Explore the Thinking behind our investment approach

Many people believe that impact investing can only be done in the private markets. While creating measurable impact in the public markets may not be easy now, we are always looking for innovative ways to mobilize systemic change. Rachel Robasciotti, Founder and CEO of Adasina Social Capital, together with a number of social justice organizations, have developed the Adasina Social Justice Investment Criteria, a data-driven set of standards that guides their investment strategies to reflect social justice values and advance progressive movements for change.1 “Social Justice movements are often early indicators of risk in public markets.”2 ~Rachel Robasciotti In this episode of TheIMPACT, learn how Adasina Social Capital approaches social justice using a combination of community sourced data and metrics along with a unique view on engagement to move the needle on social justice issues by changing investor, corporate, and government behavior.

You Don’t Have to Go Home, But You Can’t Stay Here... Say what you will about the Federal Reserve, but Chairman Jerome Powell has thrown one heck of a party in the two-plus years since the Covid pandemic began. Since the last financial crisis in 2008, the Fed has been no stranger to spiking the punch bowl in the form of quantitative easing and keeping rates near zero. But the 2020 response dwarfed all efforts that came before it. The Fed doubled their balance sheet from $4 trillion to $8 trillion, purchased corporate bonds for the first time, lent out $800 billion in PPP loans and kept rates ultra-low long after inflation began flashing red warning signs. Since inflation began to rise and the high-flyers of the Covid rally began breaking down under the surface of the equity indices in mid-2021, we have been warning about last call. Now, midway through 2022, the Fed has removed the punchbowl, shut off the music and turned up the lights. Rate hikes have accelerated from 25 bp earlier in the year to 75 or 100 bp expected at upcoming meetings. Quantitative tightening has begun at a faster pace than ever attempted previously. The party is over, and markets must now deal with the hangover. Economic Update We’ve all been hearing the word “unprecedented” a lot in the last two and a half years. First there was the unprecedented global spread of a novel coronavirus, then unprecedented lockdowns followed by unprecedented stimulus from central banks and governments. The economic shocks resulting from the actions taken back in 2020 have put the economy into truly uncharted waters today and have forced the Federal Reserve to walk a tightrope balancing inflation and growth concerns simultaneously. For the first two months of the quarter, the market narrative was that inflation had peaked after falling from 8.5% in March to 8.3% in April. The stock and bond markets stabilized as traders priced in a more dovish Fed. Hopes of an inflation peak were dashed in May when CPI rose again to a new cycle high of 8.6%, followed by another unexpectedly high reading of 9.1% in June. Combined with a University of Michigan survey showing consumer expectations of inflation had risen more than expected, the market abruptly began pricing in more aggressive rate hikes and risk assets resumed their downward trend. When the Fed met for its June meeting, Chairman Jerome Powell did not disappoint. He delivered a 75 bp rate hike and indicated another move of that scale was likely at this week’s Federal Reserve meeting on Wednesday. Download the full report for additional economic insights and details related to current market trends we are tracking along with climate and ESG updates.

The term net-zero refers to the idea of completely negating the amount of greenhouse gases produced by human activity by reducing emissions and implementing methods of absorbing carbon dioxide from the atmosphere. Karl Burkart, Deputy Director of One Earth and former Director of Media, Science & Technology at the Leonardo DiCaprio Foundation, was one of the earliest adopters of this term when he helped to create one of the world’s first net-zero climate websites nearly 20 years ago. Jeff recently sat down with Karl to discuss how One Earth is working to accelerate collective action towards solving the climate crisis through groundbreaking science, inspiring media, and an innovative approach to climate philanthropy. Karl and One Earth believe that many of the solutions to the climate crisis already exist, and that we can solve this crisis through three pillars of action: a just transition to 100% renewable energy, protection and restoration of half of the world’s lands and oceans, and a shift to net-zero food systems and fibersheds. To achieve this goal, One Earth believes that we must rapidly scale climate philanthropy to meet critical funding gaps over the coming decade.

Efficiently moving private capital into climate-focused solutions is often not the simplest of matters. According to Stephan Nicoleau, Managing Director of FullCycle, about 25% of currently available sustainable solutions receive about 80% of available private capital, leaving the remaining 75% of solutions competing for very limited financial resources. [1] In today’s episode of The Great Repricing, Jeff talks with Stephan about the inefficiency of the private markets and the role Stephan believes both the government and the private sector can play in helping to ensure that capital finds its way to a wider spectrum of solutions:

Over the long term, we believe that companies and assets facing significant climate risk will price down and those that offer solutions for decarbonization or adaptation will outperform. However, we expect a bumpy road ahead. Climate investment risk often is expressed in terms of stranded assets, notably those related to fossil fuels. Research shows that most oil, gas, and coal reserves will be stranded as world economies phase in renewables and other lower carbon energy sources.[1] This is expected to, over the longer term, adversely impact the balance sheets of fossil fuel majors. Oil prices currently are trending upward, but this is a function of short-term supply/demand imbalances and geopolitical risks outweighing the longer-term necessity of shifting energy to renewables. All of this could result in a more abrupt transition down the road. As the London-based think tank Carbon Tracker states in a recent letter to the U.S. Securities and Exchange Commission, oil and gas firms have made net zero by 2050 pledges, but “very few companies reveal whether the prices they use to evaluate oil and gas reserves or test the value of their fixed assets for impairment align with such targets or consider climate-related risks at all.”[2] Across sectors, companies insufficiently focused on how climate change will impact operations are likely to lose market share, revenues, and profitability. As climate disclosures are mandated, increasing data availability will allow for deeper analysis of company strategies. Our goal is to encourage advisors and investors to take action to integrate climate change considerations into investment decisions and to align portfolio goals with both profits and the planet. With this in mind, please check out our feature article in the most recent publication of Investments & Wealth Monitor, adapted from our longer paper, The Great Repricing: Financial Advice in the Age of Climate Change, and published by the Investment & Wealth Institute.

Individual investor access to climate focused investments in the venture capital space is generally not so easy to find. Footprint Coalition Ventures, founded by Jonathan Schulhof, Robert Downey Jr., and Steve Levin, is a sustainable technology and investment community platform directed towards opening up access to investments in climate. Their unique model produces media and content across a variety of formats and distribution platforms in order to draw more attention to climate issues and build community awareness around companies that are driving change. This week, Jeff sat down with Jonathan Schulhof to discuss Footprint Coalition Ventures and how they are making VC climate-focused investing more accessible to individual investors: