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Inflection Points: Our newsletter

Inflection Points is IPCM’s regular commentary on a variety of cutting-edge sustainability trends and issues which we believe to be germane and of interest to long-term investors. Most articles are written by IPCM team members, but we are also pleased to consider guest pieces contributed for publication, and reader feedback is always welcome. Write to us at [email protected]
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Issue 3.4 • September 2014
Time to re-engineer the UN Staff Pension Fund

The UN Climate Change Summit provides an opportunity for UN Secretary General Ban Ki-moon to re-engineer the USD 51 billion UN Staff Pension Fund so that it not only meets the financial needs of the fund’s members but also becomes a leader in mobilising climate finance. We believe this is a pivotal opportunity not to be missed. In this four-page issue of Inflection Points we propose how it can be done — and give four compelling reasons why it should. Download PDF 

Issue 3.3 • July 2014
Pickettymania and the future of pension funds

Thomas Picketty is the most popular economics writer since Friedman, with his book Capital in the Twenty-First Century reaching number one on the New York Times nonfiction list. So when Bloomberg Businessweek ran a front cover in May with the headline ‘Pickettymania’ featuring a coy Picketty as a teen-mag pin up, the dry world of economics suddenly became sexy. Whatever one’s view of his work, it touches on secular megatrends with direct and considerable implications for pension funds worldwide, and how they’re invested.  Download PDF 

Issue 3.2 • February 2014
Sustainable agriculture in Africa — a compelling opportunity

For far too long, international investors have over-estimated the risks and under-estimated the opportunities in Africa. Yet sitting at the confluence of a number of the most powerful secular megatrends currently reshaping the global investment environment lies what we believe to be one of the most remarkable opportunities in the world for long-term investors: sustainable agriculture in Africa.  

The continent has a highly diversified agricultural base, untapped irrigation opportunities, a low-cost labour force and a growing urban middle class. And Africa boasts the highest availability of unused but arable land in the world — about 60% of the world’s total. Our proposition that Africa is arguably the strategic investment opportunity of the 21st century is explored further in this four-page issue. Download PDF 

Issue 3.1 • January 2014
Strategically Aware Investment (SAI) comes to Davos

This year's World Economic Forum (WEF) attracted the usual eclectic mix of heads of state, private equity moguls, university presidents, “young global leaders”, and celebrity philanthropists such as actor Matt Damon. Former UK Prime Minister Gordon Brown, a long-time and effective advocate for dramatically increased investment in Africa’s “soft” infrastructure, joined us for the eighth annual IPCM Club of Davos dinner. IPCM’s considered view, as a strategically aware investor, is that Africa represents the single biggest strategic opportunity for the next quarter-century.  Download PDF

Issue 2.4 • September 2012
Lonmin: Adding value through sustainability analysis

In April 2012 we evaluated leading companies in the precious metals and mining sector, including Lonmin, and published a company profile on this stock for our clients. Our initial review suggested very strong year-to-year revenue growth. Profit margins were decent, and the trend was positive. Short term liquidity was sufficient and stable. Long term debt was low with a positive trend. General profitability was acceptable and pre-tax earnings growth reasonably good. But we also noted that the relationship with the local community and unions appeared to be uneasy, and that sporadic episodes of disquiet had been a troubling phenomenon over the last couple of years...  Download PDF

Issue 2.3 • March 2012
Finding well-managed companies: the investor’s holy grail

It is a widely accepted truism among financial analysts that the quality of a company’s management is ultimately THE #1 determinant of its competitive and financial performance. That proposition makes intuitive sense and is in fact the very cornerstone of IPCM’s approach and value proposition to clients. There’s just one small problem: one searches in vain among traditional investment managers for any evidence of robust criteria for systematically analyzing and defining what a well-managed company actually looks like. How would we know one if we tripped over one?  Download PDF

Issue 2.2 • February 2012
The view from Davos, 2012

This four-page issue reports from the World Economic Forum, whose official theme (“The Great Transformation”) contrasted with a lack of transformational rhetoric in the official sessions. At IPCM’s annual Club of Davos dinner, however, the mood was one of cautious optimism.  Despite slow progress in the international policy arena, encouraging and inspiring initiatives underway in the real world are already leveraging the unparalleled power of the global capital markets to catalyze positive change.

An extended article on the coming revolution in pension innovation raises one of the most important socio-economic and political questions of our time: can pension funds actually deliver on their promises? We examine what continuing global financial volatility means for the most significant group of international investors in the world. And we look at the emerging economies who, according to the World Bank, are likely to grow by an average of 4.7% a year through 2025, more than double the 2.3% forecast for advanced economies. Every trustee of pension fund assets should ask a fundamental question: is the pension fund on whose board I sit equipped for this change? Download PDF

 
“It was arguably the best Davos yet, from an IPCM perspective”

Issue 2.1 • January 2012
A plea for innovation in asset management

The good folks from Occupy Wall Street/St Paul’s/the City have rightly drawn the world’s attention to many of the worst ills of contemporary capitalism, but they have not yet mentioned one which we consider to be equally pernicious: the financial system’s almost pathological abhorrence of innovation. All over the world, asset owners and their investment managers are failing to demonstrate the level of innovative thinking – and action – commensurate with the gravity of the current global economic, environmental, and social conditions. Download PDF

Issue 1.12 • 3 August 2011
Reputation: The golden thread of stakeholder capital

Reputations provide a window into the fundamental character of companies, helping to explain strategic behavior and provide investors with confidence that managers will act in ways aligned with their interests.  Reputation is critical for the ability of an organization to attract and retain relationships with its different internal and external stakeholders. As international press focus shifts away from Rupert Murdoch to US debt, we take the opportunity to ask what have we learnt, and how investors can avoid similar reputational crises battering their investments in the future. Download PDF

