Category: Sustainability

The Impact of Corporate Climate Change Activists

August 15, 2023 Social Issues

Jeff Bartel

Chairman and Managing Director

With concerns about the health of the environment intensifying, corporate climate change activists are using their unique combination of knowledge, influence, and resources to help lead their respective businesses toward a greener future while still sharing in the benefits of a growing green economy.

Understanding Corporate Climate Change Activists

Gone are the days when corporate interests and environmental concerns were considered opposing sides. The appearance of the corporate climate change activist shows a shift in the way business leaders view their role in addressing global matters.

They come from diverse backgrounds in finance, technology, manufacturing, etc., and use their knowledge of business operations, market trends, and an understanding of how industries function to identify sustainable practices that benefit the environment and bottom line.

The Five Phases of Corporate Climate Action

When speaking about climate action, there are five specific phases in the journey to implement change successfully. They are:

  • Indifference: This is the first phase and most common for organizations when they initially consider climate change. It was only in the late 1980s that this feeling began to change.
  • Compliance: The second phase is one brought about by legal requirements or legislation. Today, most companies still meet the minimum requirements without considering the environmental impact or potential business upsides.
  • Instrumentalism: The third phase occurs when companies see and understand there are some market benefits to being sustainable. These benefits include customer appreciation and loyalty, a reduction in material waste, positive press, and partnering with other like-minded groups or companies.
  • Sustainability: The fourth phase is the most common today and the one often publicly presented by companies in their daily business dealings. It builds upon instrumentalism to achieve longer-term sustainability that balances people, profit, and the planet.
  • Climate Change Activism: This fifth phase involves using the power of the company’s brand and firm resources to target the public, consumers, governments, other businesses, and stakeholders in fighting for the cause.

Increased Corporate Climate Consciousness

For a long time, companies operated with limited awareness or interest in their environmental impact. Instead, they were more focused on generating profit. With the appearance of more specific climate change data, that changed and led to an acceptance of sustainable practices. Increased consumer demand for eco-friendly products and responsible business and climate change behavior became obvious, and the public forced corporations to make environmentalism part of their strategies.

How Corporate Climate Consciousness Affects Business Practices

Corporate climate consciousness reshapes business practices by adding sustainability to core strategies. Some methods to accomplish this include:

  • Supply chain management improvements.
  • Focus on renewable products and packaging design. 
  • Minimizing waste and maximizing resources.
  • Shifting to renewable solar and wind energy.
  • Reducing long-term carbon emissions. 

Increased consumer expectations are leading to a greater focus on corporate climate consciousness and transparency in reporting on environmental initiatives and progress.

The Corporate Climate Change Activist’s Role in Raising Awareness

These activists play an important role in raising awareness about environmental issues within their businesses. They’re usually key employees or stakeholders who employ methods that shift public opinion and behavior towards environmentally conscious attitudes. Key tactics include:

  • Releasing information through social media, articles, and public speeches, to provide data and stories highlighting climate change. 
  • Engaging in direct action and protests to generate media attention and lead a public conversation on environmental issues. 
  • Forming partnerships with other activist groups and developing shared messaging. 
  • Lobbying for policy changes at local and global levels to influence regulations and drive businesses and individuals to green practices. 
  • Building alliances with influencers, scientists, and policymakers to network and grow public sentiment.

Climate Change Activism and the Supply Chain

Climate change has been proven to have an impact on supply chains and goes beyond the usually-mentioned environmental effects of wildfires, floods, and freezes. To get ahead of potential problems, it’s necessary to be proactive and adaptive when addressing supply chains.

Climate change’s impact on supply chains falls into three categories:

  • Transition risks: These develop from regulatory, policy, and market changes during the switch to a lower-carbon economy but sometimes impact previous assets and generate lower financial returns.
  • Physical risks: These are often event-specific risks like floods and wildfires or long-term shifts like higher average temperatures, rising sea levels, and ongoing heat waves.
  • Climate change business opportunities: These are seen when product preferences or services change or as new consumer markets open. The development, adoption, and support for electric vehicles is an example of this.

How are Suppliers and Consumers Affected in the Supply Chain

By identifying companies at the beginning of the supply chain, activists for climate change can influence the adoption of sustainable material sourcing, minimize environmental impact, and encourage renewable material use. They also lead behavior through consumer awareness campaigns that influence sustainable purchase decisions. 

By targeting supply chain practices and promoting transparency, activists help consumers choose products that match their core values. This creates consumer goodwill and drives positive change throughout the entire supply chain.

Using the Political Influence of Corporate Climate Change Activists

Corporations can make a difference in promoting regulatory changes that relate to climate policy by engaging with policymakers, stakeholders, and industry groups. Examples include:

  • Forming industry partnerships that share common goals and promote sustainable climate practices and presenting smart proposals to policymakers. 
  • Lobbying government officials, providing expert testimony, and providing detailed research to support a case for policy reform. 
  • Collaborating with non-governmental organizations and advocacy groups to increase credibility. By presenting strong evidence of economic and environmental benefits, corporations can show how updated regulations align with climate goals.

How Can Corporations Profit in the Green Economy

Corporations have an influence in shaping the green economy and benefiting from strategies like tax breaks and green infrastructure projects. These initiatives align with environmental targets and position businesses to profit from green solutions and services.

Tax Breaks: Engaging with policymakers and industry associations lets corporations seek tax policies that provide strong incentives for responsible environmental practices and investments. Tax breaks help companies adapt to sustainable technologies, reduce carbon emissions, and move to cleaner energy sources.

Infrastructure: Corporations can take a lead role in developing and financing green infrastructure, like renewable energy installations, sustainable transportation systems, and eco-friendly buildings. 

The Hamptons Group Team are Climate Change and Climate Resilience Activists

Corporate climate change and resilience activists see the benefits of profit and principles that lead to a greener future. The Hamptons Group is committed to the corporate responsibility of embracing a green economy in our core values and principles. We invite you to read more about our commitment to corporate climate change activism at the following links:

Innovations in Climate Change Adaptation and Mitigation

March 15, 2023 Social Issues

Jeff Bartel

Chairman and Managing Director

Global warming and its impact on the planet, its denizens, and the ecosystem has been a mounting apprehension for decades. Despite years of attempts by the scientific community to counteract or, at the very least, moderate climate change, it remains a pressing concern. However, the recent emphasis on climate activism, climate change adaptation, and mitigation has assumed even greater significance.

There has been a considerable advance in technologies designed to reduce the impact of climate change and help the planet and its inhabitants adapt to these changes, with millions, if not billions, expected to be affected by these innovations.

Aerial view from drone of a part of a road junction. Transportation and infrastructure concept

Green Infrastructure as a Climate Change Adaptation

Green infrastructure is quickly becoming a popular tool for minimizing the impact of climate change, such as rising temperatures and extreme weather events. Green roofs and trees can be strategically used in urban environments to reduce the effects of increasing temperatures. As another example, shorelines can be protected from erosion and damage by buffers and dunes.

Innovations in green infrastructure are being utilized to tackle issues with stormwater drainage. Traditionally, towns have depended on gray infrastructure, such as pipes, tunnels, and gutters, to direct water to waterways and local treatment plants. This outdated system can increase the risk of water pollution and overburdened treatment facilities. 

Green infrastructure, such as permeable pavements, green parking lots, and rain gardens, is being installed as cities adapt to climate change. Green infrastructure also includes plants and oil systems that absorb, evenly distribute, and efficiently use stormwater as it falls.

Solar panel, sun battery, alternative renewable energy. Ecology electrical station

Renewable Energy’s Role in Climate Change Adaptation

The perception of renewable energy as a novel technology is a common one. However, it is essential to acknowledge that wind and solar power have been efficaciously energizing homes and cities for several decades. The innovation designed to reduce dependence on traditional energy sources, such as coal, gas, and oil, is rapidly advancing and helping climate change adaptation. The first cargo ship equipped with a wind-powered propulsion system set sail in October 2022.

Energy-harvesting yarn stands as yet another remarkable stride in the progression of renewable energy. Researchers from the University of Dallas invented a “stretchy yarn made of carbon nanotubes.” This yarn, which is 10,000 times smaller than a strand of hair, can convert mechanical motion into energy. Advanced technologies like this can help reduce greenhouse gas emissions, make electric power more affordable, and expand access to electricity in areas lacking.

Climate Change Adaptation with Carbon Capture and Storage

Climate change is considered primarily caused by carbon dioxide, one of the most significant greenhouse gases. Carbon Capture and Storage (CCS) is specifically designed to help reduce CO₂ emissions through carbon sequestration. This climate change adaptation method captures carbon dioxide at power plants and reroutes it to underground reservoirs.

Currently, CCS solutions can only capture about 55% of CO₂ from these plants, but the future goal is to maintain a 90%-100% capture rate. With this objective in mind and the need to mitigate the impact of greenhouse gases on the climate, we expect that investment in energy storage will grow to nearly $620B by 2040.

Climate-Smart Agriculture

According to recent studies, more than 800 million people worldwide go hungry. In addition, it is predicted that global food production will need to rise by more than 60% by 2050 to feed the world’s growing population. While there are many reasons for food insecurities worldwide, climate change is a significant culprit. Rising temperatures and extreme weather systems are impacting agricultural lands and production outcomes.

Investments in climate-smart agriculture innovation are leading the way to help overcome some of these challenges. Examples of climate change adaptation through climate-smart agriculture include the invention of drought-tolerant seeds and advanced irrigation systems. These techniques are helping more than 300,000 farmers in Niger sustainably farm nearly 80,000 hectares of land. Other scientific adaptations in climate-smart agriculture include low-carbon farming, precision agriculture, sustainable cattle ranching systems, and innovative feeding strategies.

