vast economic opportunities for investors around the globe.

In Bangladesh, for example, 95% of people use traditional cookstoves, said Nasrul Hamid, the country’s State Minister of Power, Energy and Mineral Resources. Bangladesh has recently developed an action plan to distribute 30 million cookstoves.

“From an African perspective, our governments are less in a position to finance these initiatives than in the Western world,” said Hanna Tetteh, Minister of Foreign Affairs and Regional Integration of Ghana.

Over 17% of the Ghanaian population relies on solid fuels and charcoal.

Funding from large financial institutions provides the opportunity to venture into the clean cooking sector of developing markets.

Deutsche Bank, one of the investors in the GACC fund, had plans to launch an additional $4 million fund in December 2014 to facilitate access to clean and efficient cookstoves.

“The purpose of the fund is to offer small and medium-sized enterprises that are growing and that have the potential to increase their sales through debt, the opportunity for working capital or to purchase assets,” explained Moya Connelly, Senior Consultant at Deutsche Bank.

The type of cookstoves they invest in ranges in price from $10-$15 to $80.

“Less expensive cookstoves are purchased through cash. But $80 ones need to be financed through a financial institution, as it is expensive for someone in Africa or Asia,” she added.

Overcoming challenges

Despite numerous market opportunities, impact investors have to be aware of the challenges of putting money in an immature and highly fragmented sector such as clean cooking.

They need to be ready to invest fund and offer technical and business development assistance to small companies. The focus is first on capacity building.

“For the moment, the returns are harder to justify because there are more emerging businesses,” said Jacob Moss, Director of the United States Cookstoves Initiatives at the United States Department of State.

Yet, impact investors are increasingly interested in this challenge.

For instance, Carlo Figa Talamanca, an Italian entrepreneur, took over the clean charcoal company two French non-governmental organisations set up in Cambodia.

“Their business was not financially sustainable,” he explained. “But I really believed in it. I lost money the first year but now I am making a profit,” he said.

Carlo is the Chief Executive Officer of the zero-smoke charcoal production company Sustainable Green Fuel Enterprise.

As in many emerging markets, he had to convince consumers of using his new technology, although he was selling it at the same price or slight more expensive than regular, highly polluting charcoal depending on the season and the area.

Cambodians were suspicious of a technology that replaces traditional cooking methods and solid fuels.

Two birds, one stone

Investing in clean and efficient cookstoves and fuels is a means to develop a business while making a positive impact on people’s lives, such as significantly reducing greenhouse gas emissions.

Clean cookstoves promotion is an under-covered area in investment and development. Yet, the smoke from open fires and traditional cookstoves is the fourth killer in the world, ahead of HIV and tuberculosis. Traditional cookstoves produce the same amount of smoke 400 cigarettes do in one hour.

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Jaya Smitha Menon

December 24,2014: For Barclays, the business of banking goes beyond the profit and loss statements they generate every quarter. They want to play a broader role in the community in which they live and do business. Their goal is to help change 5 million young futures by 2015.

In UK, Barclays is supporting the growth of Street League, a UK football charity. Street League uses the power of football to help unemployed 16 to 25-year-olds get into work and training across the UK. It provides an eight-week football and education programme, which develops key employability skills such as communication and teamwork, and offers several nationally-recognised qualifications. At the end of Street League ‘Academy’ programmes across the UK, 81% of graduates move into work, training or education.

In addition to the financial support Barclays provides to Street League, the employees help by running mock interviews, CV-writing and financial literacy sessions for participants. Paulette Cohen, Head of Global Programmes, said: “For 10 years, Barclays has been investing in sports facilities and programmes in the UK communities where they are most needed — creating sustainable resources and helping young people achieve their ambitions.”

Corporates like Barclays believe that businesses grow only if all the stake holders around it grow; be it the employees, customers, stockholders, environment or the society around. Corporate sustainability stems from this belief of enterprises. ‘Giving back to the community’, is a mantra the corporates have already chanted. But what differentiates corporate sustainability from corporate social responsibility is doing responsible business and a belief that sustainable business is the one which carries every stakeholder together in the organisation’s growth. Sustainability means looking inside and outside the organisation to understand the social and environmental impact it creates.

