2009 Global 100 Dinner

In 2007, the Global 100 Executive Roundtable convened to discuss the theme of “The Investor as the New Regulator.” Stephen Adler, editor-in-chief of BusinessWeek, moderated the dinner discussion with commentary from Nobel laureate Joseph Stiglitz. The evening brought together senior executives mostly concentrated in the financial sector, including the Chairman of Investment Banking from Goldman Sachs, Co-CEO of Investment Banking for JP Morgan, Chief Risk Officer of Swiss Re and Deputy Chairman of Daiwa Securities.

2007 Summary of Main Points, CKG100 Executive Roundtable Dinner

Co-Chairs: Toby A. A. Heaps, Editor and Dr. Matthew J. Kiernan

1. The financial sector has a small direct effect on the environment, but through financing activities they have a huge indirect effect—bigger than many governments.

2. Alternative energy is a hot asset class, but the bulk of activity is still concentrated within the private equity space, which represents just five per cent of the entire capital markets spectrum.

3. Mainstream investment firms have a much larger impact than traditional socially responsible investment firms.

• A corporate responsibility group executive commented: “When [a mainstream investment bank] included environment and social metrics in its energy sector analysis, it had a bigger impact than a thousand socially responsible investment funds could ever have.”

4. There must be a broader economic basis for protecting the environment.

• The chief executive of a U.S. investment bank noted: “There is a clear social cost to destroying the environment and we see a role for government to play in helping measure that cost, and in getting money from the destroyers to the people they hurt.”

5. The genuine enthusiasm for the increasing relevance of environmental, social and governance factors to economic drivers was tempered by investment executives’ frustration at the lack of large-scale quality investment opportunities.

• The chairman of a large private equity firm commented that although the cleantech story is compelling, his firm is not currently making any investments in the cleantech space, because “it is too small: [companies are all under $5 billion in market cap].”

6. There was a ready recognition that something has to be done to improve the rules of the game, to level the playing field by establishing an operating environment that better reflects the positive and negative externalities of companies and industries.

• A UK climate lobbyist argued: “While winners go to market, losers go to Washington. The winners need to go to Washington too, in order to help balance out the aggressively negative lobbying by the losers from policies that would align economic drivers with environmental impacts by providing accountability for environmental costs.”

• One U.S. participant warned that climate change, while important, should not be allowed to crowd out other environment and social issues that also merits the attention of proactive business forces.

2008: New challenges for the long-term global investor

In 2008, the Global 100 Executive Roundtable Dinner explored how to broaden the investor tent around sustainability integration to include sovereign wealth funds. The evening brought together current and former Ministers of Finance, sovereign wealth fund heads, and Corporate Knights Global 100 (CKG100) executives.

There was a general sentiment that sovereign wealth funds can take two paths: opacity, which probably leads to financial protectionism, or transparency. There was a popular sense that coupling the latter path with forward-looking investments that finance the new energy sources and industries of the future will diversify income streams and enhance long-term value portfolio value. Shortly after the meeting, several funds, including the China Investment Corporation, stepped up sustainable investment policies.

2008 Summary of Main Points, CKG100 Executive Roundtable Dinner

Co-Chairs: Toby A. A. Heaps, and Dr. Matthew J. Kiernan

1. Sovereign wealth funds (SWF) can leverage global sustainability trends to generate competitive advantage, superior returns, and positive impact. They have a vested interest in long-term stable global conditions because their time horizon is forever, and their investments transcend companies and countries.

• One European Finance Minister remarked, “It took billions of years to make the oil and gas, and we are not allowed to spend it all in one generation.”

2. Accounting numbers can only get us so far, and they get us less far every year. The discussants agreed that companies’ performance on environment, social and governance (ESG) issues is an incredibly and increasingly robust proxy for how well-managed they are—and this is more pronounced the longer the time horizon.

3. ESG considerations can be compatible with fiduciary duty. Case in point: investors from the North and South representing over $14 trillion [as of January 2008] in assets have signed onto the UN Principles for Responsible Investment pledging to integrate ESG issues into the heart of their investment mechanics.

• A top international finance official noted, “Ironically, the day that Kofi Annan rang the bell on the NYSE [on April 26, 2006 to launch the UNPRI] to say ‘4 trillion of capital get our issues,’ was also the same day that governments rejected his reform agenda.”

