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Living Responsibly on Our Island

Written on January 13, 2012 by Roland Van der Meer in stewardship, sustainability

As we all know, each of us lives on this massive island called “Earth” and for the most part, we use it as we see fit.

Progress in the developing world is accelerating at an amazing clip of 7-9% annually; advancement in the so-called “developed world” is mostly flat. The developing world wants what the developed world has: namely, food, cars, and comfortable housing. Herein lies the fundamental environmental issue: The world cannot sustain us as it is, nor can it support us all having the same conveniences and lifestyle.

When you really understand this little island with 9 billion people on it, you realize that it is critical that we recycle and reuse everything. We should strive for a zero waste society. As long as there is waste, it will continue to accumulate over time and important parts of nature will continue to be destroyed. Every natural resource we have — water, energy, food, and minerals – can and should be reused. If not, we will eventually run out of these resources and there are will be no more substitutes. For sustainability of species’ the planet, we must adopt the full recycle mentality to keep our island healthy. Here is an example of one person’s efforts to live “zero-waste.” Couldn’t we all do our part to move in this direction?

Also, we must keep our natural systems functioning in order for us to prosper as humans. The very systems that supported life for millions of years are being thrown off balance and are becoming unpredictable as we alter the landscapes, oceans, and atmosphere. The balance of climates is shifting so fast and significantly that we are seeing the extinction of massive species. Our arrogance lets us believe that we are not affected. But we are. Many societies in the past 20,000 years have perished as they altered their environments to the point of their own undoing (for example: Mayan, Angkor wat, Babylonian, etc.)

Similar to societies before us, today we believe that our technology is superior and can empower us to alter everything to suite our needs. This is not the case. For example, we are using up carbon-based fuel. “So what?” many people say as we continue to find renewable replacements. Solar, wind, hydro, etc. all appear to be adequate alternatives, but we are putting them into the atmosphere as well as the ocean and land pollutants. These all amount to big changes in chemistry to our little island.

Every day, we are carving up huge tracks of land in pursuit of minerals and fossil fuels, leveling mountains, stripping landscapes bare and leaving nothing behind. We are taking out the last dense tropical forests at an alarming rate. We have created land dumps and land fills the size of the State of New Jersey (not to pick on them). We are dumping so much garbage into oceans that an island of trash the size of Texas is floating in the Pacific, killing the ecosystem, indigenous species and making navigability a big challenge.

As we farm more than one-third of the Earth’s surface, we are stripping soil of all its biology and injecting chemicals and fertilizers, which contaminate the air, earth and water.

We have to rethink and redo our fundamental premise of what we can and cannot do here on our little island. We need to apply true costs — environmental and social — to our actions and decisions and understand there is no free ride. It is a zero sum game and potentially a negative growth game to enable us to keep our world safe for future generations. We have to address our need to “grow our way out of our economic problems” philosophy, as the world might not tolerate much more growth.

If you really want to experience what we have and why this matters try this lovely view of Earth.

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2011 — A Pivotal Year for Investors

Written on December 16, 2011 by Roland Van der Meer in Community, Economics, investing, stewardship

Impact Investing, Sustainable Investing. Double Bottom Line. Triple Bottom Line. Investing for Change. Three years ago, these were big ideas and messages that 99% of the world didn’t understand or even care about. They amounted to doing good and trying to make some money. It was the world of foundations and charities trying to express that they are not all giving money away, but rather are trying to use some of the principles of capitalism.

This year we have seen a major shift in the choice of words used to describe what is going on and what investors are willing to invest in. We are in the middle of the shift to investing in key resources that are under pressure or becoming scarce. We are seeing mainstream capital pay attention to the value of these resources and how they are being used. Sometimes, unfortunately, not for the betterment of that resource but for the exploitation of the opportunity, but we will get back to that later.

We are now seeing the first of the mainstream investors stepping up and realizing that not only can they invest in agriculture, water, energy and real estate, but they can do it the right way and take into account the environmental and social costs: By first investing in asset managers that understand and make more money (enhanced Alpha,) and then the asset class as a whole. This is a huge and significant step for capital management and the environment.

In public and liquid securities, 2011 has been a turning point as well. This week, Generation Investment Management published the Manifesto for Sustainable Capitalism, citing what companies are doing, should be doing and how investors can view their portfolios differently to encourage long term gain through better management of resources, assets, environment and people. Clearly this message is going mainstream and it is not just a negative screen or positive screen: It is a new understanding of how companies think about their impact and use of resources. It is becoming definable, measurable and investable.

