Environmental Impact Investing in Real Assets: What Environmental Measures Do Fund Managers Consider?

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2017-06-30

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Abstract

As concerns over climate change and natural resource depletion grow, investors have begun seeking opportunities for generating both market-rate financial returns and quantifiable environmental gains. Investing with the objectives of social or environmental return is often referred to as impact investing. Measuring and reporting the environmental impact of such investing is becoming of greater interest to environmental managers and investors. This report presents findings from interviews of investment fund managers of environmental real assets—defined here as real assets that rely on ecological systems to generate cash flows (e.g., timber, agriculture, fisheries, water rights). The interviews reveal little consistency in how environmental returns are measured and reported. Importantly, most of the environmental metrics are not designed to allow for evaluation of funds’ environmental performance. Hence, investors are unable to distinguish among funds in terms of environmental returns. Moreover, investors are also generally uninterested in such information. In short, impact investors seek environmental impact funds so long as they have risk-adjusted, market-rate returns regardless of environmental performance. To better evaluate the environmental returns of impact investments, whether real assets or other types of investments, fund managers and investors should directly engage the environmental science and operations management community. That community could offer insights to help ensure that investments are delivering and reporting on promise and that capital is being steered toward effective projects and opportunities.

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Spence, Liz, Belton Copp, Xander Kent, Dan Vermeer and Martin Doyle (2017). Environmental Impact Investing in Real Assets: What Environmental Measures Do Fund Managers Consider?. Retrieved from https://hdl.handle.net/10161/27122.

Scholars@Duke

Vermeer

Daniel Vermeer

Associate Professor of the Practice of Business Administration

Dr. Daniel Vermeer is founder and director of Duke University's Center for Energy, Development, and the Global Environment (EDGE), an initiative that harnesses the power of business to meet the global demand for energy, resources, and improved quality of life. Through education, thought leadership, and outreach, EDGE helps to develop promising new solutions to global energy and sustainability challenges, and convenes business, civic, and academic leaders to scale these solutions for maximum impact.

Since EDGE’s founding in 2010, Vermeer has launched several new programs including the Energy Industry Fundamentals workshop, EDGE Seminar on Energy & Environment, EDGE Chats video series, EDGE Notes blog, and the EDGE Forum (2014 Forum on the China Cleantech Revolution). He has also recruited 12 leading global companies to participate in the EDGE Advisory Council, including ABB, Duke Energy, Chevron, Coca-Cola, SunRun and Walmart. EDGE plays a major role in supporting several student clubs (e.g. Energy Club, Net Impact Club, MEM-MBA Club), and coorganizing the annual Energy Conference, Sustainable Business and Social Impact Conference, and Week-in-Cities tours.

Vermeer is Associate Professor of the Practice at Fuqua School of Business and Nicholas School of the Environment, where he teaches sustainability, energy, and international business courses. In addition to his Business Strategies for Sustainability class, Vermeer leads the EDGE Seminar Series, advises student teams through the Fuqua Client Consulting Practicum, and co-leads the China GATE Course, an immersive introduction to Chinese culture and business that includes a 2-week trip to four Chinese cities. In his consulting practice, he works on sustainability challenges with leading companies and organizations including Bank of America, ABB, GE, Walmart, Dupont, The Nature Conservancy, UN Global Compact, Claremont Creek Ventures, and other private and public organizations.

His areas of expertise include sustainability strategy, risk management, energy & behavior, value chains, resource productivity, water and ecosystem services, sustainable agriculture, industrial efficiency, product certification, and sustainable development. His current research focuses natural capital considerations in business decision-making, water risk and resilience, data and analytics for sustainable agriculture, cleantech urban development, and energy innovation in emerging markets.

At Duke, Vermeer collaborates with several related initiatives, including the Duke University Energy Initiative, Center for Sustainability and Commerce, Duke Campus Sustainability Committee, Food Sustainability Committee, and the Duke Campus Farm. He is the faculty advisor to several student Master’s Projects at the Nicholas School for the Environment and Sanford School for Public Policy. He also serves on the Duke Brazil Initiative Board, and is a partner on a Mellon grant focused on Energy Geopolitics in the Western Hemisphere.

Beyond Duke, Vermeer is an editor for the Frontiers in Energy Systems and Policy journal, and serves on the Award Nominating Committee for the Alliance for Research on Corporate Sustainability (ARCS). He also is on Sustainability Advisory Boards for Ingersoll Rand and Xylem. He currently serves on USAID’s Powering Agriculture Mentoring Council, where he advises entrepreneurial ventures that provide energy solutions for agriculture in the developing world.

Vermeer joined Duke from The Coca-Cola Company, where he led the Global Water Initiative, an industry-leading effort to protect the quality and availability of the company's primary ingredient. As part of this work, he designed a new risk management methodology for assessing Coca-Cola’s global manufacturing facilities, and founded Coca-Cola’s Community Water Partnerships program, resulting in nearly 500 public-private partnerships in over 90 countries.

During his tenure at Coca-Cola, he also launched the company’s Sustainable Agriculture program to manage lifecycle impacts of agricultural supply chain inputs, and led the Sustainable Value Chain initiative to embed sustainability capabilities across business functions, including finance, strategy, operations, marketing, and procurement.

Vermeer plays a leading public role in advocating for business sustainability through speaking, research, and institution-building. He is the founder and chief architect of the Global Water Challenge, a multi-partner organization for innovative water and sanitation initiatives, co-author of the CEO Water Mandate (signed by more than 50 Fortune 500 companies), and lead contributor to several policy documents issued through the World Economic Forum, World Business Council for Sustainable Development, and the United Nations Foundation.

Vermeer is trained as an anthropologist, and did extensive fieldwork and research in the Himalayas of India and Nepal as part of his Master’s thesis at the University of Virginia. He completed his Ph.D. in Learning Sciences at Northwestern University, where he conducted research on organizational learning and change at Xerox PARC in Silicon Valley. Currently, he lives in Chapel Hill, NC with his wife and two children

Doyle

Martin Doyle

Professor in the Environmental Sciences and Policy Division

Martin Doyle is a Professor at Duke University focused on the science and policy of rivers and water in the US.  His work ranges from fluid mechanics and sediment transport to infrastructure finance and federal water policy. His first book, The Source (WW Norton, February, 2018), is a history of America’s rivers.  His second book, Streams of Revenue (MIT Press, 2021) is an analysis of ecosystem markets. In addition to his role as a professor, Doyle has had several stints in government: in 2015-2016, he moved to the Department of Interior, where he helped establish the Natural Resources Investment Center, an initiative of the Obama Administration to push forward private investment in water infrastructure, enable water marketing, and increase the use of markets and conservation banks for species conservation.  Prior to that, in 2009-2010, he was the inaugural Frederick J. Clarke Scholar at the US Army Corps of Engineers.  

He has received a Guggenheim Fellowship, an Early Career Award from the National Science Foundation, recognized as a Kavli Fellow for the Frontiers of Science from the National Academy of Sciences and selected to deliver the Gilbert White Lecture by the National Academy of Sciences.


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