Green Finance as a Climate Change Adaptation

The Paris Climate Agreement set lofty goals for climate change mitigation and developing adaptation strategies for climate change. However, reaching these goals requires more than just government grants and climate change policy — it also requires green, sustainable finance. The good news is that worldwide green finance has increased 100 times over the last ten years. This financing includes a combination of green bonds, traditional loans, and private equity.

Investors are choosing to invest in everything from green infrastructure and renewable energy to CCS and intelligent agriculture. Additionally, banks increasingly use multifaceted risk assessments to identify potential climate-related risks. These assessments can help owners and developers work on ways to mitigate these risks, develop climate change adaptation strategies, and minimize their impact on climate change.

Climate Change Mitigation and Innovation

Issues such as food insecurities, rising temperatures, rising ocean levels, and extreme weather events will continue to drive climate change mitigation and adaptation.

As the weather gets warmer, you can use green financing to adapt to climate change. Whether investing in green bonds, green stocks, or green financing, you can be sure these funds can go a long way in helping the world mitigate and adapt to climate change. Contact Hamptons Group to explore your investment options.

A  Sustainable Future with Adaptive Planning

March 1, 2023 Business

Jeff Bartel

Chairman and Managing Director

The global pandemic taught business leaders the importance of remaining flexible and adapting quickly to changing markets. The effects of COVID-19 may be subsiding, but the need to remain adaptive has not. Between emerging technologies, shifting consumer demands, supply chain disruptions, and inflation concerns, today’s organizations must have the ability to veer and adjust as necessary. The adaptive planning model is an effective way to build flexibility into your business strategy. 

The Importance of Adaptive Planning

Adaptive enterprise planning involves building a flexible business plan that can easily adjust to shifts in various factors, such as goals, objectives, customer demand, dependencies, constraints, risks, and feedback. Some business leaders incorrectly use the terms agile planning and adaptive planning interchangeably. Despite their similarities, these planning methods differ in both scope and purpose.

While agile planning focuses on building flexibility at the operational level, adaptive planning is done at the organizational level. Adaptive planning requires collaboration from all key players. Several factors make now the right time to switch from a traditional planning model to an adaptive one.

Ability to Adapt to Shifting Markets

It is imperative that your company is flexible enough to adapt to the changing market of today. Adaptive planning assumes that changes will occur. Consequently, businesses have to evaluate and adjust their business plans.

Prepare for the Future

Since adaptive, flexible planning requires frequent assessments, it allows your team to forecast the future needs of the company better. This step enables your company to readjust its business plan to prepare for the future. This continuous cycle of assessment and adjustment can give your company a competitive edge so it can remain relevant and successful.

Data-Driven Decisions

One of the best benefits of adaptive planning is that it allows businesses to make collaborative, data-driven decisions. Building an effective adaptive planning model requires collecting and analyzing various data points. With this process already built into your business model, your teams always rely on the real-time planning potential it needs to make sound business decisions.

Build Resilience into Business Plan

Most importantly, adaptive strategic planning can help build resilience. It allows your company to prepare for the unexpected. So, when markets shift, supply chain challenges occur, or a labor shortage hinders production, your company will not be stuck navigating these issues with a rigid, traditional business plan. Instead, it can quickly set new goals, shift priorities and efficiently communicate these changes to all key players.

Steps for Effective Adaptive Planning

Studies show that 90% of small business owners have concerns about inflation, yet less than 25% have any type of plan in place to deal with this challenge. This statistic is concerning at best. Adaptive planning cannot only help your organization deal with inflation concerns, but it can help it navigate a variety of challenges.

It is necessary to set up a business planning process to be effective. Here is a look at the main steps of adaptive business planning.

Set Business Plan Objectives

The first step of any successful business plan, including adaptive planning, is to set clear goals and objectives. For adaptive management, this step requires high-level, dynamic planning that involves collaboration from all key players.

Prioritization

The next step is to break these goals and objectives into smaller, more manageable targets. Next, your team must prioritize these goals. Naturally, immediate goals most important to the company should receive the highest priority. While objectives that are long-term or are still developing should receive lower priority. This step allows the company to focus on the essential objectives and can help avoid wasting too many resources on pursuits that are likely to shift significantly over time.

Plan

With priorities set, your company can develop effective strategies for meeting these goals and objectives, with the most focus on high-priority objectives. The project planning process should also be collaborative, with all key players working towards the same common goals and mission.

Implement

Naturally, the next step is to put your business planning strategies into action. This step involves company-wide communication to ensure everyone understands their roles and responsibilities.

Evaluate

One of the most critical parts of adaptive business planning is to evaluate outcomes. This type of assessment is done regularly. For example, planning assessments should be done quarterly at a minimum. Set regular times for these evaluations, but be prepared to conduct additional assessments if a significant challenge, such as supply chain disruptions, occurs. This evaluation allows your teams to determine what strategies are working and where improvements or shifts are necessary.

