april 2015 journal of sustainable - capital...

Journal of Sustainable Finance & BankingSM

April 2015

Volume II Issue 5

Global Market Strategy Updating the Global Equity Strategy Investment Clock Michael Geraghty … p. 16

Featured Domain UrbanInnovation.mobi Erika Karp, Michael Geraghty … p. 17

Regional Imperatives A Catalyst for Collaboration in Water Tech Innovation Will Sarni … p. 19

Open Source Excellence Cracking the Affordable Housing Market in India Matias Echanove and Rahul Srivastava … p. 22

Accelerating Impact Is Investing in Ocean Health a Key to Our Urban Future? Maria Damanaki … p. 26

Enhanced Analytics CarbonCount: A Quantitative Impact Scoring System for “Green” Bonds Ken Locklin and David Posner … p. 28

Giving Fiduciaries a Hand with Infrastructure Due Diligence John Williams … p. 31

Smart Transportation: The Urban Life Force Carol L. Stimmel … p. 34

Sustainable Standout Integrating Green Spaces to Build Stronger Communities Deborah Marton … p. 36

Virtual Attendance The Model Room Andy Zheng … p. 40

©leungchopan/Crystal Graphics e

http://www.bigstockphoto.com/search/?contributor=leungchopan

Cornerstone Journal of Sustainable Finance & BankingSM / April 2015 / 2

CEO’s Letter on Sustainable Finance & Banking

Erika Karp

Founder & Chief Executive

Officer of Cornerstone Capital

Inc.

This month in the “Cornerstone Journal of Finance & Banking” (JSFB),

global markets press forward through an earnings season characterized by

pressure on US companies from dollar strength, commodities price weakness

and slower emerging market growth. In news flows, this month saw the good, the

bad, and the ugly ranging from powerful growth in Apple's global ecosystem of

aspirational products, to the countdown to UK elections and Greek debt

negotiations, to humanitarian tragedies in the Mediterranean and Nepal, and

violence erupting across tension-filled cities stateside. One thing seems clear in

this market as we navigate unprecedented times with tenuous US-Iran

negotiations, a shifting environment for monetary policy, and negative yielding

bonds joining the fastest-growing asset classes: the global growth trajectory is

uncertain and characterized by increasing interconnectedness and complexity.

This uncertainty may be underlying the fact that the world's corporations

returned over $1T of cash to investors through dividends and buy backs. We

wonder if there will be long-term damage to future prospects for value creation.

That said, in considering complexity and interconnectedness, it seems that an

area ripe for investment opportunity is the cities of the world. And so we turn to

“Urban Innovation” as the theme for this month’s JSFB.

We look at existential threats (like the lack of natural water resources in

Singapore), to tremendous opportunities (like the potential of “green” bonds in

financing cleaner energy), and new tools available to more effectively measure

the ability of the private sector to address societal need (like those of Impact

Infrastructure Inc.).

We begin with a quote from Singapore's visionary founder Lee Kuan Yew,

who died this past month. While his relentless pursuit of his vision may not be to

the liking of many, his accomplishments were remarkable with worthwhile

learnings from his benevolent dictatorship and pragmatism. “The task of the

leaders must be to provide or create for them a strong framework within which

they can learn, work hard, be productive and be rewarded accordingly,” Yew

stated. So, speaking of leaders and frameworks this month, we turn to

Cornerstone's Global Markets Strategist Michael Geraghty who offers an update

to our “Investment Clock.” In light of recent market action and bottom-up

factors, we take this opportunity to highlight a somewhat more cautious stance

in the near-term and tilt away from the more cyclical Sectors and Regions.

Will Sarni weighs in next with thoughts on innovation in water

technology, asking “How does the public sector address the ‘new normal’ of

increasing water scarcity?” He finds lessons in Singapore’s journey to become a

global leader in self-sufficiency in an urban context. From there, Matias

Echanove and Rahul Srivastava take us inside the slums of India and the

challenge of reducing poverty through sustainable development as this month’s

case study in “Open Source Excellence.” The Institute of Urbanology planners

work to empower locals to create new neighborhoods that strive to meet demand

for affordable housing in areas where quality of materials are often suspect and

families with steady incomes still face obstacles in access to housing finance.

In the “Accelerating Impact” section, Maria Damanaki of The Nature

Conservancy recalls the damages wrought by weather disasters and issues an

“all hands on deck” call to engineers, community leaders, ecologists and

investors to become champions of new “green infrastructure” so the protective


values of say, healthier coral reefs can be harnessed to stop deadly wave energy

from hitting coastal zones. And what would our cities look like without trees,

grass and proper green spaces? In the Sustainable Standout section, Deborah

Marton of the New York Restoration Project shows the impact of a solid

land-based approach to building stronger communities by reclaiming desolate

spaces and turning them into productive models for social interaction

and landscape management.

All that enterprise requires energy -- and cleaner energy at that. We tip our hats

to Ken Locklin and Dave Posner and the Alliance to Save Energy for

introducing CarbonCount TM, a new tool to help “green” bond investors

understand climate impacts of renewable energy projects. The system, which

employs a quantitative metric to evaluate expected reductions in carbon dioxide

emissions, was honored as among four top prizes in the Finance for Resilience

(FiRe) challenge at the recent Bloomberg New Energy Finance Future of

Energy conference. (NB: Cornerstone Capital Group Board Member Dr.

Holmes Hummel garnered a separate honor for the PAYS system enabling

businesses to finance their own efficiency upgrades). Further on the subject of

evaluation tools, John Williams makes the case for more sophisticated triple-

bottom line valuation assessments for sustainable design projects so

fiduciaries can feel more confident in balancing the need for proper due

diligence efforts with traditional benefit-cost and risk analysis models that might

often prove too prohibitive. Carol Stimmel rounds out this fine issue with

thoughts on smart transportation grids that use predictive analytics as a

much-needed, sustainable “life force” to move us further down the road to

economic prosperity.

My sincere regards,

Erika

Erika Karp

Chief Executive Officer

http://bit.ly/1DJtQxz


Table of Contents

CEO’s Letter on Sustainable Finance and Banking

p.2

Market Summary

Overview p.6

Market & Global Sector Performance, Monetary Policy & ESG Data

p.8

Global Market Strategy

Updating the Global Equity Strategy Investment Clock

Michael Geraghty Global Market Strategist, Cornerstone Capital Group

p.16

Featured Domain

UrbanInnovation.mobi Erika Karp Founder & CEO, Cornerstone Capital Group

p.17

Regional Imperatives

A Catalyst for Collaboration in Water Tech Innovation

Will Sarni Director and Practice Leader, Water Strategy, Social Impact

Services Deloitte Consulting LLP

p.19

Open Source Excellence

Cracking the Affordable Housing Market in India

Matias Sendoa Echanove Co-Director, Institute of Urbanology

p.22

Rahul Srivastava Co-Director, Institute of Urbanology

Accelerating Impact

Is Investing in Ocean Health a Key to Our Urban Future?

Maria Damanaki Global Managing Director for Oceans,

The Nature Conservancy

p.26

Enhanced Analytics

Carbon Count: A Quantitative Impact Scoring System for "Green" Bonds

Ken Locklin Affiliated Expert, The Alliance to Save Energy

p.28

David Posner Financial & Economic Policy Program Manager,

The Alliance to Save Energy

Giving Fiduciaries a Hand with Infrastructure Due Diligence

John Williams Chairman & CEO, Impact Infrastructure, Inc.

p.31

Smart Transportation: The Urban Life Force Carol L. Stimmel Founder & CEO, Manifest Mind, LLC

p.34


Sustainable Standout

Integrating Green Spaces to Build Stronger Communities

Deborah Marton Executive Director, New York Restoration Project

p.36

Virtual Attendance

The Model Room Andy Zheng Research Associate, Cornerstone Capital Group

p.40

Upcoming Events

Global ESG Calendar p.42

Journal of Sustainable Finance & Banking Subscription Form

p.43

Articles p.45

Cornerstone Capital Team p.46

Important Disclosures p.47


Market Summary

Overview

The first quarter of 2015 is in the books and global

equity markets are demonstrating a level of resilience

despite mixed economic data and continued turmoil

in Greece. Equity bulls seem to be driving the market

– weak economic data is viewed as likely to delay the

Fed rate hikes and strong data is viewed as generally

positive for stocks. Investors are now focused on

corporate earnings as they listen for forward-looking

commentary that confirms the “grinding higher”

action witnessed in equity markets.

In the US, equities climbed to record highs despite soft

economic data and mixed earnings. Housing market

data has been encouraging as the NAHB Housing

Market Index rose from 53 in March to 56 in April.

Existing home sales also rose 6.1% YoY which is the

fastest pace in 18 months. On the other hand, the ISM

manufacturing index declined to 51.5 in March from

52.9 in February. While still in expansionary territory,

this marks the lowest level since May 2013 so it bears

watching. Despite the strength earlier this year, labor

market data came in softer than expected. The March

jobs report revealed the economy added 126,000 new

positions, well below the 248,000 predicted by

economists, and the job gains for the prior two

months were revised modestly downward. This may

give the Fed another reason to keep interest rates

lower for longer, as it has frequently underscored the

importance of labor market conditions on its

impending decision to hike rates.

Economic conditions in Europe continue to show

signs of improvement. Germany’s Ifo Business

Climate Survey improved to 108.6 in April from 107.9

last month, marking the highest reading since June

2014. That said, bailout extension negotiations

between the Greek government and its EU creditors

remain tenuous. Greece’s three-year government

bond yields retraced to ~22% after climbing to over

29% on April 21, highlighting the market’s

apprehension around the idea of a Greek sovereign

default. Some suggest the impact of a Greek default

could be contained and wouldn’t necessarily result in

a Greek exit from the currency bloc, an attitude that

may partially explain European equity market

resiliency.

Elsewhere in developed markets, Japan garnered

attention as the Nikkei closed above 20,000 for the

first time in 15 years. Share prices were bolstered not

only by a shift of state-owned investment funds into

equities, but also higher corporate profits benefiting

from a weaker yen. Furthermore, as part of Prime

Minister Shinzo Abe’s wider corporate governance

reform initiative, Japan’s first code for corporate

governance will take effect in June. By placing closer

scrutiny on the management of Japanese companies,

the code is expected to increase shareholder return. Of

note, Japanese robot manufacturer Fanuc announced

that it would double its dividend, paying 60% of its net

profit to shareholders, up from 30% previously.

In emerging markets, equities in China continue to

rally despite a new round of ominous economic data.

China reported first-quarter GDP growth at 7%, the

lowest figure in six years, and, according to many

economists, a likely overstatement. In addition,

industrial production growth fell to a six-year low of

5.6%; recent readings for electricity consumption,

investment, industrial profit were also soft. Despite

slowing economic growth, the Shanghai Composite

index rallied to seven-year highs on increasing

expectations for fresh government stimulus. In Brazil,

despite unexpected job additions in March and an

increase in consumer confidence in April, economists

continue to lower their forecasts for GDP growth amid

persistently high inflation. In Russia, though the ruble

retraced some of its losses incurred late last year, the

World Bank expects the Russian economy to contract

by 3.8% in 2015 in light of weak investment, double-

digit inflation, lower commodity prices, and Western

sanctions.

On a one-month trailing basis, the MSCI Emerging

Markets Index outperformed the MSCI World Index

(a developed market proxy) by approximately 8%,


resulting in a YTD relative outperformance of 5.7%

Small cap equities underperformed their large cap

counterparts by 1.2%, narrowing their YTD relative

outperformance to 1.5%. From a sector perspective,

performance was mixed between cyclicals and

defensives. In the MSCI ACWI (broad index for both

developed and emerging equities), energy, telecom

and materials outperformed, while healthcare,

consumer staples and consumer discretionary lagged.

