When we founded Generation in 2004, our intention was to show how integrating sustainability research into a long term investment strategy could strengthen fundamental investment analysis. Since then, our conviction on the importance of sustainability in delivering long term performance has only increased.”
—Al Gore and David Blood
If you sit down and read through the technical report, it is interesting and could be a useful teaching tool in an environmental economics class. It tries to claim that a bunch of global challenges such as climate change and HIV/AIDS represents "risks" that firms face and that adaptive firms should think ahead about how to reduce their exposure to these risks. This is sound thinking.
The document appears to implicitly assume that carbon pricing at the world level is approaching. Why? If a firm has an enormous carbon footprint but we have no carbon pricing and no such pricing is on the policy horizon then why do such emissions pose a "risk" for such a firm?
The Report does not report what portfolio of assets this firm has actually invested in. The sustainable finance literature has doubted that these "green funds" can outperform the stock market as a whole because they can't achieve the same level of diversification as an investor who is willing to invest in "good" and "evil" companies. The NY Post hints that Al Gore's company may earn a high rate of return because liberal investors give the firm their money because of their love of Clinton/Gore. So this raises a new issue. In traditional finance, investors invest in the asset or managers offering the highest return for a given level of risk. In the case of Al Gore's firm, Gore creates a type of product differentiation as liberal investors want to be associated with him. Just as a Mercedes is a name brand car, Gore's Generation Investment Management is a name brand firm . Do any Republicans invest in his firm? Does it matter if they don't?
I have no problem with liberal private investors investing with liberal hedge funds but I do have some concerns about public funds intended to be used for the retirement funds for teachers and cops being invested by intermediaries (perhaps with a political agenda that the voters are unaware of) with celebrities whose good graces they seek.
Introducing "ideology" into the financial decision process may lead capital to be flowing to the "wrong" investors relative to a world where investors focus narrowly on risk/return.
