Erika Karp is an accidental “sustainability” investor.As managing director and head of global sector research at UBS Investment Bank, she already was used to asking executives questions about supply chains, political risk and financial controls.Those kind of questions are at the core of ESG — for environmental, social and governance –investing.
“It is a convenient moniker – ESG investing – but I would argue one day we’ll simply call sustainable, impact or values-based investing, we’ll just call it ‘investing,'” Karp said in a recent interview with ImpactAlpha. “We’ll just call sustainable finance, ‘finance.'”
Karp left UBS in 2013 to become founder and CEO of Cornerstone Capital Group, an investment management and research firm, to build a business around helping companies incorporate and articulate sustainability into their products and service offerings. Indeed the firm defines corporate excellence as “the relentless pursuit of material progress towards a more regenerative and inclusive economy.”
ESG has come to the fore in corporate scandals such as Volkswagen’s deliberate circumvention of emissions testing. In the podcast, ImpactAlpha also talks with Brian Walsh, head of corporate impact at Liquidnet Inc., and Imogen Rose-Smith, senior writer at Institutional Investor, about how the VW scandal will reflect on other companies that make sustainability claims.
In the interview with ImpactAlpha, Karp discusses some of the questions investors should ask, many of which are outlined in “21st Century Engagement,” a recently released ESG strategy guide from Blackrock and Ceres, for which Cornerstone supplied key questions for sectors such as oil and gas, electric utilities, apparel and retail and healthcare and pharmaceuticals.
“I would argue the questions around material, social, environmental, and governance factors are not being asked as systematically as they should be,” Karp says. “Let’s use words about business and finance and economics and let’s ask about revenue sources and cost drivers and supply chains. Let’s talk about margins. Let’s talk about business. And you know what? If you talk about that you’re going to end up talking about environmental, social, and governance matters. You cannot avoid it.”
Erika Karp will be speaking Thursday, Nov. 19 on a UN panel highlighting “Women’s Entrepreneurship Day.”