Thus far, 237 of the S&P 500 companies published

first quarter earnings results, approximately 76% of

which posted earnings surprise, in line with the prior

quarter’s result. Topline results are less impressive,

however, with 48% of the companies posting a

positive surprise relative to 56% in the prior quarter.

Andy Zheng contributed to this article.


Market Summary

Market and Global Sector Performance

MARKET / INDEX PERFORMANCE

As of 4/28/15 (local currency) T1M (%) T3M (%) YTD (%) 2015 P/E 2015 P/B Div. Yield

US Equity Indices

DJIA 2.33 5.91 2.28 16.3 3.0 2.4

S&P 500 2.69 6.13 3.30 18.0 2.7 2.0

Nasdaq 3.69 9.65 7.45 22.4 3.7 1.1

Russell 2000 1.57 7.50 4.90 27.8 1.9 1.3

Developed International Indices

Euro STOXX 50 1.42 11.20 18.97 16.1 1.6 3.3

FTSE 100 2.85 4.38 8.62 16.8 1.9 3.8

CAC 40 3.06 12.71 21.66 16.8 1.6 3.1

DAX -0.48 10.28 20.46 15.2 1.8 2.7

Nikkei 225 4.01 14.72 15.75 19.2 1.8 1.5

ASX 200 0.52 8.77 11.95 17.5 2.1 4.3

Emerging Market Indices

IBOVESPA 11.07 16.66 11.27 14.6 1.3 3.8

Shanghai Comp 21.29 37.23 38.42 18.2 2.3 1.6

KOSPI 6.33 10.08 12.12 11.4 1.1 1.4

SENSEX -0.23 -7.17 -0.19 15.3 2.5 1.7

Global Market Indices

MSCI World 3.47 7.44 6.25 17.8 2.2 2.4

MSCI All-Country World 4.56 6.66 4.98 15.1 1.6 3.2

MSCI EAFE 4.55 9.24 11.03 16.9 1.8 3.0

MSCI Emerging Markets 11.44 8.71 11.97 13.3 1.5 2.6


As of 4/28/15 (local currency) T1M (%) T3M (%) YTD (%) 2015 P/E 2015 P/B Div. Yield

Sustainable Indices

DJ Sustainability World Comp 4.31 7.74 6.75 16.2 2.1 2.9

FTSE4Good Global 3.89 8.20 7.27 12.2 1.5 3.6

MSCI KLD 400 Social 1.29 4.82 2.33 20.1 3.4 1.9

Bovespa Corp. Sustainability 6.08 10.59 4.67 17.2 1.4 3.5

Fixed Income

Barclays US Aggregate 0.34 -0.06 1.83

Commodities Levels

4/28/2015 10/28/2014 4/28/2014

WTI Crude 57.24 80.66 91.7

ICE Brent Crude 64.86 88.91 102.41

NYMEX Natural Gas 2.508 3.551 4.191

Spot Gold 1214.88 1228.52 1296.74

LME 3mth Copper 6065 6730 6765

CBOT Corn 365.5 393.75 526.75

Currencies Levels

4/28/2015 10/28/2014 4/28/2014

EUR/USD 1.10 1.27 1.39

USD/JPY 118.91 108.16 102.49

GBP/USD 1.53 1.61 1.68

AUD/JPY 95.35 95.77 94.88

DXY Index 96.12 85.41 79.68

Source: Bloomberg, Barclays. Equity Returns: All returns represent total return for stated period. Dividends and coupons are not included

in the DAX and BOVESPA indices. Bond Returns: All returns represent total return for the stated period. Index characteristics: P/E, P/B,

and Dividend Yield are based on Bloomberg consensus estimates for the stated period.


MSCI ACWI SECTOR PERFORMANCE

As of 4/28/15

1 Month Price Return (%)

Source: Bloomberg. Sector returns are based on GICS

methodology. MSCI ACWI is a free-float weighted equity index

that includes both emerging and developed world markets.

YTD Price Return (%)

Source: Bloomberg. Sector returns are based on GICS

methodology. MSCI ACWI is a free-float weighted equity index

that includes both emerging and developed world markets.

US EQUITY STYLE PERFORMANCE

Style box returns are based on Russell Indices with the exception of the Large-Cap Blend box, which reflects

the S&P 500 Index. All values are cumulative total return for the stated period including the reinvestment of

dividends. The index used from left to right, top to bottom are: Russell 1000 Value Index, S&P 500 Index,

Russell 1000 Growth Index, Russell Midcap Value Index, Russell Midcap Index, Russell Midcap Growth Index,

Russell 2000 Value Index, Russell 2000 Index and Russell 2000 Growth Index.

1 Month

Source: Bloomberg

Year to Date

Source: Bloomberg

0 2 4 6 8 10

Energy

Telecom

Materials

Financials

Info Tech

MSCI ACWI

Utilities

Industrials

Cons Disc

Cons Staples

Healthcare

Healthcare

Cons Disc

Telecom

Materials

Info Tech

MSCI ACWI

Industrials

EnergyCons

StaplesFinancials

Utilities

-5 0 5 10 15

Value Growth Blend

2.6

1.7

1.3

2.7

1.6

1.2

2.5

1.5

1.2 Mid

L

arg

e

Sm

all

1.3

2.7

2.9

3.3

4.9

4.6

6.2

7.1

6.2

Value Growth Blend

Sm

all

Larg

e

Mid


SECTOR SNAPSHOT – TOP 5 COMPANIES BY MARKET CAP

As of 4/28/15

Company Name Ticker Industry Mkt Cap (US$ Bn)

Price (Local)

Total Return YTD % (local)

P/E 2015E

EV/EBITDA 2015E

Div Yield % 2015E

Consumer Disc. Toyota Motor Corp 7203.JP Automobiles 244.7 8515.00 12.7 12.3 12.1 2.1

Amazon.com AMZN Internet & Catalog Retail

201.3 432.43 39.3 142.4 22.9 N/A

The Walt Disney Co DIS Media 187.3 110.19 17.0 22.4 12.9 1.0

Comcast Corp CMCSA Media 147.9 58.83 2.3 18.2 8.0 1.7

Home Depot Inc HD Specialty Retail 144.7 111.43 6.7 21.3 12.1 2.1

Consumer Staples Wal-Mart Stores WMT Food & Staples

Retailing 255.5 79.22 -7.2 16.1 8.3 2.5

Nestle NESN.VX Food Products 252.2 74.70 5.4 22.0 14.5 2.9

The Procter & Gamble Co

PG Household Products

218.3 80.45 -10.3 20.2 13.2 3.3

Anheuser-Busch Inbev ABI.BB Beverages 199.5 113.10 20.5 23.0 13.2 2.7

The Coca-Cola Co KO Beverages 178.1 40.77 -2.7 20.4 16.1 3.2

Energy Petrochina Co 857.HK Oil, Gas &

Consumable Fuels

401.8 10.14 17.9 26.1 10.8 3.3

Exxon Mobil XOM Oil, Gas & Consumable Fuels

367.8 87.80 -4.3 23.4 8.8 3.1

Chevron CVX Oil, Gas & Consumable Fuels

200.8 2061.00 -2.8 16.5 5.8 5.8

Royal Dutch Shell RDSA.LN Oil, Gas & Consumable Fuels

207.8 110.53 -0.5 28.9 7.5 3.9

Sinopec Corp 386.HK Oil, Gas & Consumable Fuels

157.4 7.26 16.2 20.0 8.9 3.5

Financials Berkshire Hathaway- CL B

BRK/B Diversified Financial Services

350.4 141.80 -5.6 18.6 N/A N/A

Ind & Comm Bank of China

1398.HK Banks 322.6 6.91 22.1 6.9 N/A 4.6

Wells Fargo & Co WFC Banks 285.9 55.38 1.7 13.3 N/A 2.5

China Construction Bank

939.HK Banks 251.8 7.76 21.8 6.5 N/A 4.8

JPMorgan Chase JPM Banks 233.1 62.52 1.2 10.6 N/A 2.6


SECTOR SNAPSHOT – TOP 5 COMPANIES BY MARKET CAP (CONTINUED)

As of 4/28/15


Price (Local)


P/E 2015E

EV/EBITDA 2015E

Div Yield % 2015E

Health Care Novartis AG NOVN.VX Pharmaceuticals 282.1 99.55 10.7 19.9 18.6 2.6

Johnson & Johnson JNJ Pharmaceuticals 279.8 100.62 -3.1 16.4 10.9 3.0

Roche Holdings ROG.VX Pharmaceuticals 245.8 273.30 4.4 19.2 12.8 2.9

Pfizer PFE Pharmaceuticals 210.8 34.33 11.2 16.6 10.7 3.3

Merck & Co MRK Pharmaceuticals 170.3 60.19 6.8 17.8 12.0 3.0

Industrials General Electric Co GE Industrial

Conglomerates 270.4 26.86 7.3 18.3 12.9 3.4

United Tech Corp UTX Aerospace & Defense

103.1 115.84 1.3 16.6 9.9 2.2

Boeing BA Aerospace & Defense

101.8 147.15 13.9 17.3 9.5 2.5

3M MMM Industrial Conglomerates

100.2 157.75 -3.4 19.8 11.9 2.6

Union Pacific UNP Road & Rail 94.5 107.90 -9.0 17.2 9.3 2.0

Info Tech Apple AAPL Technology

Hardware, Storage &

770.2 132.23 20.3 15.1 7.9 1.6

Microsoft Corp MSFT Software 396.0 48.95 6.1 19.2 10.3 2.5

Google GOOGL Internet Software & Services

382.5 566.05 6.7 19.9 11.0 N/A

Facebook FB Internet Software & Services

228.0 81.17 4.1 41.1 20.6 N/A

Alibaba BABA Internet Software & Services

209.2 84.89 -18.3 38.9 30.4 N/A

Materials BHP Billiton Ltd BHP.AU Metals & Mining 134.7 32.42 13.4 17.5 6.9 6.5

BASF BAS.GY Chemicals 93.0 92.34 32.1 16.8 9.3 3.0

Rio Tinto RIO.AU Metals & Mining 84.2 58.79 3.8 17.2 8.0 6.2

Saudi Basic Ind. SABIC.AB Chemicals 81.7 102.16 26.7 15.2 7.8 5.9

DuPont DD Chemicals 68.1 75.29 2.4 18.9 10.9 2.6


SECTOR SNAPSHOT – TOP 5 COMPANIES BY MARKET CAP (CONTINUED)

As of 4/28/15


Price (Local)


P/E 2015E

EV/EBITDA 2015E

Div Yield % 2015E

Telecom China Mobile 941.HK Wireless

Telecommunication 303.5 114.90 27.0 17.1 5.8 2.5

Verizon VZ Diversified Telecommunication

205.4 50.37 10.2 13.3 6.9 4.4

AT&T T Diversified Telecommunication

180.7 34.82 6.6 13.8 6.6 5.4

Vodafone VOD.LN Wireless Telecommunication

93.3 229.75 3.2 39.6 7.2 5.4

Deutsche Telekom DTE GR Diversified Telecommunication

84.9 17.07 28.9 25.0 6.9 2.9

Utilities Duke Energy DUK Electric Utilities 55.8 78.79 -4.8 16.9 10.3 4.0

GDF Suez GSZ.FP Multi-Utilities 51.6 19.32 -0.6 15.4 6.9 5.2

National Grid NG/ LN Multi-Utilities 51.4 897.50 -2.2 16.1 10.4 5.2

EDF EDF.FP Electric Utilities 47.1 23.10 1.2 11.2 4.9 5.4

Nextera Energy NEE Electric Utilities 46.2 104.10 -1.3 18.5 10.2 3.0

Source: Bloomberg. The securities in each sector represent the largest companies by market cap in the MSCI ACWI in their respective

sectors. Sector classification is based on GICS methodology. Equity characteristics: P/E, EV/EBITDA and Dividend Yield are based on

Bloomberg consensus estimates for stated period.