Adapt Business Plan

Once you analyze results and bring in other factors, such as new challenges, customer demands, and emerging trends, you can start to adapt your business plan. Consider customer and employee feedback, company values, changes in the market or economies, potential risk factors, and other notable factors. This process involves more than just shifting a few objectives. It may require refining the scope of your business plan, eliminating or shifting long-term goals, reevaluating priorities, or other adjustments.


Steps for Effective Adaptive Planning

Traditional planning typically takes a long-term approach that teams only evaluate annually. This rigid approach can be practical for five-year planning, but it also can be challenging to adjust and alter once in place. While traditional planning served a purpose in the past, it simply cannot keep up with today’s fast-paced markets.

On the other hand, adaptive planning takes a more flexible approach where scale and scope can be quickly adjusted to meet emerging demands in the market. This planning alternative focuses on team collaboration and assigning priorities to various goals and strategies to ensure the most critical objectives receive the most attention.

Tools and Techniques for Adaptive Planning

There are several tools and techniques available to make adaptive planning more efficient. It is necessary to evaluate your options and make sure that the tools you choose offer the flexibility required by your company. For example, your company can use multiple innovative games and techniques to help brainstorm new ideas, such as the Sailboat Game and Prune the Product Tree.

You can also use techniques such as surveys, questionnaires, and interviews to gain feedback from employees and customers. Tools, including Affinity Estimation, Planning Poker, and Wideband Delphi, can help teams better plan and set precise estimates.

Using Strategic Advisors to Implement Adaptive Planning

Preparing your business for the future means being flexible enough to adapt. Transitioning from a traditional business model to adaptive planning can be challenging. A strategic advisor can help make this smooth and effective transition. Contact Hamptons Group today to meet with one of our experienced strategic advisors.

What Does a Chief Sustainability Officer Bring to the C-Suite?

September 14, 2022 Sustainability

Jeff Bartel

Chairman and Managing Director

Sustainability is no longer an issue that anyone can ignore. From investors to consumers, stakeholders at all levels increasingly demand a shift toward sustainable business models from investors to consumers. A Chief Sustainability Officer addition to your C-suite provides your organization with insights and strategies that accelerate sustainability practices. These, in turn, can boost profitability. Explore how a CSO officer can impact your organization to determine if you should add this C-suite executive position.

The Mandate of a Chief Sustainability Officer

The role of the Chief Sustainability Officer is diverse. For example, ESG risks vary by organization and industry. Additionally, priorities and corporate sustainability goals likely differ based on company culture and organizational leadership goals.

While the mandate of the CSO varies by organization, some key responsibilities typically fall within the scope of this role. Exploring these elements makes understanding how a CSO can support your organization.

Cheif Sustainability Officer Insights

Sustainability is a complex concept heavily influenced by the external environment, including expectations from stakeholders, ESG risks, and external changes such as updated regulatory mandates. A Chief Sustainability Officer gathers insights from the outside world relating to those influences. They identify environmental risks and collect data on how others respond to those factors to help them anticipate needed changes. Then, looking inward, the CSO can assess how well prepared the company is to navigate those coming changes.

The CSO brings all this environmental insight to the leadership team. They educate the C-suite executive team on the ESG risks that could affect the organization and the changes the company needs to make to keep up with outside factors. They provide thought leadership to help the executive team navigate these issues and synthesize all the information to make it worthwhile.

ESG Governance

Another critical role of a Chief Sustainability Officer is to implement a system of checks and balances in corporate decision-making. They develop and implement governance guidelines that ensure environmental risks are given adequate consideration when making decisions.

CSOs also participate in governance activities and groups to guide and develop the sustainability agenda. For example, they might lead various committees, including ESG risk or audit councils.

ESG Strategy

Your corporate sustainability strategy requires a balance of changing with the outside forces and maintaining profitability. CSOs help to develop and implement the strategy for your organization, often supporting the CEO in strategic development to minimize environmental risks. Prioritizing ESG concerns helps create a customized approach for your organization.

How a Chief Sustainability Officer Contributes to Corporate Governance

The Chief Sustainability Officer is a C-suite fixture with a core responsibility in corporate governance about sustainability. A CSO brings the following strengths to your organization’s corporate governance.

Agile Critical Thinking

A Chief Sustainability Officer implements agile critical thinking to help you adapt in quickly changing environments. Agile critical thinking requires logical reasoning to understand a problem or situation deeply. It uses a framework with specific steps to use critical thinking effectively.

To use agile critical thinking, the CSO needs a strong understanding of your business, including the culture, risks, stakeholders, and other essential details to better understand organization-specific ESG concerns. Then, they collect and analyze the evidence for taking appropriate reactions. Remaining agile throughout the process allows the CSO to interpret and apply changes and new data as it arises.

Exceptional Communication

Corporate sustainability initiatives might originate with your CSO, but the responsibility for implementing a corporate sustainability policy and reaching related goals filters out to the C-suite and beyond. An effective Corporate Sustainability Officer has excellent communication skills to educate the team on the key issues. They not only need to disperse insight and data in a way that people outside the sustainability bubble can understand, but they also need to exert their influence to get others on board with corporate sustainability goals.

