Articles and essays
We are living in a world of radical information transparency and instant mass communications capability.
The former means that what happens in a far-flung corner of a company’s operations can now be detected and analysed by any number of affected or interested parties. The latter means that any resulting critiques of corporate malfeasance can be easily transmitted, via social networks, to global audiences. This transmission is now instantaneous, cost-free, and frictionless.
The debate on whether climate change will impact the environment is now settled, reflected in the unanimity at COP21 around the science of climate change. In this environment companies are already subject to increasing pressure to adapt to and mitigate the effects of climate change. Companies urgently need to adapt to the physical consequences of climate change, for instance,water availability — drought or floods — or severe storms that can impair the ability of production sites and threaten supply chains.
Inflection Point Capital Management has developed a new and compelling approach to investing. We call it Strategically Aware Investing (SAI), and we believe it is the only really sensible way to invest in the 21st century. In this short video, Inflection Point CEO Dr Matthew Kiernan discusses SAI with Elisabeth Cassagnes, Manager of Sustainable Development at Groupe La Française.
“Investors who fail to develop systematically aware investment processes risk commercial extinction”
Institutional investors have not yet responded to climate change in a sufficiently forceful or systematic manner, writes Inflection Point CEO Dr Matthew Kiernan in the current issue of The Journal of Environmental Investing. Not enough investors are taking meaningful, concrete action of any kind, and even those that are doing so have so far invested in only a tiny subset of their total portfolio.
Meeting CO2 reduction targets is likely to come from a combination of increased use of renewable energy, combined with measures that will increase the value that is generated from each unit of energy. The transition to a low carbon economy will support the development of new innovations, as climate policy collides directly with the Fourth Industrial Revolution, which is bringing forth new disruptive technologies.
Financial data are important, but most of a company’s true risk profile and value potential lurk beneath the surface. That’s where we focus, Matthew Kiernan tells Wealth Management magazine. While we use tools that are similar to those of traditional research departments, we focus them on different criteria. In the case of climate change, we have built up our expertise over seven to eight years while mainstream analysts have been looking at the issue for just one or two years.
Matthew Kiernan’s Investing in a Sustainable World offers clear proof that “going green” leads directly to better stock market performance, and that investors and companies who ignore it will be losing money. Revolutionary and backed by irrefutable statistics, the book reveals the most powerful global megatrends which are transforming the basis on which companies compete, and offers an approach to sustainability-enhanced investing beneficial to both investors and companies.
At its nadir, the crisis saw the Dow slip below 7000 and the FTSE below 4000. We could cite numerous other record statistics that make for sobering reading for investors as they look back over this period of market turbulence, but mercifully the worst may now be over.
The basic premise of the initial iteration of the concept (“BOP version 1.0”), was that, contrary to both intuition and popular belief, poor people do in fact have considerable purchasing power, and are indeed responsible borrowers. On this latter point, the evidence has subsequently borne this out in spades; repayment rates for the celebrated Grameen Bank in Bangladesh are typically in the range of 99%, a figure that commercial bankers at the likes of JPMorgan and Citigroup can only envy.
The trick, of course, is to assess companies’ risk and opportunity exposures with a robust, multi-factorial model, rather than relying on the criteria and information sources which seem so prevalent today: companies’ “carbon footprints”, and self-reported, unverified company “disclosures”. We have written about this in much greater detail elsewhere; the point of this article is simply to examine whether arguments which seemed compelling six months ago still hold water.
Inflection Point CEO Matthew Kiernan's article published in Environmental Finance (September 2010) argues that tokenistic investments in clean-tech funds are not enough: pension funds should urgently address environmental risk and opportunities across their entire portfolios.
Read the article online.
A casual observer might have thought that with ESG, RI, SRI, CSR, and SI already in hand, we were already reasonably well provisioned in this regard. Well we’re not. I think that we desperately need one more, and the right one just might alleviate some of both the intellectual and commercial confusion and anarchy of the current situation, where everyone seems to be clamouring for more “mainstreaming”, while the aforementioned mainstream itself remains either largely oblivious or, at most, sublimely content with only leisurely (glacial?) movement.
By “innovation”, we are not referring here to the profusion of arcane, opaque financial engineering that is trotted out as proof that Wall Street, the City, and their peers are the apotheosis of ingenuity and dynamism. No, instead we mean real, fundamental innovation that challenges the basic assumptions that underpin the financial system, and which acknowledge past failings and the fact that today’s and tomorrow’s investment environment is unprecedented.
At Inflection Point Capital Management, we believe that a series of powerful, secular global megatrends will have profound impacts on company competitiveness and financial performance over the next ten to twenty years. Investors are going to need entirely new ways of thinking to fully understand changing parameters of portfolio risk and to develop stock ideas that tap into emerging areas of opportunity.