GDP / CONSUMER PRICE INFLATION / RATES

Real GDP (% YoY) CPI (% YoY) Official Rates Long Rates

Region/Countries 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E

United States US 2.4 2.8 2.8 1.6 0.2 2.2 0.25 0.75 - 2.2 2.5 -

Euro Area EU 0.9 1.4 1.7 0.4 0.1 1.2 0.05 0.05 - - - -

Japan JP 0.2 0.9 1.4 2.7 0.8 1.2 0.10 0.10 - 0.4 0.5 -

UK GB 2.6 2.6 2.4 1.5 0.4 1.7 0.50 0.65 - 2.2 2.0 -

Australia AU 2.7 2.4 3.0 2.5 1.6 2.7 2.50 1.95 - 3.0 2.8 -

China CN 7.4 7.0 6.7 2.0 1.5 2.1 5.60 4.95 - 3.7 3.4 -

Brazil BR 0.1 -0.9 1.2 6.3 8.0 5.8 11.60 13.25 - - - -

**India IN 5.4 7.4 7.7 7.2 6.2 5.6 8.00 7.10 - 8.1 7.4 -

Source: Bloomberg. Estimates are composite of Bloomberg contributor estimates. *Italicized text represents actual data. ** India fiscal year runs to March 31.

MONETARY POLICY

Mar-15 Sep-14 Mar-14

Monetary Base growth (YoY) 3.9% 13.5% 34.9%

M-2 growth (YoY) 6.4% 6.2% 6.2%

Money multiplier (M-2/mon base) 2.9 2.9 2.9

3Q14 3Q13 3Q12

Velocity of money (GDP/M-2) 1.53 1.57 1.58

Source: Federal Reserve Bank of St. Louis


ESG DISCLOSURE SCORES OF LARGEST ECONOMIES (2013)

Composite Environ Social Governance

1. United States 14.7 20.3 18.0 48.9

2. China 18.1 10.5 22.1 42.9

3. Japan 21.0 26.3 21.0 45.1

4. Germany 26.6 32.8 39.8 38.2

5. U.K. 30.9 22.6 36.1 53.2

6. France 39.6 37.4 50.4 55.7

7. Brazil 33.7 32.9 55.1 41.0

8. Italy 36.4 41.1 51.7 42.9

9. India 14.7 14.6 19.1 43.5

10. Russia 18.0 21.9 33.5 40.6

HIGHEST ESG DISCLOSURE SCORES

Composite Environ Social

Slovenia 47.9 44.2 52.6 51.8

Serbia 43.4 30.2 63.2 53.6

Spain 41.0 44.8 54.9 49.3

Portugal 40.4 39.5 48.0 51.5

France 39.6 37.4 50.4 55.7

Finland 39.3 38.6 39.8 55.9

Hungary 37.6 35.3 38.8 41.5

Sweden 36.5 30.8 43.2 52.9

Italy 36.4 41.1 51.7 42.9

Colombia 35.2 30.7 46.6 43.3


KEY ECONOMIC CHARTS

C&I Loan Growth (%)

Source: Federal Reserve Bank of St. Louis

University of Michigan Survey of Consumer Sentiment

Source: Bloomberg

NFIM Small Business Optimism Index

Source: Bloomberg

ISM Manufacturing Purchasing Managers Index

Source: Bloomberg

US Treasury Yield Curve

Source: Bloomberg

US Initial Jobless Claims

Source: Bloomberg

-30

-20

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301960

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% Y

oY

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1978

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-0.50

0.00

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1.00

1.50

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1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 30Y

%

4/28/2015 10/28/2014 4/28/2014

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1967

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Global Market Strategy

Updating the Global Equity Strategy Investment Clock

By Michael Geraghty, Global Markets Strategist at Cornerstone Capital Group

Michael Geraghty is the

Global Markets Strategist

at Cornerstone Capital

Group. He has over three

decades of experience in

the financial services

industry including

working as an investment

strategist at UBS and Citi.

An Increasingly Cautious Near-Term Equity Outlook — Plotting

our sector and regional equity recommendations on the face of an

“investment clock” suggests an increasingly cautious near-term outlook

for global equities.

A Tilt Away from Cyclical Sectors and Regions — Last month, we

tilted further from cyclical sectors and regions. As for sectors, we are

underweight Energy and Materials, neutral Industrials. In terms of

regions, we are underweight CEEMEA and Latin America.

The Biggest Gains Behind Us? — Our current outlook, which is

driven by bottom-up factors, suggests that the biggest gains for equity

markets in the current cycle may be behind us.

When we introduced the “Global Equity Strategy Investment Clock” in

January 2015, we plotted our sector and regional equity recommendations on

the face of an “investment clock,” with 12 o’clock as the peak of the investment

cycle and 6 o’clock as the trough of the cycle.

When the hands of the clock are at “3 or 9,” either the trough of the cycle is

nearing (3), or the peak of the cycle is being approached (9).

©Vasilius/Shutterstock

Figure 1: The Cornerstone Capital Global Equity Strategy Investment Clock

Source: Cornerstone Capital Group

http://cornerstonecapinc.com/2015/01/introducing-the-global-equity-strategy-investment-clock-3/


Featured Domain

UrbanInnovation.mobi

By Erika Karp, Founder & CEO and Michael Geraghty, Global Markets Strategist, Cornerstone Capital Group

Each month in the Cornerstone Journal of Sustainable Finance & Banking (JSFB), we will offer thoughts on a “Featured Domain,” which is selected from our proprietary “Sustainable Domain Bank.” The Cornerstone “Sustainable Domain Bank” contains 2,000+ addresses on the Internet, which are an articulation of business processes, business practices and aspirations for a more regenerative form of capitalism. Many of these domain names have the potential to be developed into business plans reflecting a robust interpretation of sustainable capitalism and finance. In particular, each “Sustainable Domain” captures a principle, or reflects a value inherent in the systematic understanding of the Environmental, Social and Governance (ESG) imperatives facing businesses and the economy today. Each Domain is intended to facilitate dialogue across functions and sectors of the capital markets; and each is available for collaborative partnership, purchase or transfer should it have particular appeal to Cornerstone clients and colleagues.

A new peak in urban mobility for New York City was

achieved in 2014 with 1.7B people having ridden its

sprawling subway system. More recently, we saw

another notable milestone with the introduction of the

“UberChopper,” which offers a $484 sightseeing

helicopter ride above Shanghai so that Uber, the

disruptive player in transport, can continue to gauge

interest in airborne services. It has already

experimented with similar operations in the United

States, India, Brazil and South Africa. And to think, it

was only back in 1801 that the Philadelphia Water

Works opened for business, making Philly the first

major US city to provide clean drinking water

throughout its borders. While it is estimated that

about 2.7 billion people in the developing world live in

urban areas, we know that 100% of Singapore’s

population actually does. So it would seem that some

rather important lessons can be learned from that

burgeoning city-state.

In fact, Singapore realizes that a lack of readily

accessible water is an existential threat—and so is the

necessity to innovate. For Singapore, “urban

innovation” has resulted in no deterrent to rapid

growth. Following this month’s death of Lee Kuan

Yew, Singapore’s founding father, The Wall Street

Journal published a lengthy essay[1] discussing how a

tiny, poor nation with “a total absence of natural

resources (not even its own supply of drinking water)”

had been transformed into “an astonishing economic

success.” The Journal highlighted today’s “well-

ordered cityscape of manicured parks, gleaming office

towers, high-rise apartment blocks filled with middle-

class families and glittering malls swarming with

wealthy consumers.”

Lee Kuan Yew was nothing if not pragmatic. While his

relentless pursuit of the vision may not be to the liking

of many, his accomplishments were remarkable and

there are worthwhile learnings from his benevolent

dictatorship. He stated that “The task of the leaders

must be to provide or create for them a strong

framework within which they can learn, work hard, be

productive and be rewarded accordingly.” Lee Kuan

Yew knew what mattered most.

In speaking of frameworks, we take this opportunity

to highlight one of our own framework reports which

addresses the question of Environmental Issues &

Country Valuations: What Matters? from Cornerstone

©FelixChia_90/Flickr

http://cornerstonecapinc.com/2015/03/environmental-issues-country-valuations-what-matters/

http://cornerstonecapinc.com/2015/03/environmental-issues-country-valuations-what-matters/


Capital’s Global Market Strategist, Michael Geraghty.

Michael notes that in the past 30 years, the world’s

star performers have been the resource-poor newly

industrializing economies of East Asia—including

Singapore—while many resource-rich economies,

such as the oil-rich countries of Mexico and

Venezuela, have gone bankrupt.

His conclusion: What matters most to wealth

generation is how an economy uses flows of raw

materials, rather than the country’s stocks of natural

resources. Many resource-rich countries have lower

levels of per capita GDP than resource-poor states that

efficiently transform raw materials into wealth. The

key point is that human capital, creativity and

innovation are what drive prosperity. As the world

continues to urbanize, with all that means for

heightened interconnectedness and complexity, the

need for Urban Innovation becomes more and more

essential.

Erika Karp is the Founder & Chief Executive Officer

of Cornerstone Capital Group.

Michael Geraghty is the Global Markets Strategist

at Cornerstone Capital Group. He has over three

decades of experience in the financial services

industry including working as an investment

strategist at UBS and Citi.


Regional Imperatives

A Catalyst for Collaboration in Water Tech Innovation

By Will Sarni, Director and Practice Leader, Water Strategy, Social Impact Services, Deloitte Consulting LLP

California is in the midst of a record-setting drought,

which includes the lowest precipitation for any 12-

month period, the highest annual temperature, and

the most extreme drought indicators in more than 100

years of record.1 For the first time in 75 years, the

California Department of Water Resources found no

snow on the Philips snow course in Sierra Nevada and

traditionally, snowpack is at its peak in early April

each year. However, the snowpack measurements

from April 1st, 2015, indicated that snowpack had less

water content than on any other April 1st since 1950.2

Low snowpack suggests that cities and farmers will

potentially face a water shortfall in the summer of

2015.3

In addition to the low snowpack, according to the

National Oceanic and Atmospheric Administration,

El Niño has arrived, but is likely too late and too weak

to provide much relief for California.4 Traditionally,

snowpack and precipitation provide adequate support

to bolster reservoir levels. However, with 2015’s low

snowpack and precipitation, reservoir levels may not

meet supply needs. While the 2015 reservoir levels are

higher than they were in 2014, the levels are still far

below the historical average.2 As water shortages have

increased, permitted water allocations continue to

exceed the average renewable supply in numerous

major river basins across the state.5

In addition, Stanford researchers have found that the

risk of severe drought in California has increased due

to persistently warm conditions induced by human-

caused global warming. Therefore, there is strong

evidence that climate change is currently having an

1 Yamazaki, A and Yang, J., “California Drought and Climate Change Linked – but Rain Isn’t the Only factor,” Spring 2015. (https://woods.stanford.edu/sites/default/files/files/PNAS-Diffenbaugh-Drought-Climate-Brief-03032015-FINAL.pdf) 2 CA.gov, “Sierra Nevada Snowpack Is Virtually Gone; Water Content Now Is Only 5 Percent of Historic Average, Lowest Since 1950,” April 01, 2015. (http://www.water.ca.gov/news/newsreleases/2015/040115snowsurvey.pdf) 3 Stanford.com, “Record-low snowpack: Bad news for California, say Stanford experts,” April 02, 2015. (http://waterinthewest.stanford.edu/resources/forum/california-drought-sign-what%E2%80%99s-come) 4 NOAA.gov, “NOAA: Elusive El Niño arrives,” March 5, 2015. (http://www.noaanews.noaa.gov/stories2015/20150305-noaa-advisory-elnino-arrives.html) 5 Hodson, H., “Inside California’s $7.5 billion drought-survival plan,” New Scientist, August 19, 2014. (http://www.newscientist.com/article/dn26073-inside-californias-75-billion-droughtsurvival-plan.html#.U_tyXvmwLAZ)

impact on California by increasing the likelihood of

conditions that have historically led to severe

drought.1 As a result, these water conditions could

represent the “new normal” for California.

