Al Gore: sustainability is history’s biggest investment opportunity

Flanked by his children and grandchild, Al Gore joined 200,000 protesters on the streets of Washington DC in the blazing sunshine exactly one year ago.

The crowd marched past the new Trump International hotel on Pennsylvania Avenue and towards number 1600, the most famous address in North America.

“I worked for eight years in the White House — I never imagined I would march on it,” says the former US vice-president, who spent much of that hot afternoon holding a banner for his environmental advocacy group and posing for selfies with fellow climate change protesters.

In the years since Mr Gore narrowly — and contentiously — missed out on becoming leader of the free world, he has had to make do with leading the global environmental movement.

His activism on climate change brought him a Nobel Peace Prize (awarded jointly with the Intergovernmental Panel on Climate Change in 2007), while An Inconvenient Truth, his book and documentary, won two Oscars and a Grammy.

Fourteen years ago Mr Gore co-founded a sustainability-focused fund management company with David Blood, former head of Goldman Sachs Asset Management. Rather than the colourful “Blood & Gore Partners”, they named the business Generation Investment Management. The London-based group has since attracted $19bn in assets, managing money for institutional investors and affluent individuals, mainly in North America and Europe.

Mr Gore says sustainable investing, which he defines as “improving quality of life without borrowing from the future”, is the “single largest investment opportunity in history”. He adds: “It has the magnitude of the industrial revolution but the speed of the digital revolution.”

I meet Mr Gore in a windowless function room in the Davos Congress Centre in Switzerland. Covering asset management, it is as close as it gets to meeting a rock star backstage. Mr Gore has just given a presentation to UBS wealth advisers at the bank’s annual investment get-together. Unlike most of the PowerPoint-packed presentations, Mr Gore’s delivery is a glitzy affair, with dramatic theme music and video clips of crashing glaciers. His talk receives a standing ovation and he is mobbed for more selfies at the end.

Minutes later, Mr Gore explains his company’s objective. “When we started Generation our mission was to prove the business case that the full integration of sustainability into investments need not sacrifice returns,” he says.

“Everybody knows that the market is a wild and unruly beast, and you have to do the best you can. We’re very proud of what we’ve been able to do thus far, but we are not blind to the statistical realities of investing.”

Generation’s flagship global equity fund has returned 17.5 per cent a year for the past three years before fees, says Mercer. This compares with the 8.6 per cent annual return for the MSCI World index. Since its launch, the fund has produced annual returns of 13.5 per cent compared with 7.3 per cent for the benchmark.

Mr Gore says Generation’s performance is a vindication of the case for sustainable investing. “When returns such as ours statistically prove that you’re not sacrificing returns if this is done well, then that is a tailwind that pushes this trend even more powerfully,” he says.

A glance at Generation’s portfolio, however, shows that its interpretation is different from most. While it invests in green energy companies, it also has stakes in groups as diverse as Ocado, the UK online supermarket, Asana, a productivity tool, and Toast, a restaurant software company.

Generation defines a sustainable company as one whose earnings do not borrow from future earnings, whose revenues are driven by sustainable practices, and whose products or services are low carbon and have health or societal benefits.

This definition is looser than that used by most environmental, social and governance investors, but one with which Mr Gore is comfortable.

Generation’s team includes several of Mr Blood’s fellow Goldman Sachs alumni, including Peter Harris and Lisa Anderson, the chief operating officers, and Mark Ferguson, co-chief investment officer and son of Sir Alex Ferguson, the former Manchester United football manager. Miguel Nogales, shares the CIO duties.

Generation lists large public sector investors among its clients, such as Calstrs, the $223bn Californian teachers’ pension plan, the $192bn New York State pension plan and the UK’s Environment Agency retirement fund. It also manages money for wealthy individuals but has stopped short of opening to retail investors. Almost all its assets are run in equity mandates, yet $1bn is invested in private equity.

When Mr Gore took to the streets a year ago he was protesting against President Donald Trump’s decision to withdraw from the Paris Agreement on climate change. Just after Mr Trump’s election victory in 2016, Mr Gore visited the president-elect to try to change his mind — but could not.

Mr Gore is instead focusing on November 4 2020: the day after the next presidential election and the day the US would leave the Paris Agreement. A new president could, in theory, keep the US in the climate accord.

So will the next election be fought on a climate agenda — and will Mr Gore be involved? He replies resoundingly “yes” on both counts. But when asked whether he could be the one competing with Mr Trump, he is less emphatic.

“I’m a recovering politician. The longer I go without a relapse, the less likely one becomes,” he says. “But there is evidence that the American people are not exactly happy with the way things are going. We’re just a little over a year into this experiment with Trump, and in science and in medicine some experiments are terminated early for ethical reasons.

“I have no particular insight into what lies ahead, but where the elections of this fall and then two years later are concerned, there are early indications that there may be a course correction. But [there is] a long time between now and then.”

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