Al Gore has a new title to add to those of former vice president and former presidential contender: chairman of an investment firm that seeks out companies taking a responsible stance on big global issues like climate change.
He and a previous chief executive at Goldman Sachs Asset Management have launched the London-based firm, called Generation Investment Management, to tap what they feel is growing demand for an investment style generating returns by blending traditional equity research with a focus on more intangible non-financial factors such as social and environmental responsibility by companies.
“This new approach is designed to serve people who want to integrate sustainable returns with traditional equity analysis,” Gore said in an interview.
Gore will be chairman with David Blood — previously chief executive at Goldman’s fund arm — as managing partner.
Generation’s other founders include Peter Knight, who was campaign manager for then President Clinton's successful 1996 re-election race. Knight will be president of Generation in the United States.
The founders intend to contribute an unspecified amount to the fund’s start-up capital and have pledged to contribute five percent of its profits to a charitable foundation focused on exploring issues of sustainable economic growth.
Look at 'carbon intensity of profits'
Climate change is rising rapidly up investors’ agendas, underscored by last week’s decision by Russia to sign the Kyoto Protocol, which aims to curb global warming, Gore said.
He added it is impossible to analyze auto company stocks properly, for example, without taking the issue of vehicle emission standards into account, particularly for greenhouse gases such as carbon dioxide.
“The carbon intensity of profits is an approach that needs to be adopted,” he said, referring to the practice of measuring how much carbon is used in producing energy.
Gore, who lost to George W. Bush in the 2000 elections, has been a long-standing campaigner on environmental issues such as vehicle emissions.
He intends to get involved in helping drive Generation’s investment process, although he added he would not directly choose investments. “I’m not a stock picker,” he said.
Broadening the 'spectrum of issues'
The firm, established as a private partnership, will be based in London and also has offices in Washington DC. It is due to start running client money by the second half of next year.
Generation has already signed up to a recent initiative by four major European investment groups called the Enhanced Analytics Initiative, which will devote five percent of brokerage commissions to companies that take a longer-term and more rounded view of corporate performance.
The time is right to launch Generation because clients with years of future liabilities like pension schemes increasingly want fund managers to grasp long-term issues facing the firms they invest in, Blood said in the same interview.
“If you are going to invest with a five-year or even three-year time horizon, it is crucial that you think about a broad spectrum of issues in your analysis,” he added.
Generation will launch a fund holding global equities, but initially targeted at developed markets, to be marketed to clients such as pension funds and charitable foundations, as well as wealthy private investors, he said.
Clients will be able to compare the fund’s performance with a benchmark index such as the MSCI World Index. The firm will levy a fee linked to investment performance on a rolling three-year basis.