How does the public sector address the “new normal”

of increasing water scarcity through innovative

technology and policies? An example from Singapore

illustrates one approach.

A Comprehensive Approach

Innovation is coming from an increasing number of

organizations, innovation hubs and countries

committed to addressing their local needs and

exporting technologies as a business opportunity.

©kodomut/Flickr

http://www.newscientist.com/article/dn26073-inside-californias-75-billion-droughtsurvival-plan.html#.U_tyXvmwLAZ


Singapore is one example of how a country not only

focused on addressing their own water issues but built

a water technology export industry.

Singapore has emerged as a leader in developing

innovative technologies in the water industry and

establishing itself as a catalyst for collaboration in

water innovation.6 The 45-year journey by Singapore

in sustainable development and becoming a global

leader on water practices and technologies is

chronicled in The Singapore Water Story.7

Singapore’s relentless drive for water self-sufficiency

in an urban context has shaped its development

policies and agendas over the years, and continues to

do so. The city-state made a very deliberate effort to

address water scarcity and become a leader in

addressing key water industry issues. The government

created a comprehensive environmental management

system, including water supply, control of river

pollution, establishment of well-planned industrial

areas, and a world-class urban sanitation system as

the starting point. This became the foundation for

their goal of creating a “sustainable water supply” for

the island country.

A cornerstone to Singapore’s approach to water

stewardship is what the Public Utilities Board (PUB)

terms its “Four Taps Strategy.” The four taps are:

water reclamation, desalination, water efficiency and

importation (from Malaysia). This strategy captures

current thinking on source diversification, with water

reclamation and desalination as newer innovations.

“Tapping” Into Water Technologies

Singapore’s water reclamation strategy entails using

membrane ultra-filtration, reverse osmosis and UV

treatment to recycle water and successfully integrate

it into the national water supply, initially for non-

potable uses, and then blended with reservoir water

for potable purposes. Reclaimed water is marketed as

“NEWwater.” Singapore has a total of five PUB-built

6 http://siteresources.worldbank.org/INTEAPREGTOPENVIRONMENT/Resources/WRM_Singapore_experience_EN.pdf. 7 Cecilia Tortajada, Yugal Kishire Joshi and Asit K. Biswas (2013), The Singapore Water Story: Sustainable Development in an Urban City State, Abingdon: Routledge. 8 www.pub.gov.sg/waterhub/Pages/default.aspx.

plants that meet 30 percent of the state’s water

demand. By 2060 NEWater is projected to meet 50

percent of water demand. Singapore has taken

recycled water a step further, selling bottled NEWater

to increase consumer confidence in recycled water.

Singapore is also investing in desalination, its fourth

“tap.” Opened in 2005, the SingSpring SWRO plant is

Singapore’s first desalination facility, and one of the

most energy efficient in the world. Water was priced

at $0.48 per cubic meter, which was a record low for

desalinated seawater when the plant opened. This

plant has the capacity to produce approximately 136

million liters a day, which represents approximately

10 percent of the national water requirement.

For Singapore, water is not just a strategic risk; it is

also a business opportunity. The country is promoting

the development of water technology: Nanyang

Technological University has three water-related

research units, and Singapore’s water industry now

counts more than 50 firms winning international

contracts based on their water know-how.

Becoming a Center of Excellence

Most importantly, the country wants to be a hub for

water innovation. To that end, in 2004 The Ministry

for the Environment and Water Resources, the

Singapore Water Association (SWA), and Water

Network established a center for water excellence

known as the “WaterHub.” The WaterHub, intended

to be a strategic platform for the Singapore PUB and

the national water industry, is focused on technology,

learning, and networking to build a sustainable water

industry in Singapore.8

A key alliance of the WaterHub is the Environment &

Water Program Office (EWI), which was established

in 2006 by Singapore’s Ministry of the Environment

and Water Resources. According to the World

Economic Forum, by 2015 Singapore’s water industry

is expected to contribute $1.2 billion to the country’s


GDP and 11,000 new jobs, creating a global center of

water industry expertise.9

The goal of the WaterHub and Singapore’s PUB

Technology and Water Quality Office (TWQO) is to

become a water research and development incubator

center for the emerging water industry. This water

innovation ecosystem in Singapore is seeking to

increase water resources, keep water costs

competitive, as well as manage water quality and

security for the Singapore government. More than 70

water companies and 14 corporate research and

development centers have already set up facilities and

offices in Singapore.

Singapore is an example of the increasing focus on

solving water scarcity and quality challenges through

technology innovation. Currently, there are now

several other locations and water technology

accelerators/hubs addressing water as a complex

economic, environmental and social issue facing the

public and private sectors in the 21st century.

Parts adapted from “Water Tech: A Guide to Innovation:

A Guide to Investment, Innovation and Business

Opportunities in the Water Sector” (Earthscan, Sarni

and Pechet, 2013).

Will Sarni is Director and Practice Leader, Water

Strategy, Social Impact Services at Deloitte

Consulting LLP and a recognized thought leader on

water stewardship, technology innovation and

sustainability strategies. He is a Board Member of

the Rainforest Alliance and has worked with large

multinationals, public sector agencies and NGOs as

an advisor on water-related programs.

9 The World Economic Forum Water Initiative (2011) Water Security: The Water–Food–Energy–Climate Nexus, Washington, DC: Island Press, page 215.

http://www.deloitte.com/us/en.html

http://www.deloitte.com/us/en.html

http://www.rainforest-alliance.org/


Open Source Excellence

Cracking the Affordable Housing Market in India

By Matias Echanove and Rahul Srivastava, Co-Directors, Institute of Urbanology

©Thomas Galvez/Flickr

When the head of Lafarge’s affordable housing initiative in India visited

our small office in Dharavi — a settlement known as Mumbai’s largest

slum — we had no idea it would be the beginning of an adventure leading

us to break through huge economic and cultural firewalls.

We run an urban research and planning office principally concerned with

questions of mobility, housing and livelihood in emerging cities.

Our practice is based on the premise that end-users know what they need

better than planners and experts. When it comes to innovation, our

approach is to build on existing practices rather than replacing the system.

In an effort to crack the affordable housing market in India, Lafarge was

talking to professionals all over the country. At the time, many giant

schemes were underway. Lafarge wanted to be an actor in the affordable

housing market by supplying construction materials and solutions to

developers. However, the competition among material suppliers was and

remains fierce with very thin margins.

While there is scope for innovation in construction practices, attempts to

create affordable housing by using new products and technologies have

generally failed. This is mostly because very few players are actually

willing to spend time and money to understand the market they are trying

to enter. Most attempts at innovating in the field are based on

preconceptions of what end-users need, want and are ready to pay for.

A bias for quantitative over qualitative analysis also distorts the kind of

interventions that successful innovation requires. All eyes are stuck on the

following set of data:

Today, only 30% of India’s 1.2 billion people live in urban areas.

However, the urban population is growing fast and by 2025 well over

half a billion people will live in cities.

Currently, the government and private developers together simply

cannot meet the demand for affordable housing. Depending on the

income bracket, the gap between supply and demand is somewhere

between 25-35% according to Jones Lang LaSalle.

This means that unless a new approach is found to provide affordable

housing, millions of families will continue to be absorbed into slums.

Since 2001 the number of people living in slums has gone from 52

million to 65 million in India. According to some, about 40 million


Matias Echanove and Rahul

Srivastava run the Institute

of Urbanology and urbz.net

in Mumbai and Sao Paulo.

Their work focuses on

urbanization, collaborative

planning and design.

Echanove studied government

and economics at the London

School of Economics, urban

planning at Columbia

University, and urban

information systems at the

University of Tokyo.

Srivastava studied social

and urban anthropology

in Mumbai, Delhi and

Cambridge (UK).

new affordable housing units must be produced in the next decade in

order to contain an explosion of slums.

In Mumbai, the booming economic capital of India and the country’s

biggest urban agglomeration with nearly 20 million people, housing issues

are particularly acute. Over half the city lives in slums according to the

census. Yet, in the past 20 years, only 200,000 housing units have been

produced under government schemes.

Currently, market-driven affordable housing initiatives have only made a

tiny dent into – what the ancient Indian ruler Ashoka called - “the top of

the bottom” of the pyramid. They have managed to do that mostly by

cutting through the red tape that prevents families with a steady income

to access housing finance.

Other programs, such as the Slum Rehabilitation Scheme in Mumbai, give

incentives to private developers to produce mass housing for slum

dwellers in exchange for transferable development rights with which they

can produce market-rate housing in-situ or elsewhere in the city.

However, this scheme is plagued with institutional corruption, procedural

delays, and perverse incentives that lead to the development of housing

blocks which become vertical slums within a few years of completion.

Typically, when the government, large developers or non-profit

organizations develop affordable housing, they achieve affordability by

compromising on quality, hastening the construction cycle, moving to the

far out periphery, and scaling up the number of units produced. This has

dramatic consequences not only for the people who are resettled there

(often against their will), but also for the city at large.

Dharavi in Mumbai

Slum redevelopment is costly both in economic and social terms. Along with their

houses people lose income opportunities. Diverse neighborhoods get replaced by

monofunctional mass housing, which is often of very poor quality.

http://urbanology.org/

http://urbanology.org/


From an urban point of view, mass-producing low grade housing units is

a disaster. Slum clearance and in situ ‘redevelopment’ transforms mixed-

use neighborhoods, which provide not only housing but also employment,

into monolithic housing blocks. The residents are impoverished and add

to the number of commuters in Mumbai’s jam-packed transportation

networks. Many people simply cannot afford to live in high-rise buildings

that are expensive to maintain and tend to decay rapidly.

More worrisome, it creates the kind of socially and economically

alienating urban ghettos that many westerns cities are struggling with

today – only on a much larger scale. These vertical ghettos are far more

dysfunctional that the ‘slums’ they replace.

“What is to be done?” was Lafarge’s question. Our answer to Alexis de

Ducla, who then headed Lafarge’s affordable housing initiative, was that

he should consider the small house in which our office was located, along

with all the other 57,000 houses that make Dharavi’s urban fabric as

affordable housing in need of improvement, rather than as slums. The real

market – and the real need – was here rather than in the next scaled-up

mass housing scheme. From this point on we helped Lafarge develop what

has become one of their flagship projects in India.

Our study of local construction techniques revealed that rather than being

substandard, Mumbai’s ‘slums’ are often made of homes that are well built

and even over-engineered. Contractors hired by residents to repair or

rebuild their homes live in the same neighborhood and are part of the

same communities. Their businesses depend on their reputation, so rather

than taking the risk of building a weak house they make it ‘over solid’,

using industrially produced bricks, steel and cement sold in a multitude

of small construction material shops. Residents typically spend four to five

Mumbai households by predominant material of roof.

This chart shows that most households live in structures that have not been built by large

developers or by the government who typically make concrete roofs. These non-concrete

roof houses are instead produced by local contractors and part of incrementally

construction economy. At least half of Mumbai’s households live in houses built by local

contractors – usually in settlements classified as slums by the government.

Concrete

48%G.I./Metal/Asbestos sheets

37%

Concrete

G.I./Metal/Asbestos sheets

Stone/Slate

Machine made Tiles

Grass/Thatch/Bamboo/Wood/Mud etc.

