Business / Former Leaders’ Groups / Green Investment / Integrated Studies / Stranded Assets / Sustainable Capitalism / Total Cost Accounting

Generation Foundation

Organization Descriptions

In Brief

2004, London & NY; for “Sust Capitalism”; stranded assets risk

Description

(2015, New York and London; https://www.genfound.org).

Mission: “To mobilize asset owners, asset managers, companies and other key participants in financial markets around the business case for Sustainable Capitalism, and allocate capital accordingly.”  A project of Al Gore and David Blood that is an offshoot of Generation Investment Management, a boutique firm founded in 2004 “dedicated to long-term investing, integrated sustainability research, and client alignment.”  As discussed in a brief introductory video, the Foundation’s point of view is grounded in the analysis Gore put forward in The Future: Six Drivers of Global Change (Random House, 2013;  558p; with chapters on Earth Inc, The Global Mind, Power in the Balance, Outgrowth, The Life Sciences Revolution, and The Climate Crisis). The project is designed to support “an economic system within which business and trade seek to maximise long-term value creation, accounting for all material ESG (environmental, social and governance) metrics,” i.e., total cost accounting.  Sustainable Capitalism “exists at the intersection of business, science, politics and market forces. Consequently, it is necessary to coordinate across disciplines and sectors in order to inspire and catalyze the innovation and lasting change that we believe is urgently needed.”  Sustainable businesses “do not borrow current earnings from future earnings, and provide goods and services in a manner that is consistent with the transition to a low-carbon, prosperous, equitable, healthy and safe society.

This perspective is explained in detail in Allocating Capital for Long Term Returns (May 2015, 29p), which lists ~55 key environmental, social, and governance factors (e.g., land use, data security and customer privacy, and ownership structure); an informative set of metrics.  Activities and research are based on five recommendations to the investment community on supporting the transition to sustainable capitalism are contained in this white paper:  1) Identify and incorporate risks from stranded assets (i.e., assets that lose economic value ahead of their anticipated useful life); 2) Mandate integrated reporting that combines financial and sustainability metrics into one report; 3) End the default practice of issuing quarterly earnings guidance; 4) Align compensation structures with long-term sustainable performance; and 5) Encourage long-term investing with loyalty driven securities that reward those who hold shares for a number of years.  Among other specific actions, Generation provided seed money to the Sustainability Accounting Standards Board and the International Integrated Reporting Council.  A useful library of downloadable white papers, research reports issued with partners (e.g., the Aspen Institute and KKS Advisors), videos, editorials, and speeches is available on the website.  The Foundation is funded by distributions from the investment management firm’s profits.

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