Inflection Point Capital Management’s mission:
Inflection Point’s investment research precursor, Innovest Strategic Value Advisors, was founded in 1992, one week after the historic Earth Summit in Rio de Janeiro. Innovest’s founder, Dr. Matthew Kiernan, had been the first Director of the World Business Council for Sustainable Development in Geneva, the primary private sector advisor to the Secretary General of the Earth Summit. Dr. Kiernan had chaired the group’s initial Capital Markets Task Force. Previously, he had been a senior partner in the strategic consultancy practice at KPMG. Those two sets of experience convinced him of both the desperate need to increase awareness of sustainability factors within the financial community, and the tremendous transformational potential available if this could be achieved.
The firm’s mission then was the same as Inflection Point’s is today: to have a substantial positive, systemic impact on improving global environmental and social conditions, using the international capital markets’ influence on companies as its chief instrument.
Our objective is to mobilize and leverage the enormous power of the financial markets, and redirect their investment flows to promote rather than undermine the necessary global transition to a more environmentally and socially sustainable economy. Accomplishing this will require nothing less than “re-engineering the DNA of Wall Street”.
The fundamental logic underpinning our work is deceptively simple:
In the early 1990’s, however, environmental and social issues were not even close to being on the radar screens of Wall Street, the City of London, and other major financial centers. On the contrary, to the extent that they were considered financially material at all, they were seen as economically unproductive expenditures which actually undermined corporate competitiveness and profitability, as well as investors’ returns. As long as these misconceptions remained dominant among all the key players in the investment value chain, there could be little if any realistic hope that financial markets could become an engine of global environmental and social progress and development.
If, however, a sceptical financial community could somehow be convinced that there was indeed a direct connection between companies’ capacity to manage environmental, social, and strategic governance (ESG) challenges on the one hand and their financial performance on the other, then the game could be changed completely.
Investors would begin to systematically factor companies’ ESG performance and strategic positioning into their financial assessments, using it as a proxy and leading indicator for the firm’s overall management quality. Leaders would thus be rewarded financially by the capital markets; laggards given a concrete incentive to improve. Company executives would, in turn, accord greater attention and priority to those areas, and they would become better resourced and managed. In short, the capital markets themselves would become a powerful, systematic catalyst for positive change.
In order to achieve an impact on anything like the scale commensurate with the magnitude of the global challenge, however, the mainstream capital markets will need to be engaged, not just the 5% at the margin who consider themselves “socially responsible” investors. This was and remains an enormously ambitious and difficult objective, and it remains one of the central animating drivers of Inflection Point Capital’s work today, and the genesis of IPCM’s “Total Portfolio Performance” approach.