Burnt Brick

Hand made Tiles

Plastic/Polythene

Any other material


times less to build a small 200 to 300 square feet house than the

government spends to produce a flat with the same dimensions in mass

housing schemes.

People invest in improving their homes and businesses, thereby turning

slums into neighborhoods. A new home can help a family escape the

poverty trap. It doesn’t only increase living standards, building an

additional floor can translate into revenue generation through rentals or

a new business initiative. We call neighborhoods with an internal capacity

to improve themselves “homegrown,” because they are developed locally,

by residents.

Together with Lafarge’s affordable housing team, we conceived a new

product that would directly serve the needs of local builders: bagged

concrete. Mixing concrete on site is a messy and space-consuming affair.

It is difficult to accurately combine cement, sand and water, especially

when it is mixed on the floor. Impurities come into the concrete and a part

of the mix is wasted. Lafarge has many ready-mix concrete plants that

cater to its booming real estate market. We devised ways in which high-

quality, ready-mixed concrete, could be bagged in small quantities and

supplied to homegrown housing markets.

Contrary to what one might have assumed, people were not demanding

cheap concrete, but high-quality material that would allow them to build

good, solid homes for their families and businesses. The demand in

various parts of Mumbai, where we piloted the project, was immediate.

The initiative is now being scaled up in Mumbai and launched in other

emerging markets such as Brazil. Lafarge has good reason to hope that

this could become one of its highest growth market segments – far beyond

the traditional mass affordable housing market.

Competitors have been left far behind because of Lafarge’s willingness to

invest in a project that challenges social preconceptions. In India, perhaps

more than in other parts of the world, the cultural barriers to entry in low-

income, low caste segments are real. Initially, even within Lafarge, many

managers could not understand why a company with a global reputation,

active in high-end housing and infrastructure markets, would want to deal

with slums.

Now everyone understands that the homegrown market is here to stay.

According to Cities Alliance, which works to reduce poverty through

sustainable development, 20% to 70% of urbanization in emerging cities

is incremental rather than part of a master plan. The best way to deal with

it is to accept it – and help local actors do what they have always been

doing: improving their conditions.


Accelerating Impact

Is Investing in Ocean Health a Key to Our Urban Future?

By Maria Damanaki, Global Managing Director for Oceans at The Nature Conservancy

Today, half of the world’s people live in cities. By 2050, three out of

four people will be urban citizens. This reality makes smart urban

development one of our biggest opportunities for a more resilient,

sustainable future — a future where people and nature are connected

and thriving together.

To be successful, we have to do a significantly better job of investing in

innovative solutions in our natural environment. This is an all-hands-

on-deck moment for engineers, urban planners, community leaders,

ecologists and investors.

Perhaps the biggest opportunity lies in our growing coastal cities.

Consider that in 2011, of the 23 “megacities” worldwide (metropolitan

areas with populations exceeding 10 million people), 16 were already

in coastal areas. And, this trend is only increasing. Just this month,

scientists from Texas A&M released a new study that estimates a more

than 200 percent increase in the amount of urban land within coastal

zones by 2030, and a doubling of urban exposure to coastal flooding.

So, what does this mean? It simply reinforces the fact that public and

private sector leaders need to be able to make extremely wise

development choices starting now, as hundreds of billions of

dollars will be spent globally on coastal infrastructure. This challenge

creates an opportunity to demonstrate the cost-effective and flexible

role that nature can play alongside – or, in some cases as an alternative

to – the menu of traditional infrastructure choices, such as

breakwaters, seawalls, and levees.

Natural, or “green” infrastructure – such as coral and oyster reefs,

mangroves, sand dunes and marshes – provides benefits that many

engineered solutions can’t provide, including recreation, tourism,

food, sustainable jobs and an improved quality of life for city

residents. After all, no one snorkels at a seawall.

However, this is not to suggest that natural infrastructure could

replace all engineered solutions. The key is that when we integrate

these two approaches, we increase our resilience, reduce our risk and

enjoy other important benefits.

An example: In the weeks after Hurricane Sandy hit in October of

2012, Governor Cuomo called on The Nature Conservancy to tap into

our latest science and guidance on better ways to help protect New

©IntelFreePress/Flickr

http://www.igbp.net/news/features/features/coastalmegacitiesrisksandopportunities.5.62dc35801456272b46d17b.html

http://www.igbp.net/news/features/features/coastalmegacitiesrisksandopportunities.5.62dc35801456272b46d17b.html

http://www.sciencedirect.com/science/article/pii/S0959378015000047

http://www.nature.org/ourinitiatives/regions/northamerica/unitedstates/newyork/newsroom/nys-2100-commission-report-concludes-importance-of-natural-defenses.xml


Maria Damanaki is Global

Managing Director for Oceans

at The Nature Conservancy.

She leads a global team

focused on transforming how

the world manages its oceans,

including sustainable fisheries

management, large-scale

protection and restoration of

coral reefs and other

ecosystems, coastal resilience,

and a first-of-its-kind mapping

and quantification of the full

value of the world’s oceans to

people.

York City and the Eastern seaboard from future storms. Just last year,

Governor Cuomo and Vice President Joe Biden announced billions of

dollars of funding for storm recovery projects, which will in part

include investments in nature to strengthen overall infrastructure

performance.

This breakthrough is still an outlier, but it offers a glimpse of the path.

And, we are already on our way.

The Conservancy and our partners are conducting first-of-its-kind

mapping of the ocean’s full value to people. We are taking a fresh look

at mangroves, reefs, sea grasses, and salt marshes in terms of jobs, food

security, risk reduction, recreational revenue and other quantifiable

functions. We are examining these values at local levels and in key

coastal population centers around the world, where this information is

needed to inform development decisions.

But, once this information is shared, we still need investment solutions

to make these opportunities viable. Some innovative approaches are

already coming into focus.

We are working with insurers to incorporate the quantifiable

protective values of natural infrastructure into their risk models. This

could reduce premiums for assets protected by nature – for example,

healthy coral reefs can stop 97 percent of a wave’s energy before it hits

coasts – and incentivize better protection of these systems.

Offset payments, meanwhile, can mitigate a portion of the negative

impact of increasing offshore development activities, such as drilling

and mining. This approach could also leverage the high-value potential

of “blue carbon” – such as the carbon stored in mangroves – as a

powerful strategy to reduce climate impacts.

Blue bonds may offer another investable solution. These bonds are

similar to a standard debt obligation, but the proceeds are invested in

activities that support protection and restoration of natural and

constructed infrastructure. They are modeled on the over $8 billion in

“green bonds” that have financed World Bank projects since 2008.

Blue bonds can be repaid to investors through contributions from

national and bilateral climate adaptation funds, as well as revenue

from tourism and fishery industries.

This is just a taste of the opportunity before us — the opportunity to

transform how we protect, restore and invest in the ocean habitats that

will sustain the vast majority of people and cities on Earth.

http://www.nature.org/

http://www.nature.org/ourinitiatives/regions/northamerica/unitedstates/newyork/newsroom/nys-2100-commission-report-concludes-importance-of-natural-defenses.xml

http://www.nature.org/ourinitiatives/regions/northamerica/unitedstates/newyork/newsroom/response-to-new-york-storm-recovery.xml

http://www.nature.org/ourinitiatives/regions/northamerica/unitedstates/newyork/newsroom/response-to-new-york-storm-recovery.xml

http://oceanwealth.org/

http://oceanwealth.org/


Enhanced Analytics

CarbonCount: A Quantitative Impact Scoring System for “Green” Bonds

By Ken Locklin, Affiliated Expert and David Posner, Financial & Economic Policy Program Manager, at

the Alliance to Save Energy

There is good news for investors on the carbon impact

front as trumpeted earlier this month by Bloomberg

New Energy Finance (BNEF) at its Future of Energy

Summit: 2015 should prove to be a watershed year for

the “de-carbonization” of the US power sector, with

record volumes of coal-fired capacity to be shuttered,

renewables capacity to be built, and natural gas to be

consumed. The result: CO2 emissions from the power

sector should drop to their lowest level since 1994.1

So how might we persuade investors to capitalize on

opportunities in clean energy technology and

accelerate the market for green bonds?

CarbonCount™ is a new metric that evaluates bond

investments in US energy-efficiency and renewable-

energy projects based on the expected reduction in

carbon dioxide (CO2) emissions resulting from each

$1,000 of investment. CarbonCount™ was developed

by the Alliance to Save Energy, a leading US nonprofit

organization that promotes energy efficiency. And at

the above-named BNEF conference on April 15th in

New York City, we took home one of four top prizes in

the coveted Finance for Resilience (FiRe) competition

where 60 projects vied to demonstrate their “tangible”

and “actionable” ability to unlock at least $1 billion of

clean energy investment capital over three years.

Here’s how it all works.

Quantifying “Green”

The Alliance understands that investors will not

properly value carbon impacts until they are confident

that those impacts have been estimated impartially

and consistently. CarbonCount™ combines forward-

looking project data already used for credit ratings,

sophisticated emissions modeling software, and

clearly documented assumptions to produce a

quantitative score tailored for finance professionals.

1 http://about.bnef.com/content/uploads/sites/4/2015/04/BNEF_2015-02_AMER_US-Power-Fleet-De-Carbonisation-WP.pdf 2 “Bonds and Climate Change: The State of the Market in 2014,” Climate Bonds Initiative (July 2014), 6.

The global market for self-labeled green bonds has

burgeoned in recent years with annual issuances

rising from $11 billion globally in 2013 to $36.6 billion

in 2014, but nearly 40% of these bonds lacked any

independent review of their climate impacts.2 Third-

party verification systems are available, at no small

expense to the issuers, but their findings are not

readily comparable between purveyors.

CarbonCount™ was designed to provide a

quantitative, transparent, easily comparable metric,

and to do so at minimal cost.

Independent Engineers’ Estimates and

Investment Grade Audits

In the case of renewable-energy projects, predicted

monthly energy generation output is customarily

included as part of the standard financial

underwriting package. CarbonCount™ uses highly

conservative production values, allocated using

models and region-specific distribution tables

developed by the National Renewable Energy

©khunaspix/Crystal Graphics


Laboratory (NREL). When these data are unavailable,

we conservatively estimate on the basis of nameplate

generating capacity using the state- and technology-

specific capacity factors prepared by NREL.3

In the case of energy-efficiency projects, energy

service companies (ESCOs) usually give customers

detailed analyses of estimated energy savings in the

form of an Investment Grade Audit (IGA). Since

ESCOs guarantee savings and thus assume a financial

risk, a conservative bias is assumed. Unless hourly

load impacts are explicitly identified, savings are

allocated evenly across the year.

Quantifying Electricity-Sector CO2 Impacts

This information is combined with another publicly

available analytical tool. EPA’s AVoided Emissions

and geneRation Tool (AVERT), released in February

2014, is a model intended primarily to help state air

and energy officials evaluate the impact of proposed

energy-efficiency and renewable-energy policy

initiatives.4

The Alliance has leveraged the model, combined with

the information referenced above, to measure

electricity-sector impacts. AVERT collects operational

and emissions data from every fossil-fueled electric

generating unit (EGU) in the lower 48 United States

with over 25 megawatts (MW) of capacity. It analyzes

historical usage patterns of fossil-fueled EGUs,

recorded by the hour and grouped into ten regions, to

predict future EGU behavior and, thus, emissions.

AVERT estimates how each EGU will operate under

future regional load scenarios, with hourly

granularity. Finally, on the basis of user-defined load

reductions for a particular year, achieved either

through efficiency or non-fossil generation, AVERT

estimates avoided metric tons of CO2 for the modeled

year.