One of the largest data providers, Bloomberg Data Services, makes it possible to analyze many factors of ESG that public entities publish now. For instance, we can evaluate how efficiently energy, water, carbon is being used compared and crossed with revenue, employees, sq. ft. of space, etc. It looks at the social metrics as well, such as how a company invests into its communities of interest. Bloomberg also tracks the governance metrics that look at policies, objectiveness and transparency. These are important metrics and can only get better over time. There are 5 to 10 other interesting metric providers and we can expect that many of these will get absorbed into the mainstream investing as well.

This is also a key year for B-Corporations, a new type of corporate classification that says we are in business to make money but also count into the equation of looking at the environment and social issues that the business effects. They promise to publish even more data and have more transparency in their business operations. This year 5 more states (New Jersey, Virginia, Hawaii, California, and New York) have adopted the corporate form from the original two (VT and Maryland) and it looks like 10 more will for 2012.

Major investors such as Pension Funds, Endowments, Wealth Management Firms and Private Banks are all looking for products in agriculture, water, energy, land, real estate as well as other valuable resource investment plays. While this is good, and can be better, they do not completely understand which ones are creating a better environment and social construct versus those that just exploit the short term value: For instance, an agriculture investment that improves the land, the soil and the natural systems versus one that uses the industrial system of agriculture and also can deplete soils and ruin the environment will perform better over the medium and long term.

More time is needed to inform investors of what is possible using best practices and methodologies. More investors need to take the time to learn which are the driving forces that can make all the difference. As we look back on 2011, we will remember many key milestones — in politics, innovation and environment — and hopefully move forward in our goals to be better stewards of our planet.

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Rethinking Existing Infrastructure Systems — Part II

Written on October 17, 2011 by Roland Van der Meer in Economics, stewardship

I had a good talk at the Wharton School’s IGEL Program (Initiative for Global Environmental Leadership) A great group of MBA students attended. While the presentation was one about the key asset areas that both Bio-Logical Capital and Equilibrium Capital are focused on (energy, water, agriculture, real estate, etc) the questions were even more interesting.

The most awakening realization seemed to be that in these key sustainability sectors, it is possible to build business models that generated outsized returns while “doing it right.” In other words, by becoming a steward of the resource and managing for the long term, the IRR were more stable and higher yielding.

This surprised most people as it should. The work that needs to be done can get done and provides a path for driving change that can make great returns, and in turn, drive more capital into the sector which drives more change. It becomes a virtuous cycle. While I gave examples of how Bio-Logical Capital can turn around an agricultural system, or a wastewater treatment system and generate superior returns, it is often hard to see until you work through the plans, the numbers, and see it in action.

I could see that the audience liked the idea of the potential to work in sectors that are interesting and prospering while taking care of the environment. Rarely do people get to hear this viewpoint. There is a sense that most initiatives in the area of CSR or ESG are just a tax to the corporate P&L. These thoughts exist in Corporate America and even in most business schools.

I began my presentation with this key point: These initiatives (CSR, ESG, impact investing, etc.) all understate the problem and underestimate the opportunity. There will be fundamentally new businesses created in the key resource areas that will drive the changes needed to maintain or restore our much needed natural resources.

One student asked, “Why don’t other people do this?”
My response: It requires a rethinking and systems view and you cannot fear the complexity of what we are doing.

Another asked, “Is there an exit path for shorter term investors? (Typical being 5-10 years for these assets). Are you are talking about being stewards for a longer period of time?”
My response: Yes, once a project is up and running and stabilized the risk/return changes, we can securitize it in a REIT like or MLP-like structure with reduced yield but very predictable returns.

After the presentation, I heard from Wharton professors who said students continued to talk about the ideas for hours after the talk. They discussed how it would be great to create a roundtable/panel discussion to engage students from different parts of the college (policy, social work, design) who could discuss and debate the ideas and approach from multiple angles.

For me, being able to participate in the discussion of creating impact by doing it profitably and doing the right thing is exhilarating. I encourage others to follow what is going on and get in front of this big wave of change. It will be bigger than most people ever thought and it will be paramount to any society that wants to survive.

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Building the Economy with Recycling

Written on October 3, 2011 by Roland Van der Meer in Economics, Energy Efficiency, stewardship, sustainability

When we talk about the green economy, it does not mean we are speaking of something that is good vs. something bad. Instead, we speak about an economy where we use and reuse all resources as if they were our last ones. A green economy is about caring for the health of our very vulnerable ecosystems and natural resources: Letting nature do what is does best, and working with these processes, not derailing, blocking or altering them.