Issue 1.11 • 15 July 2011
Building the new investment portfolio

Converging global megatrends are dramatically increasing the competitive and financial impacts of a variety of new risk/return drivers, including companies’ adaptability, innovation capacity, and environmental sustainability. One of these drivers is the inexorable shift in the world’s center of economic gravity towards emerging markets. Every trustee of pension fund assets should ask a fundamental question: is the pension fund on whose board I sit equipped for this change? And if not, what do I need to do? Download PDF

Issue 1.10 • 4 July 2011
The oil price issue: the IEA intervenes

The decision by the International Energy Agency (IEA) to release 60 million barrels of petroleum to global markets raises questions about the future direction of oil prices and the impact on global economic activity. With 60 million barrels representing less than a day’s global consumption, the impact is likely to be more psychological than physical... Download PDF

Plus In Praise of Strategically Aware Investing: a new paper from Dr Matthew Kiernan argues that sustainability issues should be shorn of their historical, ideological, and emotional baggage. Download PDF

Issue 1.9 • 1 June 2011
Impact Investing 2.0: Time for a new approach

“Impact Investing” is generating an enormous amount of “buzz” these days – even if it is talked about much more than it is practised. While the precise meaning of the term is still being defined and debated, in essence, impact investing is a style which explicitly pursues social and environmental objectives as well as purely financial ones. In many cases, investors are willing to sacrifice some of the latter to achieve the former. All very good stuff, but… Download PDF

Issue 1.8 • 19 May 2011
Developing capital markets in Least Developed Countries (LDCs)

Investment in LDCs can offer lower than expected risks and profitable opportunities but due to a number of investment challenges and the presence of network effects there is a need for investors to work collaboratively and to encourage development of LDC markets through the finance sector. Our paper argues that, by working collaboratively, investors can help to develop the capital markets of LDCs. Download PDF

Issue 1.7 • 13 April 2011
Investment Funds: Philanthropy’s Bermuda Triangle

“Philanthropic foundations are like old-fashioned slot machines. They have one arm and are known for their occasional payout...”
Stephen Viederman, retired president of the Jessie Smith Noyes Foundation and presently a member of the finance committee of the Christopher Reynolds Foundation, shares his views on the power of philanthropic foundations to use their investment funds for change. Download PDF

Issue 1.6 • 7 April 2011
Emerging markets and sustainable alpha: Opportunities, risks and rewards

Emerging markets are where the global battle for environmental and social sustainability will ultimately be won or lost. The challenges are most acute there, and the potential rewards for meeting them are similarly outsized. Investors’search for sustainability alpha will be increasingly focused on emerging markets because both the greatest sustainability risks and the highest potential rewards are to be found there… Download PDF

Issue 1.5 • 22 March 2011
The Japanese tragedy: Beyond nuclear and towards a “third way”

One cannot observe the ongoing tragedies in Japan without feeling a combination of anguish for the victims and survivors as well as awe at the magnitude of the rebuilding job required. Among the many implications of the catastrophe of direct interest to sustainability-oriented investors is the fate of the Japanese and global nuclear industries. A number of pundits have already proclaimed the end of the nuclear industry. Nevertheless, we at Inflection Point Capital Management believe that accounts of the death of the global nuclear industry are, if not greatly exaggerated, at the very least premature… Download PDF

Issue 1.4 • 14 March 2011
The Food Security Issue: Where global megatrends are being played out

The FAO Food Price Index (FPI), the global barometer measuring the threat of a global food security crisis, continued to increase through February, ending at 236 points – the eighth consecutive monthly increase. Rising food prices are one of the major contributing factors to the current turmoil in the Middle East. IPCM believes that strong grain reserves, coupled with expectations of strong plantings in 2011 mean that the world is better placed than it was in 2008 to handle food security challenges. Download PDF

Issue 1.3 • 3 March 2011
Assessing the implications of Middle East unrest 

Current unrest across the Middle East is being driven by poverty, rising prices, social exclusion, anger over corruption and personal enrichment among the political elite, as well as a demographic bulge of young people unable to find work. Whilst there has been considerable international focus on the impact on global oil prices, we believe that the current turmoil presages a new world order in which companies operating in unstable regions are going to have to do a lot more to foster social inclusion, local capacity building and job creation in order to prosper. Download PDF

Issue 1.2 • 14 February 2011
Climate science: Change or unchanged? 

The last twelve months have proven to be something of a curate’s egg for the science of climate change. On the face of it, climate sceptics now have ample evidence to support their case. Spells of unusually cold weather and allegations of poor scientific practices have provided ammunition for the sceptics to cast doubt on the longer term impacts of man-made global warming. Should we as investors be more relaxed about predictions of damaging climate-related impacts on stock performance? Such doubts will only serve as a distraction...  Download PDF

Issue 1.1 • 3 February 2011
The view from Davos: The dogs that didn’t bark 

The World Economic Forum has always, quite rightly, prided itself on its laserlike focus on global megatrends, the “big picture”, and, to quote the WEF’s own motto, “improving the state of the world”. So far, so good. Indeed, when it comes to diagnosing the world’s greatest economic, social, and environmental challenges, the WEF has few peers. If, however, one’s tastes run more to catalyzing solutions and real action on the ground, then Davos might not be your cup of tea… Download PDF

IMPORTANT – The information contained in these documents has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any financial product, security or to participate in any trading strategy. Content may not be reproduced or disseminated in whole or part without the prior written consent of Inflection Point Capital Management (IPCM). While every effort has been made to ensure the accuracy of information contained in these newsletters we cannot provide guarantees. IPCM disclaim liability for any loss or damage which may arise as a consequence of any person relying on information contained herein. Before relying on any information in these newsletters please independently verify its accuracy, currency and completeness.