Alarm bells are sounding in the macro economy and in the heartland. With Washington’s continued focus on partisan red meat and geopolitical intrigue, instead of core economics, it’s time for long-term investors to think about how to mitigate systemic risk.
This is not a late-breaking crisis. In early 2016, BlackRock CEO Larry Fink urged the CEOs of the Fortune 500 to submit their plans for sustainable, long-term growth. His motivation is as clear as his urgency. As the world’s largest asset manager, with more than $5.5 trillion under management, BlackRock has institutional clients that have long-term obligations that today’s low-return, no-growth, myopic business climate is failing to meet, with no relief in sight.
Continue reading in BrinkNews.com
It’s almost that time again.
With a new year just around the corner, we dug into the GreenBiz vault to bring you a list of some of the best books of 2016 (assuming you already caught up on our earlier round up of the year’s best summer reads, of course).
In a year marked by extreme ups and downs on environmental issues, here’s a rundown of what to read on climate, cities and more:
By Mark Mykleby, Patrick Doherty and Joel Makower
This title might not be a shocker, given that GreenBiz Executive Editor Joel Makower is a co-author, but the book neatly encapsulates the interdisciplinary nature of sustainability.
Continue reading at GreenBiz.com
Risk. Return. Distribution. Correlation. As we head into the uncertainty of 2017, portfolio managers will have no problem earning their fees. But as the yield curve on sovereign bonds, especially United States Treasuries, begins to edge higher, investors must remain vigilant. Now, more than ever, it is essential to keep an eye on the long-term horizon and challenge old assumptions that may no longer hold true.
Assumptions can be useful to simplify complex systems, but if left unexamined, they can do immense damage. A famous recent example is from 2008, when former Federal Reserve chairman Alan Greenspan admitted to a major flaw in his governing theory of markets, namely that they would police themselves as risk markets became more and more sophisticated. Nine years later, with uncertainty rife, consumer credit piling up and a new incoming administration, investors cannot afford exposure to another such flaw.
This is especially important for institutional investors. As a rule, institutional fund managers need long-term, low-risk, stable growth to meet large and predictable obligations. Many, including the largest pension fund, CalPERS, and the largest sovereign wealth fund, Norway’s, are doubly in the red. They are underfunded vis-à-vis their obligations and their annualized returns have not been hitting their targets. Indeed, the California pension giant is only 68 percent funded, while Norway’s fund requires 4 percent annual returns, but expects to average only 2.3 percent over the next three decades.
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Paul Ellis: As a nation, where do we currently stand in grand strategic terms?
Mark Mykleby: In the context of grand strategy, we’re currently looking in the rearview mirror. The old grand strategy was based on suburban expansion at home and containment abroad—our post-WW II view of the world. That strategy was so successful, for so long, that we now think of prosperity and security, two of our enduring national interests, as separate issues, unrelated enterprises.
Worse, since 9/11, we have allowed threat and risk to become the drivers of our existence. The resulting risk embedded in trying to maintain the economic status quo is enormous. We are, in effect, expending our prosperity in pursuit of security that is mostly defined by our 20th century past, not our 21st century reality.
In contrast, we see the raw ingredients for a powerful new strategy just waiting for public or private leadership. The demand is there, the capital is there, all at a time when investors are looking for new investment hypotheses for America and the world.
Continue reading in Financial Advisor.
What if oil and gas were the key to solving climate change?
The basic idea is quite simple: If we shift the primary end use of oil and gas from combustion to building materials, there is no need for hydrocarbons to remain locked beneath the earth’s surface in order to address climate change. In fact, the scale and urgency of climate change requires we tap these resources to build a sustainable future.
It’s a story of two imperatives. The first is well understood: To stay within the limits of planetary warming that the overwhelming scientific consensus views as tolerable, we cannot continue to power the economy with combustion. The International Energy Agency and Carbon Tracker Initiative have already identified a planetary “carbon budget,” estimating we can burn only about one-fifth of the untapped oil and gas currently on the books of publicly traded companies and state-owned enterprises.
Let us be clear: We’re on the side of science. To keep global warming as close to 1.5 degrees as possible, we need to stop burning things—oil, gas, not to mention coal and biomass—as fast as possible.
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Sometimes, an idea comes along that you just can’t pass up. It may be that the messenger behind the idea is charismatic, or that the timing seems exactly right, or that the idea itself just feels important, or that this is exactly the challenge you needed at this point in your life.
Sometimes, it’s all of the above.
That’s as close as I can come to explaining why I decided to push aside so many things two years ago to co-author a book about grand strategy, sustainability and America’s future: the messenger, the timing, the topic, the challenge and a gut feeling that this just might be the culmination of everything that I’ve been doing for the past, well, 40 years.
The International Energy Agency estimates that to stay within 2 degrees Celsius of atmospheric warming, the global economy will have to avert emitting the carbon from roughly 80 percent of world’s proven reserves of fossil fuels. This is called unburnable carbon. It does not include the carbon from shale oil and gas being extracted through fracking.
Download the white paper included in President Obama’s December 2012 “big ideas” binder and later published in ForeignPolicy.com.