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David Blood: How Can We Make Investing Sustainable?

David Blood: How Can We Make Investing Sustainable?

Charles Wookey speaks to David Blood, co-founder and senior partner at Generation Investment Management. They explore how investment management firms can move towards sustainability.

5 minute read

2nd Aug 2023

A Blueprint for Better Business are an independent charity whose purpose is to create a better society through better business. They help businesses to be inspired and guided by a purpose that benefits society and respects people and planet. Their podcast series, hosted by their former CEO Charles Wookey, explores the challenges and complexities of creating and running a purpose-led business.

David Blood is the Co-founder and senior partner at Generation Investment Management. He has had a remarkable career in investing and is a globally recognised and respected leader in sustainable investing. Before co-founding Generation Investment Management with Al Gore, he headed up Goldman Sachs’ asset management practice globally. 

Charles Wookey speaks to David to explore the relationship between sustainability and purpose in organisations.

“It’s about attracting great people, motivating them in growing their capabilities to be excellent stewards in the months and years ahead.”

This interview was condensed and edited for clarity.

How did you get into investment banking?  

I am in finance by complete accident. Growing up I didn’t aspire to be in the investment banking business or even in finance. I chose child psychology at university, which it turns out was the perfect degree for managing investment bankers! 

While I am good with numbers and have had a successful career in finance, my interests have always been in social justice and the environment. I’m very fortunate to ultimately found and work in a firm that allows me to bridge the two.

How does Generation Investment Management operate differently to other investment management firms? 

While at Goldman it was clear that the challenges of sustainability were increasing and the capital markets were too short-term oriented to address them. I saw the need to develop a different approach to allocating capital.

Generation is a mission-driven organisation: we aim to deliver strong investment results for our clients, and to promote sustainability in the capital markets. People work at Generation for the latter, but they also know that if we don’t deliver strong investment results, we wouldn’t be particularly good advocates for sustainability – there has to be a commercial imperative.  

What frameworks do you use at Generation Investment Management?

The drivers of the economy are linked to long term sustainability – issues like climate change, biodiversity challenges, water challenges, fairness challenges, inequality challenges, health challenges – so understanding them is critical.

We’ve developed a framework using ESG factors to help us understand the quality of business and management of our investments. But to develop that framework and to execute on it requires consistency of values. We like to say we always want diversity of thought, but we don’t want diversity of values and beliefs.

In the financial services industry in particular, transitions in boutique or even middle-sized firms can be terrible. Our organisational structure works to anticipate that the founders will leave at some point. You have to assume there will be a transition; you have to be prepared for it economically and structurally. So it’s about attracting great people, motivating them in growing their capabilities to be excellent stewards in the months and years ahead.

These different terms – purpose, sustainability, ESG – are they all different ways of talking about the same thing?

We have an alphabet soup of acronyms, and it can get very confusing. We don’t believe ESG is an outcome; the notion of a single score is insufficient as a lot of environmental, social and governance factors can run counter to each other.

“People assume that sustainable investing or ESG is always a win-win. It’s not; there are difficult trade-offs.”

People assume that sustainable investing or ESG is always a win-win. It’s not; there are difficult trade-offs. Sustainable investing by itself will not solve all the world’s challenges. It’s important, we need more of it, but we still need public policy that addresses the world’s challenges. Sustainable investing is a tool, capital allocation is a critical part of how we build economies, but in and of itself, it’s not sufficient.

Why aren’t there more firms committed to sustainable investing given that you’ve been successful?

It’s really, really hard. It’s hard to deploy capital from a sustainability perspective. There are trade-offs and judgements. We get plenty of things wrong along the way, but we think the approach is a superior way to do it. The freedom to operate within that construct has been helpful – bigger organisations don’t always have the freedom. 

But do I think you can build a great culture of ten thousand people or even a hundred thousand people? I believe the answer is yes. It starts with leadership, no doubt – plus mission, purpose, core values, how you work together. We chose to do it differently by starting from scratch, but it’s absolutely possible.

Listen to the full podcast series at A Blueprint for Better Business.