3 “US Renewable Energy Technical Potentials: A GIS-based Analysis,” National Renewable Energy Laboratory (July 2012), available at

http://www.nrel.gov/gis/re_potential.html. 4 “AVoided Emissions and geneRation Tool (AVERT) User Manual Version 1.2,” US Environmental Protection Agency (October 2014). 5 Emissions from fuel oil and natural gas combusted onsite do not vary by location or time of use; see

http://www.epa.gov/climateleadership/documents/emission-factors.pdf. 6 “Green Bonds – Made by KfW,” (September 2014); see

http://www.sec.gov/Archives/edgar/data/821533/000119312514346549/d792167dfwp.htm.

The AVERT model cannot directly capture the CO2

impacts of fuel-oil or natural-gas usage offset by

onsite energy-efficiency improvements, but these are

easily calculated using factors developed by EPA.5

These savings can then be added to the results from

the AVERT model for a total CO2 impact.

Finalizing the Metric

The final step in generating CarbonCount™ involves

apportioning CO2 impacts for the fraction of project

capital provided by bonds and then scaling to a

common investment size – metric tons of CO2 (CO2e)

offset per $1,000 of bond value. Given that AVERT

forecasts on the basis of the existing generation mix,

we use only one year of CO2 savings as a metric when

assessing the bond, even though the capital basis

covers the lifetime of the project.

Whether the market will share our preference for a

robust one-year metric over softer life-time

projections remains to be seen, but we note that the

German development bank KfW recently employed a

similarly conservative approach when it scored its

own US dollar-denominated green bonds.6

CarbonCount™ has been tested on five instruments

to date:

Continental Wind LLC Senior Secured Bond

(utility-scale wind);

Southern California Public Power Authority’s

Milford Phase One Revenue Bond (utility-scale

wind);

SolarCity Series I LMC 2013-1 Bond (distributed

solar);

Topaz Solar Farms LLC Series A Senior Secured

Bond (utility-scale solar); and

http://www.epa.gov/avert/

http://www.epa.gov/avert/

http://www.nrel.gov/gis/re_potential.html

http://www.epa.gov/climateleadership/documents/emission-factors.pdf

http://www.sec.gov/Archives/edgar/data/821533/000119312514346549/d792167dfwp.htm


Hannon Armstrong Sustainable Yield Bond, a

representative of governmental ESPC projects.

The results in metric tons of CO2 offset annually per

$1,000 bond are as follows:

Continental Wind ~1.037

Milford Wind ~0.392

Solar City ~0.161

Topaz Solar ~0.198

Hannon Armstrong ~0.522

Detailed reports on these bonds are available via the

Alliance to Save Energy’s information center. Anyone

using CarbonCount™ is advised to examine these

reports and carefully consider the primary drivers of

the metric (project cost and regionally specific

emissions situations).

Conclusion

CarbonCount™ is an intentionally simplified solution

to a complex problem, but we believe it provides a

low-cost, consistent and quantitative measure of CO2

emissions reductions/offsets per unit of investment

that US bond buyers can use today to evaluate the

carbon impacts of specific projects.

To help investors value the impact of CarbonCount,

the Alliance pledges (resources permitting) to

evaluate any bond brought to us by issuers in 2015 and

certify that projected CO2 savings have been modeled

consistently, utilizing comparable energy generation

and savings forecasts.

Ken Locklin is an Affiliated Expert with the Alliance

to Save Energy. He also serves as a Director of

Impax Asset Management (US) LLC.

David Posner is the Financial & Economic Policy

Program Manager at the Alliance to Save Energy.

http://www.ase.org/

http://www.ase.org/

http://www.ase.org/

http://www.impaxam.com/

http://www.ase.org/


Enhanced Analytics

Giving Fiduciaries a Hand with Infrastructure Due Diligence

By John Williams, Chairman & CEO Impact Infrastructure, Inc.

Not Our Problem

About five years ago a large number of planners,

designers, architects, and engineers were gathered at

a conference hosted by the Zofnass Program for

Sustainability at Harvard University’s Graduate

School of Design. The theme of the conference was

Infrastructure Sustainability. There were more than a

dozen distinguished speakers including a director of

research for a prominent rating agency. His remarks

were preceded by panels of experts in sustainable

design. Each speaker, including the author of this

article, was convinced that they were doing their part

to change the world, one high-impact infrastructure

project at a time. It was a love-fest.

And then we heard from the rating agency. His

remarks included rudimentary points about project

finance and bond ratings. When asked if sustainable

design would make a difference from a rating

perspective. The answer came quickly, “No.” He went

on to say that his agency, “was not interested in factors

like social and environmental benefits associated with

the projects we rate.” What? Our work doesn’t matter

(we all thought)?

There was a follow-up question, “What if there were

billions of dollars in demand for investment

opportunities in high-impact infrastructure and

building projects. This demand would come from

investors that also want objective and transparent

ratings?” His answer was, “That would be different.”

A Teeming Market

Fast forward to today where the need for

infrastructure and building investment is now in the

trillions of dollars in the US alone, and tens of trillions

worldwide. It’s also a time when interest in SRI, ESG

and Impact Investment vehicles is higher than ever.

According to Bloomberg New Energy Finance, the

1 Green Bonds Market Outlook 2014, “Blooming with new varietals,” 2 June 2014, Bloomberg New Energy Finance

historic green bond issuance rate climbed from under

$3 billion in 2007 to a $40 billion plus by the end of

2014 (triple the volume issued in 2013 – also a record

year). Bloomberg describes the green bond universe

as made up of: Corporate self-labelled, Green Asset

Backed Securities, Supranational/international,

Government including national, regional or local

governments to finance green projects, and Project

bonds backed by cashflows of an underlying

renewable energy project or portfolio of projects.1

It’s also a time when the traditional roles and

responsibilities of fiduciaries and the legal obligations

of asset managers are being reconsidered. Five years

ago, it was common to hear that fiduciaries were

legally compelled solely to maximize financial returns.

That was the common assumption, but not really the

sole focus. According to attorney Keith Johnson, who

specializes in fiduciary duty, in a paper written

together with International Institute for Sustainable

Development, “One of the fundamental fiduciary

principles of the duty of loyalty is impartiality between

different beneficiary groups, including different

generations (Hawley, Johnson and Waitzer, 2011).

Given the potential for shifting of wealth,

environmental remediation costs and climate risks

©khunaspix/Crystal Graphics


between young and older generations, failure of

fiduciaries to adopt a sustainable development

investment approach has fiduciary duty implications

and raises questions about the ability of fiduciaries to

efficiently allocate investment capital to growth

opportunities and manage risks to economic growth

and future portfolio returns.”2

A Closer Look

It is critical that fiduciaries look closer and not just

consider financial risk and returns but also

sustainable returns associated with investments

under consideration – also known as the “Triple

Bottom Line.” That includes the tangible and less

tangible but extremely relevant costs and benefits

associated with SRI, ESG and impact investments.

These costs and benefits are always a consideration in

corporate or public sector capital investments in

facilities, buildings, and infrastructure. They are

significant projects, generally having long-term

financial, social, and environmental, even resilience

implications. Related costs, benefits, and risks reach

beyond energy sources, consumption and residual

impacts. Sometimes they include water consumption

and wastewater produced. There are other factors

including community health, worker productivity,

safety, urban heat island risks, and even brand risk

among the less-tangibles that can be calculated and

presented over a range of probable outcomes. These

outcomes are often important and material to

corporate decision-making, community interests, and

are relevant to investor goals.

These values are captured through benefit-cost and

risk analysis (BCA is the global default standard for

infrastructure, buildings and facilities valuation). The

process is complex, time-consuming and expensive,

and often requires specialty consultants the cost of

whom may only be justified for major projects

(assume $100+ million in capital costs). These costs

are a major barrier to inclusion of BCA for high-

2 Johnson, Keith. “Introduction to Institutional Investor Fiduciary Duties,” The International Institute for Sustainable Development, http://www.reinhartlaw.com/Documents/art140402%20RIIS.pdf. Pg. 10 3 US Department of Transportation, About TIGER Grants, https://www.dot.gov/tiger/abouttigergrants. Pg.1 4 Ibid 5 2013 Benefit-Cost Analysis Guidance for TIGER Grant Applicants, https://www.dot.gov/sites/...TIGER%202013%20NOFA_BCA%20Guidnace_0.pdf

impact infrastructure and buildings in green bond and

other investment portfolios. Recent experience with a

US Department of Transportation merit-based grant

program known as TIGER (Transportation

Investment Generating Economic Recovery) offers a

glimpse at investor emphasis on the need to reveal the

full value associated with projects in the built

environment. “The TIGER program enables DOT to

examine a broad array of projects on their merits, to

help ensure that taxpayers are getting the highest

value for every dollar invested.”3

This heavily oversubscribed program requires that

“applicants detail the benefits their project would

deliver for five long-term outcomes: safety, economic

competitiveness, state of good repair, livability and

environmental sustainability.”4 DOT feedback to

applicants states that, “The best applications are often

prepared by transportation agencies that have used

in-house economic expertise and benefit-cost analysis

(BCA) to influence design of the project from the

beginning. All applicants should also consult the

TIGER BCA Resource Guide... ”5 This example is

relevant to due diligence demands on fiduciaries in

that it offers proof of demand for less tangible data in

investment analysis while reinforcing the point that

BCA is used to determine total or full value.

Cost of Due Diligence

The cost and time required for due diligence are often

the reason cited for placing little to no emphasis on

comprehensive Triple Bottom Line analysis of capital

investments in facilities. Larger projects may be able

to justify the expense; however, most infrastructure

investments involve smaller projects valued at less

than $100 million or even $10 million. Emerging

technology and best practices are addressing the

challenge of Triple Bottom Line (TBL) assessments.

AutoCASE® is a cloud-based automated Benefit-Cost

and Risk analysis tool. When linked to design software

including Autodesk Civil 3D, Infraworks, and Revit

http://www.reinhartlaw.com/Documents/art140402%20RIIS.pdf

https://www.dot.gov/tiger/abouttigergrants

http://www.dot.gov/sites/...TIGER%202013%20NOFA_BCA%20Guidnace_0.pdf


Building Information Modelling (BIM) products,

project planners, designers and financial analysts can

run real time TBL business cases. Massive amounts of

data can be harvested from BIM products for TBL

analysis.

AutoCASE produces TBL valuation assessments at a

small fraction of the cost of custom studies, enabling

users to run cases early and often throughout project

development, commissioning, and long-term

operations. Users have the ability to access TBL

outputs that include the Net Present Value (NPV) of

financial returns as well as the NPV of externalities

and the Sustainable Return on Investment. Each

category of value can be subdivided by project

stakeholder (i.e., owner, investor, community,

environment, taxpayer) to answer the “What’s in it for

me?” question that tends to lead to project opposition

and delays.

Technology is solving a problem for fiduciaries of

investments that have sustainability or climate risk

reducing elements while making it possible to design

for optimal Triple Bottom Line outcomes. It addresses

fiduciaries’ concerns relative to the cost of due

diligence while addressing challenges associated with

facility performance measurement, monitoring and

reporting.

John Williams is Chairman & CEO of Impact

Infrastructure, Inc., with offices in New York City

and Toronto. The firm is partnering with software

giant Autodesk at the center of a movement to bring

solutions including AutoCASE to the global

marketplace.

http://www.impactinfrastructure.com/

http://www.impactinfrastructure.com/


Enhanced Analytics

Smart Transportation: The Urban Life Force

By Carol L. Stimmel, Founder & CEO, Manifest Mind, LLC

Life force represents our sense of vitality; it’s the thing that separates the

living from the nonliving. In our cities, our collective life force is

demonstrated by the quality of our lives, as measured by the health of

our society, economy, and our relationship to the environment; indeed,

transportation is the vital force that spurs continued growth and well-

being for communities.