Flexible Management Style

Successful Chief Sustainability Officers embrace and incorporate a variety of managerial styles to facilitate sustainability in corporations. These styles allow the CSO to become a catalyst for long-term, radical change. Key management styles for a sustainability director include:

  • Agitator: This type of leader aims to disrupt, pose questions, and challenge the status quo to create change. They bring up issues publicly to draw attention to the problem and rally people around making the desired change without presenting solutions.
  • Innovator: Innovators work to create solutions for the identified problems. While generating those pathways, they look for potential issues and other options to avoid roadblocks.
  • Orchestrator: This type of leader helps coordinate the different parts of the solution to make it happen.
  • Executor: When someone takes on the executor role, they put the solution into effect while instructing and managing the people making the changes happen.
  • Facilitator: Facilitators serve as mediators, invite input from others, and encourage others to promote collaboration.

An experienced CSO knows when each style is required based on the organization’s needs and specific situation. As a result, they often move between different leadership styles to get the desired results.

The Impact of Social Venture Capital on Society

August 18, 2022 Corporate Responsibility

Jeff Bartel

Chairman and Managing Director

Venture Capital as a Force for Societal Change

While traditional venture capital investment continues to provide investors with opportunities for financial reward, impact investing and social venture capital are beginning to take center stage in the investment arena. Venture capital projects with a potentially positive impact on society provide investors with an opportunity to return profits while supporting the most critical, necessary societal changes. Often supported by both the public and the public sector, there are many advantages to social venture capital. 

Trends in Social Venture Capital in 2022

Venture capital grew throughout 2021 and into 2022 after exiting the disruptions of 2020. It was up $332 billion in the first three quarters of 2021 compared to the same period in 2020, and early-stage funding was up by more than 100%. Despite that growth, venture capital did not see the types of growth in ESG considerations that other investment areas did. That creates a significant opportunity for growth in social venture capital in 2022 and beyond.

Over the past year, movement in social venture capital indicates many firms and sectors are poised for that growth. Venture capital collaborations are moving to improve practices across the industry to support diversity and other critical missions, and many firms are hiring directors of sustainability and other professionals meant to steer investments and initiatives in ESG directions.

What Are the Main Advantages of Social Venture Capital?

Social venture capital offers many benefits for firms, businesses, entrepreneurs, and the community or society. Some of the benefits of social impact investing and social ventures include:

  • Better access to funding sources. Governments and other agencies offer incentives for social impact investment, making investors of all types more likely to enter the pool. In addition, channels such as crowdfunding and angel investments are typically easier to access when a mission backs the venture.
  • Increased service to the community. Services developed in social impact finance tend to be more relevant to community needs and more likely to solve known social or environmental problems.
  • Easier buy-in. ESG venture capital firms act on agreed-upon environmental, social, and governance missions. Because of that, it is easier to get buy-in from all stakeholders because the mission is clear, and most people can stand behind it.
  • Greater diversity. Consumers increasingly buy from brands they believe support important missions and social responsibility. Social venture capital tends to lead to increased diversity naturally.

Does Social Venture Capital Have Any Disadvantages?

Social venture capital is not without disadvantages. For example, social entrepreneurs relying on social venture capital may give up control to get funding. In addition, a lack of historical case studies may make it difficult for social entrepreneurs to convince potential investors. This may be challenging until social venture capital becomes a long-term trend.

The Dual Nature of Social Impact Investing

One of the challenges leading to investor hesitance for social impact investing is its dual nature. Investors and venture capitalists historically were concerned with the return on their investments. The bottom line can not be ignored, as investors that pour money into ventures that do not perform go out of business quickly. But social investors are also concerned with how the venture performs with regard to social or environmental factors, including diversity, sustainability, reduced emissions, or policies that provide for the community.

A business woman investor examines solar panels while holding her notebook with social venture capital impacts listed.

Social Impact Investing To Cool the Planet

One growing area of social impact ventures has to do with the environment. Social entrepreneurs are leveraging innovation, sustainability, and other processes to create products or provide services in a way that safeguards the planet. Climate impact investors are putting money behind those efforts, funding businesses and efforts that keep the planet central to all missions.

Venture Capital to Reduce Poverty

In the same way, for-profit and nonprofit venture capital investors seek to improve the quality of life of people across all borders. For example, many are looking at ways venture capital can reach the poor in developing countries. Funds from private and public sources are being used to educate and train people in these nations to help them develop businesses, local economies, and even entire infrastructures that might lead to longer-term profits or prosperity. Again, the efforts come up against significant challenges, including currency risk, cultural barriers, and long-term poverty that can be difficult to change.

Removing Barriers for Minority Entrepreneurs

Women, Black, LGBTQ, and other minority entrepreneurs have historically found it challenging to get funding for several reasons. First, historically, not many partners in venture capital and investment firms match these demographics. People often invest in ventures that make them feel comfortable, which can mean a trend of investors funding ventures for and about people that look and act as they do.

