Do or do Not, There is no Try

    Stockholm (NordSIP) – Robert Rubinstein (pictured) has been running the worldwide conference and impact foundation TBLI, which stands for “Tripple Bottom Line Investing” for more than 20 years. NordSIP had a chance to catch up with Rubinstein and find out how the impact space has evolved and what investors need to focus on right now.

    Pushing the pain buttons

    Having started his entrepreneurial career in the publishing business, in the 1990s, Rubinstein set his mind on creating an economy based upon wellbeing. “I realised that I needed to have the business community on board, but that they would only respond to pain. So, I looked at what pain buttons I could press to get the attention of those business leaders behind the idea of profits and principles,” Rubinstein explains. “The three pain buttons that I found to be effective were finance, personnel and reputation. I studied these three pressure points and chose finance.”

    “In the mid-nineties, I looked at the concentration of assets globally. I found out that if I only focused on the top 100 asset owners and managers, I could achieve the maximum impact with the least effort. By aggregating the assets of those top 100, I saw that they had direct or indirect control over 20 to 25% of worldwide assets. If only I could convince 100 guys!”

    “By using an international conference on ESG and impact investing, I could help educate this group of investment allocators. For the next 25 years, I continually engaged with large institutional investors to educate them about ESG and Impact Investing. But it takes time to teach farming to hunters! And the financial sector mainly consists of hunters incentivised for short-term behaviour,” Rubinstein exclaims.

    Starting in an acronymic desert

    “When we started, there was no PRI, CDP, GIIN, Equator Principles, etc. It was a barren wasteland. Among a few others, TBLI pioneered the ecosystem for ESG and Impact Investing,” the founder continues. In 25 year, his independent organisation held 34 international summits in Europe, Asia, Latin America and North America. He also gave hundreds of talks to institutional investors about the importance of Value(s) Investing.

    “We always spoke the radical truth and confronted the status quo to change investors’ mindset regarding ESG and Impact Investing. People don’t like hearing that their children are ugly. They were probably irritated by our continuous pushing of the sustainable investing agenda, but we held onto our beliefs. As a result, we have, today, the largest network of investors truly interested in ESG and Impact and are well known, for our understanding, passion and authenticity.”

    A train in motion, but no station in sight yet

    Rubinstein sees the change the industry has undergone in the past few years, but he is not yet satisfied. “People are talking more about sustainability,” he says. “The financial sector has been forced to create products. Carbon has a cost and money flows have increased significantly towards ESG and Impact. Still, there is far too much chatter and not enough check writing. Everyone wants to be a member of ‘the ESG fitness club’, but few want to do the actual work or get onto the exercise machine.”

    “The investors doing the most are talking the least and the ones talking the most are doing the least,” Rubinstein continues. “I don’t see liquid investments supporting an economy based upon wellbeing. While ESG may have slowed down investments from fuelling negative developments, most liquid capital is still heading in the wrong direction. I wouldn’t call that progress. The market for liquid assets is massive, and many can earn fees from it, but merely doing less harm is not going to cut it.”

    “Asset owners, particularly pension funds, tend to prefer first-tier fund managers offering plain vanilla strategies. The fund selectors may invoke compliance or risk management, but it is, in fact, their career reputation they are protecting, by not venturing into innovative products. Most innovative egg or impact fund managers I advise don’t visit pension funds anymore. Pension funds may call me more often, but I don’t bother visiting them. I already know that, while they may listen and pick our brains, they will continue to focus on the usual top-tier funds. Family offices are more interesting for us, as they are far less bureaucratic and willing to give new ideas a try. To paraphrase Yoda ‘Do or do not. There is no try’”.

    ESG won’t’ bring about a Green New Deal

    For Rubinstein, ESG integration hasn’t had the expected effect on externalities. “Creating a financial model that truly addresses environmental and social issues is one step, but it won’t make a difference fast enough with listed companies. Investors increasingly integrate ESG and engage with companies, but we can’t see that having any significant effect rapidly enough. We need a massive Green New Deal and a sense of urgency the way Roosevelt drove the allies to win WWII. I don’t see that. The pain is not bad enough for people to make dramatic decisions.”

    “It is time to increase money flows into illiquid assets or alternative investments in sustainability,” Rubinstein recommends. “Give fund managers who invest sustainably at scale a chance. Publish the carbon intensity of institutional investments! All companies doing business with governments should be required to produce carbon reports by now. Meanwhile, fund managers that are still investing in fossil fuels should lose mandates for pension fund management.”

    The Green Silk Road

    While the Old World may be dragging their feet, Rubinstein sees hope in Asia. “Asia will move much faster than Europe or North America,” he believes. “However, while Asian governments and institutions may be able to redirect capital effectively, education has lagged, until now. At TBLI, we focus on Asia now. We want to help build an ecosystem to allow ESG to thrive, and we have the expertise to do so.”

    “Some Asians believe that convincing Europeans about Climate Risk and ESG was easy. When I started, I told them, I was asked to give a talk about Climate risk to and Association of Insurers in the Netherlands. A country below sea level could experience issues while the sea level is rising, I suggested. One of the insurers argued that the rising sea level was not a problem for them as they didn’t cover saltwater damage. Eventually, the insurers got the message.”

    For 2020, Rubinstein dreams of the Yidan Prize. “We were shortlisted,” he says, proudly. “This is the world’s largest cash award, four times larger than the Nobel Prize!”

    Picture courtesy of TBLI

    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA is Editor-in-Chief for NordSIP and Managing Director for Big Green Tree Media. She has 18 years of experience in the asset management industry in Stockholm, London and Geneva, including as a long/short equity hedge fund portfolio manager, and buy-side analyst, but also as CFO and COO in several asset management firms. Aline holds an MBA from Harvard Business School and a License in Economic Sciences from the University of Geneva.

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