David Blood, co-founder and managing partner of Generation Investment Management, spoke about long-term investment in companies committed to corporate sustainability during a speech in Riggs Library on Tuesday.
Blood, the former chief executive officer of Goldman Sachs Asset anagement, co-founded Generation Investment Management in 2004. The firm aims to raise the standards of investment by asking corporations to examine more closely their treatment of the environment, their employees and their customers.
“We believe that companies that embrace sustainability will outperform their competitors,” Blood said.
Contrary to its competitors, Blood said that the Generation Investment Management firm focuses only on long-term global equity investments. Clients can expect a five-year interval before they see significant profits and thus the company relies on performance fees for a lot of its profits.
The firm screens corporations by requiring that they pass its sustainability criteria. Among other things, Generation requires good corporate governance, social accountability, concern for the environment, transparency, innovation, community investment and involvement, employee satisfaction and compensation, and economic growth from companies clients invest in.
Though the concept of sustainability criteria is not new, Generation’s attempt to bring mainstream investors into the realm of sustainable investment is considered cutting edge.
Blood cited several corporations to demonstrate that sustainability standards can have different meanings for different industries. He mentioned Costco as a corporation that treats its employees well. Of Costco’s employees, 63,000 are unionized and, according to Blood, the company encourages all of its members to join unions. This gives the company a competitive advantage over similar wholesale suppliers, he said.
Blood identified Toyota as the automobile company most prepared to accommodate changes in oil prices. Toyota, a leader in producing environmentally-sound cars, will be unaffected by rising prices in petroleum imports, he said.
“They have integrated sustainability,” Blood said.
Blood also lauded T. Rowe Price for what he called its “highly ethical” business practices and its customer service. He applauded Synthesis, a Swiss-based medical products group, for its selling practices. He also cited Novol Enzymes for offering biological organisms versus chemical enzymes, which he said gives the company a competitive advantage.
The firm, headquartered in London with an office in Washington, D.C., has several high-profile partners, such as former Vice President Al Gore, a founding partner and chair of the firm.
The event was sponsored by the Pacem in Terris lecture series.