Cultural and societal barriers, including systemic racism, also play a role in reduced funding opportunities for minority entrepreneurs. However, as more investors seek social impact ventures and awareness about diversity needs continues to rise, those trends are changing. As a result, venture funding to minority businesses has been up in recent years, though there is still a lot of ground to cover, as it remains small compared to the entire funding pie.

How Do You Measure the Impact of Social Venture Capital?

The first step in measuring the impact of social venture capital is to define why it matters and what success looks like for all involved. The second step is finding a numeric measurement that can help indicate performance.

If someone is trying to create more diversity, a good metric of success might be how many of their venture investments are run by or related to minorities. Investors interested in climate impact investing might want to measure the emissions associated with their portfolios.

Going beyond measurement, social venture capitalists might rely on case studies to demonstrate success in a more narrative format. Case studies can raise additional awareness and funds and illustrate the impact on investors and other stakeholders.

Examples of the Effects of Social Virtual Capital on Society

Social virtual capital has plenty of positive effects on society. For example, a venture capital fund that seeds startups helps businesses get off the ground. But a social venture capital fund that specifically seeds startups with a community mission does more than that: It helps a business help others. Likewise, a social impact investor that puts money behind ideas that introduce sustainability into sectors that do not tend toward eco-friendly processes helps those businesses grow and protect the environment.

Ultimately, social venture capital can change the world. Investors must do so, however, with one eye focused on change while the other eye remains trained on the bottom line. It can be a problematic duality to walk, but it is critical to the future success of communities, nations, and even the planet.

Reacting to Recent Trends in Shareholder Activism

July 18, 2022 Corporate Responsibility

Jeff Bartel

Chairman and Managing Director

Shareholder activism was robust from 2017 through 2020. Though it saw some decline in 2020, partly due to economic and business disruptions related to COVID-19, activism is bouncing back. Large-cap companies in the United States saw a 30% increase in activist campaigns in early 2021 compared to the same period in 2020. The expectation is that shareholder activism will continue to rise. Understanding shareholder trends and reacting proactively to them is essential for businesses, investors, and governments.

Shareholder Activism in 2022

M&A and shareholder activism trends in 2022 continue to follow paths set in 2021 and even earlier. However, the evolution of societal, economic, and political factors continues to play a role in how these paths develop. Some types of shareholder activism investors and businesses can expect through the rest of the year and the immediate future include:

  • ESG as a continued focus. Record numbers of ESG-related proposals were presented and successfully won shareholder support in 2021. That trend is expected to continue, especially given that governments and other agencies are pushing these agendas alongside private equity and activists.
  • M&A activities leveraged as change mechanisms. M&A activity continues to be a driving force in shareholder activism, with hostile takeovers and board member removal used as change mechanisms to drive desired future states. For example, when Senator Investment Group failed to secure CoreLogic due to the CoreLogic board voting down the proposal, it teamed up with activist shareholders to vote out members of the board and replace them with people willing to vote in the acquisition.
  • More shareholder support for social and environmental activities. Board takeovers and other changes managed through shareholders and voting are likely to increase with growing support from shareholders in certain areas. In addition, shareholders are increasingly stepping up to champion environmental and social proposals—a fact that boards, other investors, and businesses must take note of to continue with success in 2022 and beyond.
  • More activist efforts are succeeding. Historically, boards and businesses could count on activist efforts to fail in most cases. But the David and Goliath dynamic has slipped, and shareholder activism holds more power than existing structures. As a result, business leaders and others should not act on the assumption that activist efforts are likely to fail.

Growth of ESG Shareholder Activism

Investors’ desires to back personal and societal missions with money have increased, creating a significant force in the changing balance of power that ensures more activist efforts succeed. These factors have, perhaps, the most current momentum in two areas: climate change and social justice.

Activist investors and activist shareholders are putting pressure on firms of all types to go green to reduce emissions and carbon footprints, reach toward Net Zero futures, and reduce risks associated with climate change. Tactics used by these investors range from creating awareness for their missions to negotiating with firm management to make change happen. For example, they may put proposals in front of boards or other shareholders for votes. They can even go so far as hostile takeover activities such as voting out board members or arranging proxy votes to orchestrate change.

One interesting note in 2022 is that this type of environmental-economic activism is taking a top-down journey. The greenest companies have become too expensive for some investors, and shareholder activists may find they have done all they can with such firms. The dollars, then, are trickling down to investments where ESG is fledgling and shareholder activists can make more significant changes.

Social justice is another rallying point for shareholder activists, who look to embed missions related to economic and social equality into firm activities and growth. In many cases, shareholders support these proposals because failure to engage in social justice is seen as a risk for modern businesses, especially as business partners and consumers become increasingly aware of such activities.

M&A Shareholder Activists: Firms Should Remain Vigilant

It is increasingly important for firms to be aware of shareholder activism and its potential impact on M&A activity. Activist investors are increasingly driving M&A activity, selling, or breaking up companies to achieve desired results for social or environmental concerns. 

