Here is part 2 of an exclusive interview with David Harris, chief investment officer at Rockefeller, about the firm’s involvement in sustainability and impact investing.

Here is part 2 of an exclusive interview with David Harris, chief investment officer at Rockefeller & Co, about the firm’s involvement in sustainability and impact investing. With its roots tracing back to 1882, Rockefeller & Co and its subsidiaries are today responsible for some $41 billion in assets under administration for individuals and families, family offices, non-profit organizations, foundations, endowments and global institutions. View part 1 here.

Why did Rockefeller & Co launch an Ocean Strategy?

Rockefeller & Co launched a formal investment strategy over 30 years ago reflecting sustainability and impact principles, with a strong focus on climate change, protecting ecosystems and environmental sustainability.   Over the past decade in particular, there has been an increase in scientific awareness of the extent of ecological damage being done to the Earth’s oceans.

As a natural extension of Rockefeller & Co’s sustainability and impact investing work, we engaged in conversations with several organizations regarding the trends of ocean damage, and collaborated on research with The Ocean Foundation.  This collaboration focuses on Rockefeller & Co’s expertise in global asset management and impact investing, and the Ocean Foundation’s deep research on the environmental issues and trends damaging oceans and other water bodies.

The official launch of Rockefeller’s Ocean Strategy in June 2012 included a portfolio of over 50 companies that we believe had a beneficial direct or indirect impact on the health and sustainability of the ocean environments.  The portfolio is diverse, owing to our ability to identify companies from all market caps and global geographies in seeking to source the best investment ideas. We focus on business models and integrate sustainability criteria such as environmental impact, carbon footprint and climate change mitigation in our investment thesis and decision-making process.

What have you learned since the launch of the Ocean Strategy?

Since the launch, we believe that a number of events have supported our initial thesis and corroborated our outlook on the long-term drivers for the Rockefeller Ocean Strategy.  For example, the tragic impact of Superstorm Sandy on the Northeastern US highlighted the potential scale of the consequences that climate change could have on coastal urban areas in the coming decades. Many communities began to inquire about technology and infrastructure solutions including dewatering pumps, wastewater equipment, and related services.  Companies with expertise in flood management solutions have become attractive to municipalities who are reviewing their contingency plans to update them for the likelihood of rising water levels and more frequent extreme weather events.

What are the opportunities for the Ocean Strategy?

We see an emerging opportunity for companies to become leaders in providing niche solutions that have the potential to contribute to the health and sustainability of oceans either directly or indirectly, as well as to the safety and long-term sustainability of coastal communities.

These solutions include:

Marine environmental services

•    Environmental regulations that affect the global shipping industry are emerging in a number of jurisdictions.  International organizations with a focus on maintaining healthy marine environments are promoting ballast water guidelines.   Invasive marine species released from ballast water into new marine environments can create serious ecosystem and economic disruption.

•    Additionally, in August 2012, Emission Controls Areas in North America, the Baltic Sea, and the North Sea imposed stricter emissions controls from particulate matter such as sulphur dioxide and nitrogen oxide.

•    Several well-positioned companies are providing solutions to these issues; our assumption is that this trend of regulation will increase over the next 10 years.

Resource sustainability

•    Ongoing global trends such as population growth and greater urbanization are increasing environmental pressures and infrastructure demand on clean water, sewage, and food supplies.

•    We focus on identifying companies with a significant focus on activities that we believe will be essential for resource sustainability, including recycling technologies and sustainable agriculture practices.

•    Examples include companies that are developing innovative and efficient recycling methods and methods for using waste as a potential source of energy.

Water management and services

•    We believe that wastewater management and equipment is a potential growth industry as water utilities in the developing world need to upgrade infrastructure.  In addition, developing countries need to build new systems to keep pace with rapid growth.

•    The need for water purification, treatment, and distribution systems aligns with the trend of tightening regulation and the desire for increases in energy efficiency.

•    We seek to identify forward-thinking water utilities and water equipment service providers that have the capacity to enhance the health of the ocean ecosystems.

Low carbon energy

•    The reduction of carbon dioxide emissions is considered a critical factor in avoiding the worst consequences of climate change.

•    The shift away from fossil fuels to less carbon-intensive energy sources is an underlying theme for the Ocean Strategy and our Sustainability & Impact Portfolios.

•    In the Ocean Strategy, we focus on companies that are involved in wave/tidal power, waste to energy, biofuels, geothermal energy, and smart grid equipment.

The above commentary is provided for informational purposes only and is not intended, and should not be construed, as investment or other professional advice.  It does not purport to be a complete statement of approaches, which may vary due to individual factors and circumstances.  Although the information provided is carefully reviewed, Rockefeller & Co. cannot be held responsible for any direct or incidental loss resulting from applying any of the information noted.  Past performance is no guarantee of future results and no investment strategy can guarantee profit or protection against losses.