In February 2022, Canadian Pension Plan (CPP) Investments, the investment management organization that managed funds for the CPP, one of the biggest pension plans in the world, announced a net-zero commitment for its portfolio by 2050. Under its CEO, John Graham, it outlined key actions to get there but pleasing stakeholders on all sides was a tough ask. While some lauded the fund's efforts, others questioned its decision not to set interim emissions reduction targets and to continue to finance fossil fuel firms. In practical terms, executing on the firm's sustainable investing approach meant making appropriately weighed investment decisions daily, a complex exercise. In mid-2023, one such investment under consideration was Aera Energy, a California oil and gas asset transitioning to a green business model-renewables and carbon capture and storage.
This case is about TPG Rise Climate, a $7.3 billion climate impact fund launched in 2021 by alternative asset manager TPG. Climate investing is a complex, capital-intensive endeavor; entering it has forced TPG to think and act differently. Relative to other funds, Rise Climate's investments take longer to mature, require far more capital, and are more vulnerable to swings in commodity markets and fickle government policies. Set in December 2023, the case finds TPG considering the future for Monolith, a Rise Climate portfolio company with significant impact potential but an uncertain business model.
In 2023, sustainable investors faced several challenges. The first was the lack of access to standardized and vetted environmental, social, and governance (ESG) data, and equally, the interpretation of this data into investment-useful insights. Reducing reliance on third-party-generated ESG ratings was also an issue. Another challenge was mitigating the risk of greenwashing. Finally, sustainable investors were also under pressure to stay focused on maximizing financial returns. PortageBay, a sustainable analytics platform that leveraged AI to aggregate and analyze ESG data, was founded to solve these problems. As the platform grew, two clients approached PortageBay for help in ascertaining whether they should include Amazon and Goldman Sachs within their climate and gender-focused exchange-traded fund (ETF), respectively. The founders delved into PortageBay's suite of tools to answer their questions.
Sajjan Jindal, Chairman & Managing Director of JSW Steel, India's largest steel producer by market capitalization, was facing a dilemma. Steel demand in India was expected to grow exponentially over the next decade. However, given its traditional reliance on carbon, steel was a "hard to abate" sector and was one of the most highly polluting industries globally. It was particularly polluting in India, where its production relied heavily on the use of coal. Given investor's increasing focus on sustainability, and global regulatory changes that were likely to penalize high emitters, Jindal was acutely aware of the need to decarbonize production. But investing in these technologies required heavy capital expenditure. Moreover, technology was fast evolving and there was considerable uncertainty about which one would be the ultimate "winner." Jindal and his team needed to make decisions. What kind of emissions intensity should it target, how much should it allocate towards decarbonization strategies, and which technologies should it bet on?
In November 2021, Ford Motor Company offered a $2.5 billion green bond to finance investments in electrification. Issuance of green bonds significantly increased into the 2020s, and to date, the Ford Motor Company green bond was the largest such bond offered by a non-financial corporate institution. How would investors assess the attractiveness of the bond?
Pittsburgh, PA, was once the crown jewel of American heavy industry. During the 19th and 20th centuries, the city was an undisputed leader in steel production, boasting some of the largest companies and wealthiest individuals in the world. Its abundance of manufacturing jobs also attracted diverse migrants seeking a better life. But when the US steel industry collapsed in the 1980s, major companies fled Pittsburgh, along with wealthier residents and much of the middle class. The city and surrounding towns plunged into poverty, and "Steel City" lost a crucial piece of its identity. By 2022, Pittsburgh appeared to be thriving again. Major research institutions like Carnegie Mellon University drove the city's transition to an "eds and meds" economy. With its profusion of technical talent, Pittsburgh also developed industry clusters around advanced technologies like robotics and lured technology giants like Google and Amazon. Yet this newfound wealth did not extend to all corners of the city. Infrastructure was crumbling, poverty rates remained high, and Black residents had worse outcomes than both white residents and their counterparts in many other cities. Moreover, fiscal challenges and fragmented governance made it difficult for local leadership to implement solutions to these complex problems. Ed Gainey, Pittsburgh's newly elected and first Black mayor, considered objectives for his four-year term. How could he ensure both growth and shared prosperity? Which problems should he tackle first, and who should be at the table? How would he measure progress?
In November 2021, Girish Nadkarni, the head of TotalEnergies' corporate venture capital arm (TEV) was considering whether, and on what terms, to exit an investment in Hyzon Motors, a start-up supplier of hydrogen-powered trucks. TEV had invested $4 million in Hyzon, which had gone public in July 2021 with a $2.7 billion valuation. Nadkarni was now eager to take TEV's gains, but recognized the potential harm that selling TEV's Hyzon shares could cause. Market observers might interpret TEV's exit not as profit-taking but as an early investor's lack of confidence in Hyzon's prospects. Further, TotalEnergies had signed an MOU with Hyzon to bring 80 trucks to Europe-the goal was to demonstrate for its truck fleet customers the viability of hydrogen as a viable replacement fuel for the diesel it already supplied. Selling the Hyzon shares might convey the opposite message.