Firms should always remain aware of potential shareholder activism and how it might impact mergers, acquisitions, or overall business growth. However, before launching any effort, firms should take time to analyze weaknesses, particularly concerning ESG, and understand shareholder desires and makeup. Looking for shareholder positions of strength that can leverage to force M&A activity to move in a specific direction can help firms understand where weaknesses are and what potential paths shareholders might try to push the business down.

Moving Industrial Clusters Toward Net Zero

July 15, 2022 Corporate Responsibility

Jeff Bartel

Chairman and Managing Director

Executive Summary

Industrial clusters are one tool for companies to take the climate action consumers are demanding. An estimated 70% of the global economy appears committed to reaching Net-Zero by 2050. For the past decade, industry has accounted for more than 25% of the global economy. The industrial and energy sectors account for more than 50% of global greenhouse gas emissions.

By working together, businesses within industrial clusters can significantly impact emissions and help achieve net-zero goals on time.

Net Zero Solutions for Industrial Clusters

Industrial clusters have a lot of power and responsibility as essential drivers of wealth and growth in various global regions. That includes responsibility for social and environmental factors that may feel impacted by industrial businesses. With around 70% of the global economy, including economies in China, India, Africa, and Saudi Arabia, committing to net zero, industry clusters must find solutions to support net-zero emissions and other environmental goals while helping maintain economic stability within their regions.

Direct Electrification

Electricity is a crucial factor in moving toward net-zero energy for all types of industrial clusters. Relying more on electric power over fossil fuels and other energy sources can significantly affect pollution emissions. However, moving in that direction involves an energy transformation that has not been seen since the Industrial Revolution and, even then, likely outpaces that historic time of innovation. Therefore, energy companies and industrial clusters must embrace new solutions from digitization and low-carbon technologies. 

Carbon Capture

Despite the excitement over direct electrification, resource and functional limitations mean that not all efforts within industrial clusters can transition to these cleaner forms of energy — certainly not in the immediate future. Carbon-capturing technology has become increasingly critical in this environment, and current efforts are falling short. According to data from the International Energy Agency, at the current rate of progress, carbon capture projects will fail to capture the 1.7 tons of CO2 required by 2030 to keep up with global goals for a 2050 net-zero scenario. Industry cluster businesses must step up to push these efforts further and gain more ground in this area.

Hydrogen Technology

Hydrogen technology is a low-carbon, clean energy alternative that may help industries turn away from high-carbon gasses and fuels. While hydrogen technology is currently in use, it is a relative newcomer to sectors that have long relied on fossil fuels. Nevertheless, industry leaders are committing to hydrogen research and developing this technology. Others in the niche must follow suit by implementing these technologies as they become available.

Bioenergy

Bioenergy is the oldest form of energy used by humans, who began burning wood for warmth centuries before electricity, fossil fuels, and other energy sources were available. Researchers are delving into different biomass energy resources, including byproduct residues from industries such as forestry and agriculture and even fumes from landfills. Bioenergy is frequently focused on turning the byproducts of one process into energy sources for another.

 

Carbon Net Zero in industry can be attained through industrial clusters

Collaborations for Net Zero Industrial Clusters

Organizational and governmental actions must drive collaborations to help create net-zero industrial clusters. Since the world is already falling behind on total net-zero goals, U.S. government efforts, U.N. collaboration, and buy-in from large sectors, such as China’s industrial clusters, are critical to future success.

Industrial Cooperation

Profound transformation must occur by 2030 to support the final goals of net-zero emissions by 2050. It is a relatively short time frame, requiring intense cooperation and collaboration among industry clusters. The IEA notes that investments are already being made in technologies to support low-carbon and net-zero approaches. By 2040, the average expected investment in technologies for this purpose is $350 billion; by 2060, those investments are expected to rise to $3 trillion.

While alternative energy investments are significant, businesses and agencies within industrial clusters must also cooperate to:

  • Set and work toward short- and long-term goals together. Goal-setting is a requirement for companies adopting the Net-Zero Standard. Working together can help businesses within industrial clusters set realistic goals and work through the challenges of obtaining them.
  • Find ways to make rapid, deep emissions cuts in the short term. By working together to find the low-hanging fruit and enacting quick cuts to emissions where possible, businesses in industry clusters can significantly impact global emissions, even in the near future.
  • Moving beyond value chains. Most businesses prioritize cutting emissions within value chains, but industry cooperation lets organizations move beyond those goals to find further options for reducing emissions.

Government Initiatives for Industrial Clusters to Reach Net Zero

With approximately half the global population highly vulnerable to the impacts of negative climate change, governments across the globe have reasons to join in the cooperative effort to reduce emissions. Some ways government initiatives and collaborations can lessen the impacts of climate change by supporting industrial cluster moves to net-zero include:

  • Setting priority policies to support net-zero efforts. These can range from creating and enforcing regulations for driving net-zero approaches to funding and rewards for industrial clusters and businesses that meet goals.
  • Creating opportunities for investors. Public-private partnerships increase available capital for green-tech efforts and drive flexibility for rapid adoption and implementation of sustainable technologies.
  • Being aware of internal issues. Understanding government issues and how they might create blockers for success with net-zero is important, as it allows nations and agencies to address challenges and create smoother paths to success for industrial clusters and businesses.