Today, over 72% of S&P500 companies are reporting on sustainability. These companies measure their sustainability efforts and bring out detailed report at regular intervals similar to the financial reports public companies publish every quarter. The role of a chief sustainability officer has also expanded in the last few years.

Adding value to the balance sheet

However, sustainability is not just about growing together. A recent study by the Smith School of Enterprise and the Environment (SSEE) at the University of Oxford and Arabesque Asset Management provides clear academic evidence of the financial rewards of corporate sustainability. The report reveals a strong correlation between corporate sustainability and stock price performance, with 80 per cent of research sources showing that stock prices are positively influenced by good sustainability practices.

The report titled ‘From the Stockholder to the Stakeholder’ also reveals that 88 per cent of studies link strong environmental, social and governance (ESG) practices with better operational performance in a company, ultimately translating into cash flows. Factors ranging from good workforce relations, environmental management and executive compensation are cited as amongst the most impactful on improved operational performance. Ninety per cent of analysed studies reveal that high ESG standards will lower the cost of capital for companies, with superior sustainability standards improving a corporation’s access to capital.

Doing responsible business

For every organisation, sustainability efforts are based on three pillars; compliance, efficiency and innovation. Understanding where the organisation stands in terms of compliance with environmental, social and cultural standards; improving the operational efficiency to achieve these standards and innovating to do responsible business based on ESG standards form the foundation of all sustainability efforts.

London Stock Exchange recently announced that it will partner with the United Nations Sustainable Stock Exchanges (SSE) initiative, joining nine other exchanges in the US, Europe, Africa and Asia to promote sustainable business practices among publicly listed companies worldwide.

“Stock exchanges have a crucial role to play in enhancing both the quality and quantity of environmental, social and corporate governance reporting by companies listed on their exchanges,” said Fiona Reynolds, Managing Director, Principles for Responsible Investment. “Only 3 percent of the world’s largest companies currently disclose information about their ESG performance. Better disclosure will improve the usefulness and comparability of information being reported in each market, enabling institutional investors to better manage risk and make more informed investment decisions.”

Food and beverages giant Nestle’s sustainability efforts include doing responsible sourcing. With consumers becoming increasingly inquisitive about the raw material used in the products they buy, Nestle felt the need to make their supply chain transparent and traceable. Nestle insists that its suppliers across the globe adopt internationally recognised good agricultural practices (GAP) that address environmental, social and economic sustainability for on-farm processes and result in the production of safe and quality food and non-food agricultural products. Such initiatives by organisations increase their credibility and brand loyalty, which has a long lasting impact on their balance sheets. “Profitability and sustainability are not mutually exclusive; quite the opposite in fact. It is almost a given that being more sustainable also improves the robustness and longevity of a company, but the other consideration is how it improves reputation. With growing consumer interest in sustainability, the reputational benefits that integrating sustainability brings are invaluable,” says Rebecca Pritchard, head of business banking, Triodos Bank.

A pioneer in the field of ethical and sustainable banking, Triodos Bank does business only with companies with good sustainability practices. Pritchard says, “Ethical investing is the only kind of investing we do. Every investment decision we make follows a rigorous research and selection process to ensure that the money our customers entrust to us is invested only in companies with the best sustainability performance. Our SRI funds invest only in companies that achieve a best-in-class combination of social, environmental and economic performance”.

Triodos Bank selects companies on the basis of strict social, environmental and governance criteria, and after a rigorous research and selection process that provides a firm foundation for every investment decision. “We also have an active engagement programme with the aim of raising awareness of sustainability, stimulating action and creating lasting change,” adds Pritchard.

In the last decade, companies hiring chief sustainability officers (CSO) have increased considerably. CSOs are the champions of the sustainability efforts of the organisation. One of the major challenges for a CSO is to convince the chief financial officer (CFO) to fund these sustainability efforts. But with growing evidence of sustainability adding value to business and balance sheets, the role of a CSO has become more strategic and evolved. But CSOs insist that an oversight and insistence from a board will go a long way in ensuring a sustainable organisation.

Sustainability is not the priority of corporate giants alone. It is a virtue in which every business should invest in.

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