So how do you build the new Eco Economy? Is it possible? Yes it is, and it is beginning to flourish. A great example is the Appliance Recycling Centers of America joint venture with GE. These plants are the beginning of what we can expect a lot of in the coming decades. They recycle and reuse 98% of the materials in old appliances. But what is fantastic is the whole system and how it deconstructs the appliance and then optimizes each piece and part to its best application. The website for Planet911 is very interesting as they are tracking each piece that is recycled and the businesses that are being created and pushing this agenda with great success.

This is a complete rethinking of a process and system. A careful evaluation of the economy and the resources needed bring to light many of the opportunities in the Eco Economy. Most economic theory suggests that there are no finite resources in the long term and scarcity is temporary, as every component has a replacement one. The substitution principal guides most economic models. Now it is becoming clear that it is not so. We cannot replace fisheries, nor key minerals, nor even ore itself, or our tropical forests. Even worse, we cannot undo the massive amount of destruction and contamination of water, soil and air from shale oil and gas or coal mountain top removal or industrial agriculture. These resources are truly irreplaceable. These are natural systems that have prospered, thrived and adapted for the ages and we have the ability to destroy them in a mater of years. Nature is dynamic and adapts to all sorts of shocks and events but not at the speed we are moving.

To keep the Earth’s natural systems we cannot extract a resource, produce something, use it and then throw it out. We need to repurpose and reuse everything. We must make sure nothing is wasted. A byproduct or waste stream from one process becomes the input for another. Systems are intertwined and working with nature in a way that is robust resilient and fault tolerant. Why don’t we do this today? It’s simple: The cost of recycling is higher than extracting, building, producing from scratch or new.

We do not have a true costing of the externalities that exposes the hidden cost to people or to the environment. So lets create a system of cost accounting that includes that of natural systems and resources. This will help us appreciate what we have around us and live harmoniously within our environment.

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Are We Running Out of Natural Capital?

Written on September 13, 2011 by Roland Van der Meer in Economics, investing, stewardship, sustainability

This is not a trick question but an honest ask. We are dependent upon nature. We can not live if the earth that hosts us is being expended, used up, exhausted.

This weekend in the New York Times, Nicholas Kristof writes “We’re Rich! (In Nature). The US has fantastic natural resources that we seem to be indifferent towards. He says that we need to get out there to enjoy and walk in nature: It is why we are all here and what we need to center ourselves. Even the US Forest Service has gotten into the act with a fund website and this great video. Yes, we work hard so we can go to the beach, swim, snorkel with fish, watch dolphins, whales, or we go to the mountains and hike in nature, see the wildlife, or go ski and enjoy the beauty and excitement. Or, for some of us we go out to eat fabulous food (food that has to come from a healthy environment.) Nature is what supports us and lets us thrive. If we take it for granted, waste it, pollute it, or destroy it, we will not be here any more.

At the Earth Policy Institute, Lester Brown saw this issue coming decades ago. He describes it best in the Eco-Economy when he discusses that we are now at the point that the Ecological Capital is being depleted and used faster than it can be restored. This is because our economic capital does not value this in its equation, in fact micro economics accerlate the destruction of a limited natural resource.

When a natural resource is starting to be scarce, its value goes up and this drives the push to extract the resource faster until the resource is exhausted. We have to watch out for any natural resource that is being harnessed past its sustainable level or we will all suffer the loss.

For example, the fisheries of the world are in serious decline. Every time we can stop the over fishing we should. In Greece, there are many islands where the fish do not exist as they were all dynamited until their eco systems collapsed. In Scotland, there is a well s tudied fishery, where in the 1890′s the community banned trawling within 3 miles of shore because of over fishing. This worked and the fish returned. Then in the 1980′s, the economic interests put political pressure to reverse this law, and within two decades the fishery was exhausted and not recoverable; and with that, the local industry died. This has played out time and time again all over the world.

In Kristof’s article, he writes about how our national forests are again under pressure where certain industries are pushing for legislation to open up 50 million acres to logging and unsustainable grazing. We have seen this motion before and this is not a good direction.

Lester Brown is urging us to head toward an eco-economy, which is an environmentally sustainable economy that requires that the principles of ecology establish the framework for the formulation of economic policy. Having the two studies integrated is imperative as the differences are fundamental. Ecologists worry about nature’s limits, while economists tend not to recognize any such constraints. Economists have a great faith in the market, while ecologists often fail to appreciate the market adequately. Ecologists see the world as interlinked network of natural systems that cannot exist without one another. Economists see the world as a set of micro economies that can substituted for each other.