ExxonMobil, the world's fifth largest source of carbon emissions, remained committed to aggressively expanding its oil & gas business despite global warming. During the COVID pandemic this strategy resulted in massive losses as the price and demand for oil declined. In the summer of 2021, a start-up impact investing hedge fund, Engine No. 1, invested $38 million in ExxonMobil stock and mounted a proxy fight to change the company's direction by electing Directors experienced in renewable energy. Over fierce objections by management, Engine No. 1 won 3 board seats. By then, demand for oil had resumed and Exxon's strategy had begun to pay off. The case raises provocative questions about whether maximizing shareholder value required Exxon to use its existing resources to drive short term profits without regard to future consequences and environmental impact or, alternatively, to move beyond its core capabilities into initiatives suited to a low-carbon future. Voted best case by first year MBAs.
In early 2021, BlackRock-the world's largest asset manager with $9 trillion in assets under management (AUM)-sought to become a leader in promoting environmental and social sustainability. Over the previous ten years, CEO Larry Fink had written an annual open letter to CEOs, pushing them to view sustainability and climate change planning key components of any long-term strategy. He had built an investment stewardship committee to attend portfolio company shareholder meetings and implement these goals. He had also recruited a team of prominent impact investors to BlackRock to lead a new impact investing fund. Now, as the new fund came of age, both the fund's managers and BlackRock's senior leadership faced difficult choices. At the fund level, they needed to define how to implement their two main selection criteria-intentionality and additionality-in choosing the fund's next stocks. At the company level, BlackRock's leaders wrestled with the question of just how much impact BlackRock could have on the companies it invested in, when well above half of BlackRock's AUM were invested passively.
By January 2020, sustainable investment firm Generation Investment Management (Generation), founded in London in 2004, had grown from a shared vision among seven founders to a 90-person firm managing $27 billion in public and private equity. Throughout its history, Generation had worked towards its mission of seeking to generate superior financial returns by investing in sustainable companies that created long-term value. The case examines Generation's investment process in general, and in particular with respect to a global manufacturer of agricultural equipment. It also examines some of the strategic decisions and challenges facing the firm.
The Piramal Foundation was launched by diversfied Indian conglomerate, the Piramal Group, to improve the healthcare services and quality of education of India's economically and socially disadvantaged. The foundation operates under three verticals-'Piramal Foundation for Education Leadership' (PFEL) for improvements in student learning outcomes; 'Swasthya' for healthcare; and 'Sarvajal' for safe drinking water. Over the years, the Foundation has directly and indirectly benefitted nearly 90 million lives, yet its management team find themselves in a quandary. With finite resources, mostly provided by the Piramal Group, they wonder if they ought to only grow existing programs that show the most promise. They also wonder how to attract more external funding and how to further embed their programs into government platforms in order to create impact at scale.
In Spring of 2018, Chris Ailman, CIO of the $200 billion pension plan for California public school teachers (CalSTRS) was mandated by his board to "prioritize engagement with makers and retailers of firearms in California" following a series of gun-related tragedies in schools. While CalSTRS had a long history of engagement and even divestment, as a fiduciary for the retirement assets of current and future teachers, calls for values-motivated screening or divestment always posed an inherently complex challenge. Having spearheaded the development of Principles for a Responsible Civilian Firearm Industry released on November 14, 2018, Chris Ailman and his team had to decide what to do next.
Jana Partners, a well-known "activist" hedge fund has announced the launch of a new fund Jana Impact. The basic premise is that the fund will be able to generate superior returns by using Jana's activist approach with companies that are underperforming on ESG metrics. The case examines the history of activist investing and Jana's proposed approach in unlocking ESG value.
After much internal debate, THE VELUX FOUNDATIONS of Denmark have decided to allocate a small percentage of their investment portfolio to impact investments. Cambridge Associates, one of the leading investment advisory firms in the world, has been engaged to assist them in developing and implementing an "impact strategy." VELUX only invests in funds (as opposed to direct investments) and must now decide on fund selection criteria and on specific fund investment options that have been presented to them.
Goldman Sachs acquired Imprint Capital Advisors, a small firm that specialized in advising clients on environmental/social/governance (ESG) and impact investments. The founders sold Imprint with the belief that joining a global financial firm would help to scale impact investing, if not bring it into the mainstream. The case is set two years after the acquisition. It describes impact investing, the founding of Imprint, and its evolution from serving foundations and home offices to financial institutions, and its sale to and integration within Goldman Sachs. The founders consider the past two years and whether the acquisition has, in fact, help to scale ESG/impact investing.
At the end of 2017, Morgan Stanley's firm performance - the strongest since the financial crisis - is linked to the overall success of its corporate strategy set out in 2015. Following several years of development and integration of a sustainability strategy in sync with overall firm strategy, the case asks the question of what "version 2.0" of a sustainability strategy should look like for the firm. The question is posed by Audrey Choi (HBS MBA 2004), Chief Marketing Officer, Chief Sustainability Officer, and CEO of the Morgan Stanley Institution for Sustainable Development. Since joining the firm in 2007, Choi worked with senior management and key individuals in each of the firm's business segments to transition sustainability from being a niche initiative to being part of the broad firm-wide strategy, embedded across Morgan Stanley's core businesses. The case recounts the process of integrating sustainability into each of the firm's three business units and examines the challenges, the product development, and the outcomes of the integration strategy in order to pose the question of what should Morgan Stanley do to further embed and grow its sustainability strategy.