In 2020, investors poured $51 billion into impact investing. This focus on ESG (Environment, Social, Governance) more than doubled from 2019 and is partly due to investors motivated by climate change, inequality and sustainability. Many predict that the White House’s current focus on similar issues, along with improved technology and data, will super-charge investments in ESG practices.
Philippe Cousteau Jr. and Doug Heske recently partnered to deepen impact investing’s ability to improve our world. They, however, are not new to this arena.
Cousteau—grandson of Jacques Cousteau and son of Philippe Cousteau—continues his family’s longstanding legacy of innovating to honor the planet. Heske has been an asset manager for over two decades and is CEO of Newday which offers portfolios for individual and institutional investors to align their values with financial returns. In addition, Newday donates 5% of revenue to nonprofits such as Cousteau’s EarthEcho.
I had an opportunity to interview them recently. Given their track record, the perspective and insight they share is well worth a listen.
Chaka Booker: Philippe, in your Ted Talk you say, “We've lost the sense of imagination, wonder opportunity and excitement that comes with protecting our planet…”
Philippe Cousteau: Absolutely. In the environmental movement there is an over-reliance on doom and gloom because those are good short-term motivators. The movement’s bread and butter has been philanthropy, often individual donations. A message about something disappearing gets people to donate. But it's not capturing the spirit of innovation and adventure that inspires long-term. I think about my father and grandfather, when you look at their films and books, what inspired so many people was a sense of adventure, comradery, and joy. We have to return to that.
Booker: What does the path forward look like?
Cousteau: We can’t always say, "Stop doing this." Instead, we have to become the movement of, "Here's a vision for a better world. Let’s work together on reinvesting and reimagining.” ESG investing represents that and is something I've been involved in for many years. It’s what I love about the partnership with Newday.
Booker: How does Newday determine if an organization is operating sustainably?
Doug Heske: This question is important because many organizations are accused of “greenwashing,” and often for legitimate reasons. We’ve identified a common thread among most companies that operate in a sustainable way. Their concept of responsibility is rooted in long term strategy and governance decisions—which become primary drivers of investment returns. These companies typically have adopted a stakeholder approach to allocating capital, as opposed to a shareholder approach. Not to the detriment of shareholders, but to their benefit.
Booker: How does that play out?
Heske: When making decisions, these companies think about the distribution of value among all their stakeholders—employees, customers, suppliers, community, environment. As a result, they acquire “contingent assets,” not from an accounting perspective, but assets that drive long-term value. Contingent assets aren't normally reflected in financial metrics. They are excess factors often underappreciated in the marketplace. They create what we identify as market inefficiencies that can be exploited over time. If an organization effectively discharges its ESG practices, then it drives future returns before they end up becoming real financial factors that get embedded into security prices.
Booker: You identify value that others aren’t seeing yet.
Heske: Our role as investment managers is to identify great businesses. What do great businesses do? They create extraordinary wealth for their shareholders, but they also leave a positive impact on the communities in which they operate. Enormous power sits in the hands of these companies which sometimes have larger revenues than some countries. The work of sustainability has almost moved from government-led toward corporate-led functionality.
Booker: Philippe, why does your work often involve youth?
Cousteau: Young people have been the backbone of every great social movement. The best way to achieve change is to invest in young people’s leadership and education. It’s why I founded EarthEcho. Young people not only impact their communities—they also influence their parents. I’ve never met an adult who said, "I didn’t believe in climate change until I saw that billboard on the highway.” But a lot of them do tell me, "My kids come home every day, nagging about this and that. And now we've done this, we've done that.” Changing adult behavior is very difficult. The exception to that is young people’s incredible power to influence adults.
Booker: What drew you to Newday?
Cousteau: About 13 years ago I was listening to a panel on total charitable dollars versus the trillions in market value. I thought to myself, how do we get into that business? We're begging for scraps as nonprofits. We started working on a few initiatives and had a good run. We were a little ahead of the curve, but now impact investing has caught on. When I met Doug, I learned how they are making ESG investing accessible to anybody. I loved their vision, depth, and authentic work to be a catalyst for change as well as their work in education through the SIFMA Foundation.
Heske: We’re working with SIFMA to provide sustainability education. We provide our Sustainability Index as part of their National Stock Market Game which is taught to more than 600,000 students. It’s important we educate the leaders of tomorrow about transformational behavior.
Booker: How can investing in the stock markets help our planet?
Heske: The transfer of a share of common ownership in a public company from one person to another does not directly translate to impact. However, investing in companies elevates the potential for shareholders to use their stakeholder power to demand that morality be present in how value is created. Climate change, ocean plastics, greenhouse gas emissions—are all symbol of humanity's relationship with the planet. They are collective action problems. All of us have a responsibility to incorporate this kind of decision-making into our daily lives. It would be irresponsible to ignore the public investment space, especially given the power they have. There are 100 companies, most of them public, that account for 71% of all industrial greenhouse gas emissions since 1988. That's staggering. Think about the impact we can have if we just address those 100 companies and their behaviors.
Cousteau: There are extraordinary opportunities for investing in the blue economy and harnessing the power of the ocean. The importance of aquaculture keeps growing. Kelp and seaweed forests allow renewal of the ocean ecosystems, carbon sequestration, and job creation. You want capital flows to reward that. ESG represents the rethinking of the fundamental economic levers in our society.
Booker: How can people get involved?
Heske: On June 8 we'll be hosting an ESG World Oceans Day event focused on moving from single-use product packaging to reusables. The world produces more than 380 million tons of plastic every year which often end up as environmental pollutants. I read recently that every week we ingest five grams—the weight of a credit card—of microplastics into our bodies. We’ll have three executives presenting on their work moving from single-use plastics to reusables.
Cousteau: I’m excited because one of our youth leaders—Sadie—is on the panel and we’ll hear the youth perspective as well. It will be focused on innovating and investing in solutions. Not the doom and gloom but the opportunity. How do we come together to solve this? Where's the innovation and technology?
Heske: There is a long list of organizations supporting this event. SIFMA is encouraging their community to join the event. There are seven or eight other impact investment firms supporting it. That is great news because there is growing recognition that when we pool our efforts to drive transformational change, we can move the needle in really meaningful ways.
The conversation has been edited and condensed for clarity.
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