April 26, 2019
| By Scott Minerd, Global CIO
A version of this article appeared in The Power of Ideas, the flagship publication of the 2019 Milken Institute Global Conference.
Video: The Sustainable Development Quotient
The importance of transitioning sustainable development into an institutional asset class.
One of the most rewarding partnerships of my career began about a decade ago in Reykjavik while sharing a bottle of Zicam. At a gathering of the Arctic Circle, while discussing challenges and opportunities in the Arctic region in part resulting from climate change, I was seated next to Carter Roberts, Chairman and CEO of the World Wildlife Fund (WWF) in the United States. Besides wanting to avoid a cold (hence the Zicam), what connected us was our shared vision for economic development to be done responsibly and sustainably in the changing Arctic. Even though we approached the problem from different perspectives—he runs an NGO focused on conservation, and I am responsible for billions of dollars of investment assets—we both realized that our approaches to meeting this challenge were complementary. Our organizations have worked together ever since.
I mention this story because the need for sustainable development is so great, and the challenges are so complex, that it simply will not be possible for one government, firm, organization, or person to solve them alone. An estimated $4.5 trillion in capital investment is needed every year in developing countries between now and 2030, according to the United Nations Global Goals for Sustainable Development (SDGs), which aim to end poverty, promote economic equality, and protect the planet.
Accomplishing the SDGs is so daunting in scale and complexity that the 17th and final goal calls for groups to work together to help transform the world. Partnerships, according to Goal 17, are vital if sustainable development is to succeed.
I am a firm believer in this goal and, in my experience, there are four basic models that have shown an ability to achieve it.
One model is for a diverse group of stakeholders to converge around a single purpose. My most notable experience in the power of this model was in the effort to establish the Arctic Investment Protocol, a multi-year effort organized by the World Economic Forum and crystallized by a 22-member council of concerned stakeholders, including academic institutions, local and national governments, NGOs, businesses, trade organizations, and financial institutions. The result of our combined efforts in this project was a milestone in sustainable and responsible business practices, governance, and environmental stewardship.
Another model calls for a smaller team of complementary partners to work together to complete a focused task. For example, Guggenheim has a long-running working relationship with WWF on sustainable development issues. Most recently, together we worked with the Stanford Global Projects Center to analyze the methodologies and tools for establishing sustainability standards. The result was a landmark study of the state of the practice, an important step in transitioning sustainable infrastructure development into an institutional asset class.
A third model is when many like-minded entities converge around ideas that open up engagement and lead to more targeted solutions. I call this the conference model. Conferences such as the Milken Global Conference and the World Economic Forum are important platforms for providing deadlines, focusing arguments, and prioritizing future projects. Within the larger Davos gathering, Guggenheim launched—with partners WWF, the UN Foundation, the Rockefeller Foundation, and Ericsson—the Goal 17 Partnerships event space. This event kicked off an ongoing program designed to expand partnerships to more broadly examine and develop real commitments to long-term sustainable development.
The fourth model is the client/provider model. In almost every instance of pursuing sustainability goals, a principal has to hire a consultant or advisor to ensure proper execution. We see this at work in the asset management business: It has become increasingly important to a growing number of clients that Environmental, Social, and Governance (ESG) factors are formalized in asset managers’ investment decisions. The partnership between client and asset manager is an important tool in using the economic power of institutional investors to advance sustainability goals while seeking an acceptable level of return.
Openness to sharing financial, technological, and knowledge resources—in whatever partnership model works best—is necessary to address the planet’s complex sustainable development challenges. It is incumbent on all organizations to seek out partnerships, collaborations, and relationships that work for them so that their contributions can lead to a healthier and safer world.
Written by Scott Minerd, Co-Founder, Chairman of Investments, and Global Chief Investment Officer, Guggenheim Partners
Important Notices and Disclosures
Investing involves risk, including the possible loss of principal.Infrastructure investments may be subject to a variety of risks, not all of which can be foreseen or quantified, including operating, economic, environmental, commercial, currency, regulatory, political and financial risks. Investing in a specific sector such as infrastructure is more volatile than investing in a broadly diversified portfolio, as there is a greater risk due to the concentration of holdings in issuers of similar offerings. Sustainability requirements, including environmental, social, and governance (ESG) obligations may limit available investments, which could hinder performance when compared to strategies with no such requirements.
This material is distributed or presented for informational or educational purposes only and should not be considered a recommendation of any particular security, strategy or investment product, or as investing advice of any kind. This material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. The content contained herein is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
This material contains opinions of the author or speaker, but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.
©2019, Guggenheim Partners, LLC. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Guggenheim Partners, LLC.
Brian Smedley, Head of Macroeconomic and Investment Research, discusses major trends likely to shape markets this year.
Anne Walsh, Chief Investment Officer for Fixed Income, shares insights on the fixed-income market and explains the Guggenheim approach to solving the Core Conundrum.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"). Guggenheim Funds Distributors, LLC is an affiliate of Guggenheim.
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.
Investing involves risk, including the possible loss of principal.
*Assets under management is as of 09.30.2020 and includes leverage of $14bn. Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.
Guggenheim Investments. All rights reserved.
Research our firm with FINRA Broker Check.
• Not FDIC Insured • No Bank Guarantee • May Lose Value
This website is directed to and intended for use by citizens or residents of the United States of America only. The material provided on this website is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation. Investing involves risk, including the possible loss of principal.