Typically, in a discussion of smart city technology, transportation and

human services aren’t explored together. But if we’re committed to

designing a smart environment that’s founded on empathy for our

citizens, we must first consider how our design influences the movement

of people through the city. We also need to account for the subsequent

impacts on fundamental transport issues as well as public health and

wellness. How we organize a smart city’s transportation system

determines how the city develops and becomes sustainable over time.

Our design affects land-use policies and myriad elements of the built

environment. It also forces us to face the truth about how transportation can

segregate disadvantaged neighborhoods and how that isolation can limit

ready access to hospitals, community clinics, public parks, and even food.

In this light, the concept of urban transportation must go one step further

than our traditional thoughts about conveyance, because wherever the

transportation infrastructure accommodates and encourages non-

motorized transportation, positive impacts on public health can result.

Physical activity improves citizens’ health, but equally important is the

decrease in transportation-related pollution that results in asthma,

respiratory illness, heart disease, lower healthy birth rates, and certain

types of cancer. Further, multiple studies have shown that a limited

access to affordable transportation creates health inequity, decreased

access to education, and fewer recreational opportunities for all

populations – especially disabled and senior citizens. Transportation has

always been job one for urban designers, but if we believe that smart

technologies should improve livability and increase resource

sustainability, there may be no more impactful a goal for transportation

design than improving health outcomes by how we move people around.

Big Data Analytics Guide the Way

Data about location-based, real-time conditions can improve the use of

existing infrastructure, but it can also serve to build out new, almost

fantastical systems of transport. But, fundamentally, transportation

©Matthias Rhomberg/Flickr


Carol L. Stimmel is the

Founder & Chief Executive

Officer of Manifest Mind LLC.

scenarios must begin to embrace smart technology for advanced

coordination that comprehends more than just the mechanics of moving

people and things around; it must consider for the habits and behaviors

of drivers and riders themselves.

Smarter transportation solutions that positively impact the urban

experience include:

• Creating healthier, more-walkable, and more-livable cities

• Improving transportation infrastructure to reduce congestion and

enhance public safety

• Reducing urban food deserts and improving access to social services

Transportation analytics provide the tools and models that bring

nontraditional data sources to our well-known operational systems.

These analytics encourage smarter traffic data systems and adaptive

technologies, with social media feeds that can tell us where people are

going and where they last ate tainted seafood to deter burgeoning public

health issues.

Data allows us to get to our bus on time, but it also enables improved

predictions about which roads will be impacted by the construction of a

high-speed train route and how to adjust other transit schedules and

communicate with the public about how they can best cope with the

major construction impacts. When unplanned incidents and events occur

– such as accidents or strikes — traffic can be rerouted and other

utilization decisions can be made in many planning horizons, from

budgetary cycles to real time. Data-informed transportation planning is

able to account for comprehensive land-use development strategies, such

as understanding how to account for the transit requirements that will

result if we build a new hockey rink in an outer downtown ring, or look

to modify our streets to create public spaces for mobile food trucks in

blighted areas.

The design opportunities only become greater as more data is brought

under consideration. And designers can become more capable as

analytics techniques improve and people understand how to better

access data, use it properly, and improve their interpretation of it. How

cities access and activate the data that’s available to smarten our cities

determines the rate and depth at which favorable change can occur.

Advanced transportation systems are a key element of an enriched and

vibrant city and an opportunity for high-impact solutions that can reach

most every urban dweller.

https://manifestmind.com/


Sustainable Standout

Integrating Green Spaces to Build Stronger Communities

By Deborah Marton, Executive Director at New York Restoration Project

©Bette’s Rose Garden / Courtesy NYRP

Complex problems don’t have simple solutions. Despite best intentions

and enormous investment, social and economic problems burdening

communities persist through generations. What are we missing?

Copious recent studies demonstrate that like all living creatures, human

beings are inseparable from their environment. Asthma and obesity,

brain development, crime, economic resilience, even voting levels, are

all inextricably linked to physical environment, which amplifies and

forms the social fabric at the heart of our shared lives. Municipalities,

laboring under competing agendas, limited human and financial

resources, resistance or lack of resources to innovate, and outdated

bureaucratic structures, have been unable to develop an integrated and

effective response that addresses the deep interdependence of people

and place.

If we are going to ease chronic poverty and other social ills, we need to

recognize the role of our physical environment. The work of community

development must include the proactive design and creation of

community — inspired, built ecologies so that human and natural

systems thrive together. While the public sector may desire this change,

it is fundamentally not structured to achieve it. As a private,

independent, non-profit organization working in the public realm, New

York Restoration Project (NYRP) addresses these issues head on, and

with creativity, resulting in a new paradigm for community strength.

Since our founding in 1995, NYRP has acted with a holistic and

integrated understanding of how to design and create community

vitality by joining forces with the community itself. Working on

properties wholly owned by NYRP as well as on city-owned land under

multiple jurisdictions – Parks, Transportation, Housing Authority and

Education – we have pioneered a powerful new land-based approach to

building stronger communities. Our integrated process includes

community engagement, design and construction, maintenance and

operations, education, and activation of open spaces through a range of

arts and fitness programs.

The impact of this comprehensive approach can be most effectively

delivered in the 52 community gardens under NYRP ownership. In

many neighborhoods, our gardens are the only clean, safe, green space

within walking distance. We engage communities surrounding our

gardens in their governance, modeling productive modes of social

interaction and conflict resolution. Through the ongoing and reliable


engagement of on-the-ground NYRP staff, we also provide ad hoc job

training in horticulture and landscape management skills. Because we

know the stakeholders well — both individuals and community based

organizations — we can mount a fast, flexible response when necessary

to resolve issues, support community initiatives, or bring new

resources.

Any one garden may include urban agriculture, children’s play areas,

contemplative corners, and gathering and performance spaces. It may

also include composting, storm water management elements, soil

amelioration, and plants chosen to attract butterflies and birds and to

increase biodiversity generally. Or it may contain all of the above!

These features work in tandem to increase environmental quality at the

neighborhood scale, and when aggregated, can impact the total urban

environment at the city scale. Taken together, the physical nature of

spaces under our management and the human needs they meet

demonstrate how linking environmental justice and social equity

enhance the ability to achieve both.

Positive and Systemic Outcomes

The impact of this work extends beyond the boundaries of our gardens.

Time and again we have witnessed how our activities influence quality

of life and learning throughout our neighborhoods. When we distribute

trees through our free “Tree Giveaway” program, recipients understand

that by planting that tree they are changing the essential nature of the

urban environment; residents are transformed into partners who help

steward the urban canopy. When we work with volunteers to turn a

once trash-filled and unusable space into a safe, clean and beautiful

community garden, neighbors understand their own power and act to

reclaim other nearby open spaces.

A more orderly public environment creates a sense of safety, and

residents spend more time outdoors. Public spaces with more people

and less trash and disorder lead to reduced negative behaviors like

vandalism, public illicit activities, and verbal harassment. Ultimately,

our goal is transformation at the neighborhood scale. In a connected,

safe, beautiful community, every walk — from home to school, work to

the subway, subway to local commercial areas — reinforces the

importance of an individual life, while also communicating a message

that every person is a valued participant in the wider culture of the city.

Cultivating Community

NYRP’s Cultivating Community Program stands as the philosophical

and practical underpinning of our day-to-day work on the ground in

public parks, community gardens, through tree-planting efforts and

community activation in all five boroughs. NYRP effectively and

Deborah Marton is Executive

Director at the New York

Restoration Project, a citywide

conservancy that brings a

comprehensive approach to

urban land management,

including community

engagement, capital

construction, cultural

programming, landscape

maintenance and environmental

education.

https://www.nyrp.org/

https://www.nyrp.org/


responsibly manages more than 100 acres of public open space for the

benefit of millions of New York residents.

Our approach to urban land management is comprehensive and

holistic. On the land we own – 52 community gardens throughout the

five boroughs – with direct community participation, we:

Design and build with resources derived through private

fundraising;

Program community events;

Deliver adult and youth education, both formally and on an ad hoc

basis;

Provide technical resources and supplies to create gardens, 70% of

which support agriculture in neighborhoods lacking adequate

access to fresh produce;

Clean and maintain, while also training and developing related

skills in the community so they may participate in the care of their

neighborhood public open spaces;

Initiate public dialogue around community values, inspiring a

commitment to stewardship of land and community; and

Make and maintain places where people love to congregate and

engage in neighborhood life.

Similarly, in the public open spaces we are entrusted to manage under

agreement with the NYC Department of Parks and Recreation, we have

become an essential partner — the only conservancy acting citywide.

On public land, we undertake all tasks described above, and also:

Before After In 2013, the Gil Hodges Community Garden in Brooklyn was transformed by the installation of a rain garden featuring permeable

paving, an outdoor classroom, a birch reading grove, and bioswales to filter storm runoff. This work was funded in part by the New

York City Department of Environmental Protection and Jo Malone London, a fragrance company that inspired the addition of a

“fragrance walk” of perfumed flowers to the finished garden.


Model and pilot best open space program and management

practices for the municipality;

Developing unconventional public assets, such as the Peter J. Sharp

Boathouse; and

Quickly and efficiently provide resources when needed, such as

cleanup and recovery after Hurricane Sandy.

And through our Million Trees NYC program we have:

Successfully increased the urban canopy by planting or causing to

be planted nearly 250,000 trees on public and private property;

Educated New Yorkers about the benefits of the urban canopy;

Trained tree stewards; and

Impacted the total environmental condition of all of New York City

by reducing energy usage and airborne pollutants and increasing

biodiversity and storm water infiltration.

As NYRP grows, so does our mandate to ensure that what we build and

manage in partnership with the City of New York and our many

partners is continually maintained, stewarded and programmed

directly for and with the community. This systemic, needs-based, and

community-initiated approach represents a commitment to the

individuals, families, businesses and communities within our city.


Virtual Attendance

Cornerstone Capital at “The Model Room”

By Andy Zheng, Research Associate at Cornerstone Capital Group

In one of the most iconic rooms of New York,

Cornerstone Capital Group joined together with the

Rockefeller Brothers Fund, Astia Angels, XMS Capital

Partners, The Clinton Global Initiative and ATCO

Realty, to host an event this month to consider what it

takes to create the world’s next wave of iconic

entities…businesses and leaders who will have a

lasting legacy. “Business Model Innovation” and

“Impact at Scale” were the order of the evening on

April 2nd where entrepreneurs, innovators and

financiers gathered at the New York Yacht Club’s

“Model Room” to engage in wide-ranging discussions

on sustainable and impact investing and the potential

for the private sector to drive system-level change.

In his welcoming remarks, Richard Parsons of

Providence Equity Partners pointed out that investors

have become more sophisticated about the

interconnectedness of the world and the notion of

sustainability. For many, simply driving for returns

isn’t enough; they also strive to move people, the

economy and the world in a more positive direction.

“With our investing, we take a point of view. We want

returns, good returns, but we also want to see a

‘second bottom line’; we want to see that we are

making a positive difference with our invested

dollars.” On the same note, he praised the

commitment and expertise of Cornerstone Capital for

combining “the discipline from the analog world in

which we grew up and the sensibility of the world into

which we are going.”

As for ways to effect positive change in the world,

Justin Rockefeller of the Rockefeller Brothers Fund

©Joe Jenkins


suggested that as people and institutions what we do

with our money “has moral consequences,” and that

we should consider ways to deploy the variety of tools

at our disposal. These may include: time, networks,

connections, government lobbying, the capital

market, and even our day jobs. And sometimes, he

suggested, it is simply the insistence to “ask annoying

questions.” By leveraging these tools and applying

them to certain acupunctural points – such as

investing in businesses that create social and

environmental impact – we can drive measurable

societal change.