4. Our addiction to oil and our fondness for cheap goods is driving the growth of sovereign wealth fund coffers, and these two desires are not going anywhere soon, so these funds are just going to get bigger and bigger.

5. Sovereign wealth funds can raise global human rights and environmental standards by depriving egregious companies of capital and actively engaging the majority of other companies to respect minimum standards, and the latter is more effective with the prospect of the former lurking in the background.

• The head of a large SWF made the point, “If we succeed in having influence on 7,000 companies, that is real power.”

6. To be consistent with maximizing long-term returns and to follow guidelines to bolster the long-term prospects of the global economy, it is crucial sovereign wealth funds invest in developing countries to a far larger extent than is currently the case.

7. There can be a virtuous cycle between oil profits and cleaner energy, because it enables SWFs to invest more in the energies of the future.

• A leader from the Gulf elaborated, “Sheikh Mohammed is investing $15 billion to build a zero-carbon city called Masdar. They have two big conferences in Abu Dhabi every year – oil and gas, and defence. This was the first year they had the World Future Energy Summit, and it was bigger than both of them.”

2009: The Next Motor That Will Power the Global Economy

In 2009, the Global 100 Executive Roundtable Dinner focused on powering our way out of the recession and beyond on a foundation that will not crumble. The evening’s lead discussants included George Soros, Investor and Philanthropist; Lord Nicholas Stern, author of the landmark 2006 Stern Report on the economic implications of climate change; and Nobel Laureate Joseph Stiglitz of Columbia University. Lord Nicholas Stern noted the current crossroads presents “a Schumpeterian growth opportunity” across the economy for dirty inefficient elements to be replaced by greener leaner infrastructure, new rail transit, and retrofits. He called for a global green stimulus package of $400 billion invested over each of the next two years.

Shortly after the dinner, Lord Stern and Professor Joseph Stiglitz published an op-ed in Financial Times on the topic. Cumulative global green stimulus announcements have reached $0.5 trillion as of July 2009. In the fall of 2009, George Soros announced he was investing $1 billion in clean energy technology.

2007 Global 100 Dinner

Co-Chairs: Toby A. A. Heaps, and Dr. Matthew J. Kiernan

1. We are faced with two crises: An economic crises and a planetary crisis. A former bank chief economist surmised, “A crisis is a terrible thing to waste. Missing one would be unfortunate. Missing the opportunity presented by two crises would be carelessness.”

2. The indebted U.S. consumer can no longer be depended upon to power the global economy as it has for the past quarter century.

3. The only route to growth is one founded in drivers with longevity. A low-carbon economy meets that definition.

4. At the same time, dirty energy from politically corrupt sources is harmful in many ways.

• A prominent U.S. hedge fund investor summarized two options: “One is pushing forward with alternative energy resources, and two is reducing energy consumption through efficiency measures. It looks like we are going to do both, and this will require a large investment. Investors who choose prudently will be rewarded handsomely.”

5. There was also a strong sense that low-carbon growth requires a minimum price on the cost of energy, and the least politically painful way of doing this to establish a floor price the next time oil reaches $100 per barrel.

6. There was broad consensus that we need to initiate a fiscal overhaul where we tax ‘bads’ and relax taxes on ‘goods’, like labour. The group agreed that, properly rolled out, a carbon tax as part of a system where we reduce income taxes is a winning policy.

7. There was general anxiety that a failure to reach some semblance of a global climate compact at Copenhagen or soon after could lead to a breakdown of our multilateral trading system.

• A Nobel laureate economist warned, “The spectre of growth of protectionism is on the horizon. If industries perceive an unlevel playing field with respect to carbon pricing, where other countries are practicing ‘beggar thy neighbour’ free riding for polluting carbon, countries are going to erect carbon tax import duties. And it is probably legal under the World Trade Organization. There is a real risk for this to get out of hand and to close up our trading system.”

2010: Scaling Up Global Finance for Cleaner Capitalism

In 2010, the Global 100 Executive Roundtable Dinner will focus on a financial innovation to create a $100 billion Green Fund, as proposed by George Soros, Chairman of Soros Fund Management, LLC. Participants will include key officials providing input into the 2010 summer G20 Summit agenda in Canada.

2010 Summary of Main Points, CKG100 Executive Roundtable Dinner

Co-Chairs: Toby A. A. Heaps, Editor and Dr. Matthew J. Kiernan

Dinner is on January 27. Check back on January 28^th for update.