There is much to do and so little time, but we do have some very good ideas about how to evolve our economy with the environment. It will just need a lot of political will to get there.

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Good Food Is The Answer To Many Issues

Written on August 30, 2011 by Roland Van der Meer in Economics, Organic, agriculture, stewardship, sustainability

What is good food? First and foremost, Good Food is food that tastes great!

But it is also real food, grown right, prepared right. It is healthy for your body and healthy for the environment. If we grow real food the right way we heal our environment. We create great soil that nourishes the food that nourishes us. This same soil rich with biology will be rich with minerals and store gases and hold water. It is fundamental to a healthy environment.

Good soil does not run off in the rain. Good soil is rich in its biology that for every 1% increase in biological mater in soil will hold water like a sponge, 20,000 gallons per acre.

A friend of mine recently, cited that we need to appeal to people’s greed. Greed for sugar. A carrot grown in a rich healthy soil can have a Brix count(amount of sugars present) of 30, while a industrial grown carrot, 5 to 10. Ask yourself or anyone, “Do you want to eat this sweet delicious carrot or this cardboard rendition?” One costs 25 cents the other 10 cents, but which would you eat?

In a wonderful interview of Alice Waters in a United Airlines Magazine, She said,” We need to pay for it. We need to pay for the food and pay the people who produce it. That’s profound and terribly important. We still think we can get it for free. And you know, it’s that idea that we have been indoctrinated to believe that food should be fast, cheap and easy. And it’s really that kind of thinking that is destroying the world.”

She is talking about the environment and our health. The environmental damage from our industrial agriculture damage is undisputed. The damage to our health is dramatic. Our processed food industry is not about real food or health. It is about tricking our bodies to eat more of a bad thing. Our bodies also have to eat more to get anywhere near the nutrients that we require. The rest we store as fat and then comes Diabetes.

The chart above that summarizes what has happen to us as we journeyed down the industrial agriculture road. Our costs of food fell from 17% of our household budget to 6%. Inversely our healthcare budget has gone form 7% to 17% of our budget. There is almost a direct correlation. This is not entirely due to food, but a very direct correlation to the food industry and diabetes with all its co-morbidities is the major driver of cost in our health system.

Industrial agriculture is also the major driver of our environmental issues, from the methane released by our industrial livestock systems to our releasing of fertilizers and pesticides into our ground, water and air. This culprit needs to be fixed.

Amazingly this is in our control. This is the one area we can tackle if we focus. We need to understand cheap food is not good for anyone nor is it really cheap. The true costs to us as people and our environment is huge. We just lost track of what is really important.

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Recognizing the Changes We Need to Make

Written on August 14, 2011 by Roland Van der Meer in Economics, Energy, Uncategorized, investing, stewardship

Whether we like it or not the world continually changes. It is never standing still and we continually have to learn to adjust. Our planet is an island and we have reached, or maybe even over reached, its limits. Even with all its beauty and vastness it is still finite, and the changes we will see in the coming decades may be severe. Not just in the climate, but in the way we live as we begin to recognize its resources are running low. The commodities we took for granted will begin to be valued dearly.

A very important piece by Jeremy Grantham, “Time to wake up”, was summarized well here. This research dives into the value of commodities and how the pricing will now begin a climbing ascent into the future. It is well thought out and documented and probably as succinct as I have seen. It is alarming for investors and mankind to read through and begin to understand the trends that have been set in motion.

If you really would like to scare yourself, an Article this week in the Times on Grantham, clearly walks through the scenarios that are pending. It is not for the faint of heart. We have a lot of work to do and need to put our economic and political efforts in motion to stop the draining of precious resources and start investing in their proper care. This is probably the biggest opportunity for investors in the century.

So lets pay attention and start to treat our earthly assets with the value and care they deserve.

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Building A Community

Written on April 28, 2011 by Roland Van der Meer in Community, stewardship

Community…. Many people use the word, but what is a community? A town? A neighborhood? A bunch of people living together in a defined area?

Maybe it’s much more, such as a group that is together and sharing or a common bond, heritage or way of being. I like to think of it as a place where I can walk down the street, know some of the shop keepers, bump into or meet people I know, and enjoy the good feeling that comes with that.

This concept is centered around a small town where shops, restaurants, business, apartments, and homes are all concentrated in an area, so people can walk around to do their business; go to school; and enjoy the town shops and feel the good vibe.

In the New York Times article, “The Last Townie”, Greg O’Connell shows how one man can make a difference. He clearly thought out what is essential: good eats, a little entertainment, unique shops; coffee shops, bakeries, restaurants, pubs, movies, arcades, what ever appeals to people to engage and partake in the town.