Collaboration across business sectors, national borders, and industries is critical to reaching net-zero goals and objectives. Industrial clusters can lead the way by modeling collaboration and implementing rapid new developments.

Sustainable Banking to Address Climate Change

June 17, 2022 Sustainability

Jeff Bartel

Chairman and Managing Director

Modern finance and banking must integrate a new green — one that has nothing to do with the color of the American dollar bill. Organizations within the industry are being called upon to address climate change through policies, investment practices, and sustainable banking.

These burdens come when the nation — and the world — is looking to change. The disruption of the COVID-19 pandemic created new normals in all sectors, and leaders and citizens wonder if returning to old ways following the global health crisis would be a wise or sustainable move.

One of the drivers behind a desire for ongoing change is the climate crisis. According to the National Oceanic and Atmospheric Administration July 2021 was the hottest month on record at that time for planet Earth. Wildfires, record-breaking rainfall in many areas, and rising sea levels lead to growing concerns, and those concerns are turning into action.

Governments are initiating regulations, pushing banks and other financial organizations to enact sustainable practices. Discover more about these practices and the current transition in financial sectors below.

How Financial Institutions Enact Sustainable Banking Practices

Supporting Partnerships With Regulatory Organizations

One essential strategy for sustainable banking is collection action between regulators and others within the industry. Banks and other financial organizations get a say in those policies by partnering with regulatory agencies and demonstrating a sincere desire to enhance sustainable policies. They can bring expertise and background to the table to help regulators understand changes’ business and economic ramifications and find the right compromise between sustainability and support for financial concerns.

Helping to Direct Private Sector Financing with Sustainable Banking

Sustainable investing, such as socially responsible real estate investing, can amplify positive policies enacted by governments, bringing practical change to financial sectors. But environmental integrity is a top-down asset. So financial institutions must model it and encourage private investors to do the same.

Moving Toward Green Agendas With Financing

Banks can help push forward green agendas by choosing to finance efforts with those goals. Ultimately, corporate responsibility for sustainability is shared across industry sectors, and banks can support partners by backing the appropriate measures.

Windmills financed with sustainable banking.

Impact of Low-Carbon Transition on Asset Values

The move to reduce carbon footprints across all sectors around the globe is changing asset valuation for banks. During this period, financial organizations may be looking for sustainable banking opportunities such as alternative energy investments, but they must also be mindful of assets in transition that may become stranded.

Examples of Investment Needs During the Transition to Sustainable Banking

Investment needs during the transition range from supporting new infrastructure to backing products and projects that drive positive outcomes for the environment. Some examples include:

  • Sustainable energy, including infrastructure such as wind farms and solar panels as well as R&D on innovative solutions
  • Upgrading existing infrastructure, particularly in fields such as manufacturing, to support ongoing functionality with a reduced carbon footprint
  • Products and services that move communities and nations away from reliance on fossil fuels, such as electric vehicles

Financial Factors Impacted by the Transition

The evolution during this transition has an impact on financial factors, including:

  • Operating expenses are likely to increase — at least in the short term — for organizations that work to enact change. Research and development, implementation, and training are just some efforts that could drive up operating costs and impact asset cash flow during the transition.
  • Depreciation and amortization of equipment and assets that don’t align with sustainable practices. The value of these assets may drop faster than initially planned, creating monetary stress that ripples up through financial organizations.
  • Costs of financing can create burdens for investors and other businesses as they seek to generate sustainability while maintaining current cash flow and other financial goals. As a result, investment financing may be an option that more partners turn to during this period.

Stranded Assets

Going increasingly green means abandoning long-term infrastructure and processes, stranding once valuable assets. As a result, transportation, oil and gas, and manufacturing are all at risk, and assets in these sectors may quickly become liabilities soon.

Climate-Focused Credit Risk Assessments

Banks are working to embed climate risk into lending practices to reduce the potential for losses in the future. Some techniques in this effort include:

  • Considering climate risk assessments at the origination of investments or loans. Businesses and even individuals seeking financing may need to demonstrate a plan for sustainability on top of traditional factors such as creditworthiness.
  • Banks are using practices such as ESG scoring to include climate concerns in underwriting practices to mitigate risks further.

Sustainable Banking Stress Testing

Traditional risk forecasting does not work well in assessing climate risks because traditional models were never built with sustainability in mind. So instead, governments, central banks, and other institutions are implementing climate stress testing.

At its highest level, sustainable banking stress testing looks at whether an institution or process is taking the right actions and has a good mix of suitable investments to make it through the climate transition. However, stress testing should also occur at lower levels concerning each customer, investor, and investment.