On the need to “ask annoying questions,” Erika Karp,

Founder and CEO of Cornerstone Capital, and former

Head of Global Sector Research at UBS Investment

Bank, concurred with Rockefeller. She added that it is

these “annoying questions” that possess the power to

“challenge the status quo and bring greater

transparency and collaboration.”

Greater disruptive power must come from business

model innovation. To illustrate that potential,

Cornerstone showcased rapid-fire presentations from

four ambitious “Impact Entrepreneurs:”

Guy Halfteck, Founder and CEO of Knack,

showed how the digital games his company

develops can uncover the talents, traits, skills and

strengths of a player. Knack’s algorithms help

identify a person’s innate potential based on the

way they solve problems and play these games,

which are accessible via handheld apps or a

desktop. For young people who lack access to

education and sophisticated technology in

particular, Knack’s ability to unlock previously

hidden human potential offers a path to economic

empowerment.

Julie Lerner, CEO of PanXchange, explained

how her company’s user-friendly, web-based

commodities negotiation and trading platform

provides true price information where supply

meets demand. Built by traders, for traders,

PanXchange’s solution improves price

transparency, liquidity and market efficiency for

physical market players.

Mike Brady, President and CEO of Greyston,

adopts an “open hiring policy” at his company’s

bakery operation in Yonkers, NY, which is a key

supplier to Unilever’s Ben & Jerry’s unit. In other

words, he’ll hire individuals with a criminal

record, or no prior work experience, or education,

and teach them the skills they can use to rebuild

their lives. By eliminating the barriers to entering

the labor market, Greyston serves as a force for

personal transformation and community

economic renewal, while baking high-quality

products.

Ron Gonen, Co-founder and CEO of Closed

Loop Fund, showed how the Fund spurs

innovation and progress by catalyzing investment

in recycling infrastructure and programs. With

the interest-free and below-market-rate loans the

Fund provides, municipalities and private

companies can support and scale their recycling

initiatives, and realize savings in waste

management.

In her closing words, Karp underscored that though

challenging, to achieve impact at scale is paramount.

“It’s not hundreds of millions, or billions, but trillions

of dollars that we need to move, if we are to address

the challenges of climate change, health care,

infrastructure, education and income inequality,

globally.” Equally vital is the need for collaboration

and capital. “Because a little bit of catalytic capital can

drive enormous change if we continue to learn and to

share, collaborate, communicate and articulate how

we can do capitalism right.”

Andy Zheng is a Research Associate at Cornerstone

Capital Group.


Upcoming Events

Global ESG Calendar

Date/Time Event Location Information

4.29.15 – 4.30.15

14th Annual Sustainability Summit

Cornerstone Speaking Event

The Conference Board

Conference Center

New York, NY

https://www.conference-board.org/

4.29.15 – 4.30.15 TBLI Singapore Insead School

Singapore

http://www.tbligroup.com/tbliconference.h

tml

5.4.15 – 5.6.15 US SIF Conference 2015

Cornerstone Lead Sponsor Event

The Westin Michigan Avenue

Chicago Hotel

Chicago, IL

http://www.ussif.org/conference

5.7.15 – 5.8.15 Divestment and Sustainable Investment

Forum


Grand Hyatt Denver

Denver, CO

http://www.intentionalendowments.org/de

nver_forum

5.12.15 – 5.13.15 Shared Value Leadership Summit 2015:

Business at Its Best

The Conrad

New York

http://sharedvalue.org/groups/shared-

value-leadership-summit-2015-business-

its-best

5.13.15 – 5.15.15 2015 Ceres Conference The Fairmont Hotel

San Francisco, CA

http://www.ceres.org/

5.26.15 – 5.27.15 Sustainable Brands, Istanbul Park Bosphorus Hotel

Istanbul, Turkey

http://www.sustainablebrandsistanbul.co

m/2015/en/

5.31.15 – 6.2.15 2015 RIA Conference Banff Centre.

Banff, Alberta

http://riacanada.ca/conference2015/

6.1.15. – 6.4.15

Sustainable Brands, SB15 San Diego Paradise Point Resort & Spa

San Diego

http://events.sustainablebrands.com/sb1

5sd/

6.2.15 – 6.3.15 RI Europe 2015 London, United Kingdom https://www.responsible-

investor.com/events/

6.10.15 – 6.14.15 Waterkeepers Annual Conference Millennium Harvest House,

Boulder, CO

http://waterkeeper.org/events-2/annual-

conference

6.19.15 ESG Summit


NASDAQ MarketSite, New

York, NY

http://skytopstrategies.com/esg-

company-performance/

6.22.15 – 6.23.15 Low Carbon Investing Summit


The Princeton Club

New York, NY

https://www.frallc.com/calendar.aspx

6.25.15 The Private Debt Investment Summit The Princeton Club

New York, NY


6.29.15-6.30.15 Fifth Annual Responsible Extractives

Summit

Hilton Tower Bridge Hotel,

London, UK

http://events.ethicalcorp.com/extractives/

6.29.15-7.1.15 The Green Sports Alliance 2015 Summit McCormick Place West,

Chicago

http://summit.greensportsalliance.org/

https://www.conference-board.org/

http://www.ussif.org/conference

http://www.intentionalendowments.org/denver_forum

http://www.intentionalendowments.org/denver_forum

http://www.ceres.org/

http://riacanada.ca/conference2015/

https://www.responsible-investor.com/events/

https://www.responsible-investor.com/events/

http://skytopstrategies.com/esg-company-performance/

http://skytopstrategies.com/esg-company-performance/



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Recent Articles from Cornerstone Capital Group

Cornerstone Journal of Sustainable Finance & Banking – March 2015

Cornerstone Journal of Sustainable Finance & Banking – February 2015

Cornerstone Journal of Sustainable Finance & Banking – January 2015

Cornerstone Journal of Sustainable Finance & Banking – November 2014

Cornerstone Journal of Sustainable Finance & Banking – October 2014

Cornerstone Journal of Sustainable Finance & Banking – September 2014

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Cornerstone Journal of Sustainable Finance & Banking – June 2014

Cornerstone Journal of Sustainable Finance & Banking – May 2014

Cornerstone Journal of Sustainable Finance & Banking – April 2014

Cornerstone Journal of Sustainable Finance & Banking – March 2014

Cornerstone Journal of Sustainable Finance & Banking – February 2014

Cornerstone Journal of Sustainable Finance & Banking – January 2014

Cornerstone Journal of Sustainable Finance & Banking – December 2013

Cornerstone Journal of Sustainable Finance & Banking – November 2013

Cornerstone Journal of Sustainable Finance & Banking – October 2013 Inaugural Edition

The Economist: “Revisiting the Wealth of Nations: The Seas” by Erika Karp – March 2015

http://www.economistinsights.com/opinion/revisiting-wealth-nations-seas

Wall Street Week: “Embrace the Grey” by Erika Karp, Derek Yach – September 2013

www.wallstreetweek.com/guest-post-embrace-the-grey

Forbes: “The Power to Convene” by Erika Karp – December 2012

http://www.forbes.com/sites/85broads/2012/12/10/the-power-to-convene/

Forbes: “Sustainable Capitalism…If Not Now, Then When?” by Erika Karp – November 2012

http://www.forbes.com/sites/85broads/2012/11/08/sustainable-capitalism-if-not-now-then-when/

Forbes: “Could Sustainability by Unsustainable?” by Erika Karp – September 2012

http://www.forbes.com/sites/85broads/2012/09/26/could-sustainability-be-

unsustainable/?utmsource=allactivity&utm_medium=rss&utm_campaign=20120926

Wharton Magazine: “The Clients of my Clients....Sustainable Selling” by Erika Karp – July 2012

whartonmagazine.com/blog/sustaining-selling-success/

Wall Street Week: “Leaving Rio....and Going towards Corporate Sustainability” by Erika Karp – June 2012

http://www.wallstreetweek.com/leaving-rio-and-going-towards-corporate-sustainability/

Harvard Business Review | HBR Blog Network "Why Go it Alone in Community Development?" by Andrew MacLeod – June 2012

http://blogs.hbr.org/2012/06/why-go-it-alone-in-community-d/

Forbes: “Sustainable Investing and Moments of Truth” by Erika Karp – March 2012

http://www.forbes.com/sites/85broads/2012/03/28/sustainable-investing-and-moments-of-truth/

Wall Street Week: “Investing in Diversity…Painful but Profitable” by Erika Karp – March 2012

http://www.wallstreetweek.com/guest-post-investing-in-diversity-painful-but-profitable/

Wall Street Week: “Noise Cancelling Investment Research - ESG Analysis and Sustainable Investing” by Erika Karp – February 2012

http://www.wallstreetweek.com/noise-cancelling-investment-research-esg-analysis-and-sustainable-investing/

Forbes: “Superheroes of Capitalism” by Erika Karp – January 2012

http://www.forbes.com/sites/85broads/2012/01/13/superheroes-of-capitalism/

Forbes: “Superheroes of Capitalism: Part II - The Women” by Erika Karp – January 2012

http://www.forbes.com/sites/85broads/2012/02/01/superheroes-of-capitalism-part-ii-the-women/

http://cornerstonecapinc.com/?p=6053






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http://www.forbes.com/sites/85broads/2012/09/26/could-sustainability-be-unsustainable/?utmsource=allactivity&utm_medium=rss&utm_campaign=20120926

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http://www.wallstreetweek.com/leaving-rio-and-going-towards-corporate-sustainability/

http://blogs.hbr.org/2012/06/why-go-it-alone-in-community-d/

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http://www.forbes.com/sites/85broads/2012/01/13/superheroes-of-capitalism/

http://www.forbes.com/sites/85broads/2012/02/01/superheroes-of-capitalism-part-ii-the-women/


1180 Avenue of the Americas, 20th Floor

New York, NY 10036

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The Cornerstone Capital Inc. Team

Erika Karp

Founder and Chief Executive Officer

[email protected]

Joel Beck

Chief Operating Officer & Chief Compliance Officer

[email protected]

Nicola Shelbourne

Treasurer & Director of Executive Financial Services

[email protected]

John Wilson

Head of Corp Governance, Engagement, Research

[email protected]

Phil Kirshman

Chief Investment Officer, CCIM

[email protected]

Craig Metrick

Director, Manager Due Diligence and Thematic Research

[email protected]

Ariane de Vienne

Managing Director, CCIM

[email protected]

Urs Weber

Senior Portfolio Manager

[email protected]

Michael Geraghty

Global Markets Strategist

[email protected]

Margarita Pirovska, PhD

Policy & Sustainability Analyst

[email protected]

Michael Shavel, CFA

Global Thematic Analyst

[email protected]

Betsy Emerson

Head of Research Operations

[email protected]

Karen Benezra

Head of Strategic Marketing & Communications

[email protected]

Tanya Khotin

Head of Institutional Business Development

[email protected]

Alice Petrofsky

Executive Director Institutional Business Development

[email protected]

Mauricio Barbeiro

Latin America Business Development

[email protected]

Juan Lois

Director, Business Development

[email protected]

Matthew Daly

Director, Client Services

[email protected]

Kara McGouran

Assistant to the CEO

[email protected]

Andy Zheng

Research Associate

[email protected]






















Cornerstone Capital Inc. doing business as Cornerstone Capital Group (“Cornerstone”) is a Delaware corporation with headquarters in New York, NY. The Cornerstone Journal of Sustainable Finance and Banking (“JSFB”) is a service mark of Cornerstone Capital Inc. All other marks referenced are the property of their respective owners. The JSFB is licensed for use by named individual Authorized Users, and may not be reproduced, distributed, forwarded, posted, published, transmitted, uploaded or otherwise made available to others for commercial purposes, including to individuals within an Institutional Subscriber without written authorization from Cornerstone.

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