He bought buildings at good prices then dropped the rents of the store fronts to allow the most creative and eclectic entrepreneurs to open their shops. This in turn drove people to want to be there and live there. The rents for living were more standard in price, but well worth it as the main attraction was on the shop front.

He figured out what the neighborhood needed and he helped create it. He became a good steward of the town. In developing a picture of what would work, he thought about the long-term. The huge value he created for everyone in turn benefited him. His own assets appreciated with the value of the town!

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Sustainable home improvement update

Written on January 26, 2011 by Roland Van der Meer in Community, Energy Efficiency, stewardship, sustainability

A long year of work and not much progress to show at my house. We set out to become as waste free as possible. We quickly realized this is hard work. Here is an update on our home improvement progress towards living more sustainably:

We installed the solar system that powers our whole house. Now we enjoy about seven months of the year “off grid” while the other five months we get only 50% of our power needs from the system. We knew this when we started but the idea of “free” electricity is addictive.
We have installed CFL bulbs where possible and are stuck with a Halogen lighting for much of our home. While very efficient, it is not up to par with LED systems, which still have to drive down the cost curve.
We have tracked our power consumption issues to AV and computer equipment around the house. These are notorious uses and we are installing power down smart sockets where we can. The other big culprit was the pumps for the pool. We now only run the filters at night and have upgraded to more efficient pumps as well.
On the food front, our garden did very well and continues to produce lettuce for us into winter. But we are retooling for a better spread of a growing season and selection. We also are experimenting with our own composting and we will wait to see if we are successful.
Our water consumption is doing fine as we are all on a much reduced shower plan and take group showers (just kidding). Really, we are all now super conscience of how much time we shower and trying limited toilet flushing when possible.

Which now leaves me to the big issue of garbage. This past Christmas we were shocked at the waste of packing and materials that were used. We are going to think about how we change wrapping and even the packaging of things we give as gifts. I am not sure Santa would approve, but even he must care about the trees. In general we are down to one garbage can and a huge recycling bin.

I read about a family that has taken this to a whole new level, The Johnsons. They have a zero-waste approach to using resources that is admirable. They have fantastic approach that made the process manageable and have achieved amazing results. Maybe something we should try next?

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What is a Sustainable Community?

Written on January 21, 2011 by Roland Van der Meer in Community, Energy, stewardship, sustainability

Many times I find myself in discussions around what a “sustainable” community is, and how it is different from a “normal” community.

There really should be no difference when you think it through. What we mean when we say “sustainable” is that we are setting the goal of something being self-sustaining, which is virtually unattainable. This means that everything (and I do mean everything) that is consumed is produced within the community. In today’s world we know it is not practical to have everything produced and consumed locally, so in reality when we say “sustainable community” we mean that what is produced has a very low impact footprint on the resources used.

The idea is not to take away more from the earth than what we put back, in the form of renewable or recyclable materials. Ultimately, what also matters is how we live and exist in our communities – from the basics like water, energy, gas, food and garbage to the more subtle ideas of livability indexes that measure quality of life and “net user” — and consider our role as “net-giver-back” to the environment or Earth. We need to pay attention to the materials used in homes, buildings, and infrastructure of the community and strive to have them be renewable or recycled whenever possible.

Creating sustainable thriving communities is essential to having a robust economic engine. A sustainable town or village at its best can only support 15-25% of the jobs needed. This is good in the sense that today’s suburbs probably only support less than 5% of the jobs in the community.

In creating sustainable communities, we are going to have to ask not only what can be more economically produced or serviced locally (because that answer is very limited,) but also what is the total cost to the environment or population of any given product or service. No where is this more obvious than in the local food equation, but it also applies to a host of other products and services, such as medical services (every town needs doctors to care for its people.)

The article in The San Francisco Chronicle “Small-town emergency” is a classic tale of economic optimization which does not take into consideration the overall cost to the community. There are many such examples. We have to think differently about the entire cost of living and how we as people want to live. The more services or products that can be produced in a community, the more integrated it becomes and usually the happier and more interconnected the commmunity is.

To solve the bigger equation of employment, every community needs an economic engine that drives it. We can use the example of a company town; one where many people find employment at the local company plant. That has many benefits to the community, but we have also seen the downside when that company ceases to operate. The more dependent a town is on one industry the more vulnerable it becomes. We have seen many towns in the east, mid-west, and west go bust as the industry that helped launch the town died.

The key to community survivability and sustainability is diversification of economic engines or the adaptability of the community and this we can discuss in future posts.

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