Business enables evolution, investors enable business
Evolution is at its best when it is beneficial to both the organism and its surrounding environment.
For evolution to be most beneficial it must sustain the organism and its environment. That’s why we’re passionate about businesses contributing to the benefit of people and the natural surroundings they depend on. Much environmental destruction has occurred at the hand of capitalism, it must be stopped and reversed at pace.
As investors, we have a unique opportunity to influence the management of companies in adopting sustainable policies. Where information is lacking, or where we believe improvement can be made, we actively communicate those concerns to management. Being proactive in this way exerts meaningful pressure on management who rely on investment for their operations to be viable.
The investment community at large is now adopting a sustainable mindset, demanding responsible actions by the management of companies it supports. Global sustainable investment is now over $30 trillion – up a massive 68% since 2014 and over 10 times that of 2004 (McKinsey, 2019). The United Nations (UN) has played a key role in coordinating this effort. Blue Oceans Capital is supported by and contributes to the UN through our membership with The United Nations Environment Program Finance Initiative (UNEP FI) and by signing The Principles for Responsible Investment (PRI).
The PRI is the world’s largest enabler of responsible investment. Its function is to understand the implications of investment as it relates to environmental, social, and governance (ESG) factors and supports a global network of investor signatories in their effort to incorporate these factors into decision making processes. The PRI is independent. It does not operate for profit, is not affiliated with any government, and is part of the United Nations but not supported by it.
A partnership of 240 institutions working with the UN Environment to address the most pressing environmental issues facing the world today. The group works to understand known and emerging issues, why they matter, and how to overcome them as relevant to banking, insurance, and investment decision making and market practice.
Presented below are a series of case studies outlining our Environmental, Social, and Governance analysis on some of our current investments and also Facebook, a company we sold due to ESG concerns.
SolarEdge – One of the worlds largest and most innovative solar panel and inverter manufacturers. Solar edge in actively transitioning the world towards sustainable energy usage.
The Trade Desk – An independent media buying platform that has scaled to a size where it is actively challenging the dominance of Google and Facebook by offering a completely unbiased, transparent service that protects the privacy of the consumer.
Appen – Human-annotated datasets for machine learning and artificial intelligence deployed by some of the world’s biggest companies and governments. Appen is enabling artificial intelligence that, when applied ethically, can help to accomplish many of the UN Sustainable Development Goals (Vinuesa, et al., 2020).
Adyen – A single solution payment gateway, fraud protection, data capture and reporting tool for merchants. Adyen improves society by enabling omnicommerce, reducing or eliminating the potential for fraud, and creating greater business efficiency.
Paycom – Efficient human management tool. Paycom allows employees to manage their own onboarding and training which greatly improves their efficiency and engagement. Cost savings to the business can be redistributed to innovation that drives greater employment and social benefits (Malloy, 2012; Martin & Kemper, 2012).
Facebook – ESG analysis uncovered critical social issues inherent in social media and failures by management of Facebook that forced us to exit a position we had held for some time.
Blue Oceans not only invests in companies with sound sustainable policies but actively imposes them on the management of our own business. In managing internal ESG issues, we follow the standards as set out in the ESG Reporting Guidelines for Australian Companies as set by the Financial Services Council. View a copy of our ESG Policy for Blue Oceans Management.
Malloy, C., 2012. “Wall Street Doesn’t Understand Innovation.” Harvard Business Review.
Martin, R., Kemper, A., 2012. “Saving the Planet: A Tale of Two Strategies.” Harvard Business Review.
McKinsey Quarterly, November, 2019. “Five ways ESG creates value.” Retrieved from: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/five-ways-that-esg-creates-value
Vinuesa, R., Azizpour, H., Leite, I. et al. “The role of artificial intelligence in achieving the Sustainable Development Goals.” Nat Commun 11, 233 (2020). https://doi.org/10.1038/s41467-019-14108-y