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May Commentary

Climate change seems to be felt even at Ballin Temple: there have been only a couple of wet days in nearly six weeks which is unusual in Ireland and, while the dry weather has helped slow the growth of weeds, it has required additional irrigation as we harvest early summer baby spinach, radish, lettuces, parsley and watercress. Another sign of change is the windfarm that has been erected in the Blackstairs mountains: at least the eyesore reminds us of the far greater pollution of fossil fuels!

In May we have been inundated with opportunities, both worthy businesses and meeting people and organisations leading the change to a sustainable world.

In the background has been an increasingly embarrassing war in Iraq and persecution in the Middle East as well as increasing evidence for the need to mitigate climate change and poor governance. But these blinding embarrassments are galvanising change – people are increasingly realising that humanity is in a complex crisis made real by the immense global risks caused by the great power human systems wield, like WMD, climate change, natural disasters, disconnected decision making. We are more optimistic that the trend to sustainable economics is accelerating. It is being driven by people from all walks around the world who increasingly recognise a void of ethics in industry, government and society.

This note will highlight and link a number of reports and news items for consideration. A number of new items have been added to the resources section of the website; see the list here. And a selection of books on sustainable business have been added to the bibliography here.

Review of Activities

The bethechange.org.uk conference was a seminal gathering of leading scientists and business people who are developing sustainable systems. Introduced as “leading edge science and consciousness” it did not shy away from connecting humanity's higher needs of well being with business and scientific analysis. For example, presentations showed that ¾ of SRI funds outperform the averages and that the SRI asset class has grown 40% faster than any other since 1995. You may see our notes here. (Many thanks to Tim Macartney of pathways.co.uk for letting us know about the conference.)

Among others we met spiritinbusiness.org a committed network of entrepreneurs, business leaders and scientists that can help engineer business evolution and access opportunities. In a similar vein, a guide to planning for future systems may be surmised from the principles of sustainable development proposed by earthemergency.org, which are reproduced here.

In contrast the Oxford Business Forum in early May was striking in that the panelists, all leading traditional businesses (including a top consultancy, a top investment bank, one of the largest food companies, one of the largest Asian infrastructure businesses and so on) all recognised the superior need for ethics in business, but none of them, except a leading social entrepreneur now teaching at Harvard's Kennedy School, could demonstrate an understanding of appropriate ethical standards and how to implement them. There was some business school speak about culture, rules and setting examples but none could demonstrate an integrated system approach, nor that they themselves had set an example. Though disappointing, this also highlights the opportunity for the economic landscape to change rapidly as sophisticated sustainably managed businesses grow to the detriment of traditional command and control models.

Perspective and Market Commentary

The markets continue to be under pressure. Our concerns about risk continue to be justified and the evidence of an ethical revolution continue to mount. The conflict in Iraq and the middle east absorbs attention and resources and associated risk of terror continues. Recent reports on the management of climate change and business governance continue to raise the demand for sustainable management and technology.

In May SocialFunds.com released its annual survey of 100 best corporate citizens (USA). The following list is those companies that have been in the list for 5 years. (http://www.business-ethics.com/100best.htm)

Five Years of the Best Companies on the List 2000-2004

1. Fannie Mae
2. Procter & Gamble
3. Intel Corporation
4. St. Paul Companies
6. Deere & Company
7. Avon Products
8. Hewlett-Packard
10. Ecolab Inc.
12. IBM
14. Herman Miller

17. Timberland Company
19. Cisco Systems
22. Southwest Airlines
24. Motorola
27. Cummins Inc.
31. Adolph Coors
32. Modine Manufacturing
33. Clorox
43. AT&T
44. Pitney Bowes

45. Starbucks Coffee
48. Merck & Company
49. Graco
53. Brady Corporation
57. Medtronic
63. New York Times Co.
74. Golden West Financial
89. Sonoco Products
98. Whirlpool

Another sign of changing times is the admission in May by Gap, the clothing retailer, after years of defending itself from charges of worker exploitation, that many of its 3,000 factories across the world fail to comply with minimum labour standards.

Terror Risk and War

The principal issue in May was the abhorrent treatment of prisoners in Iraq. As noted in our last report, this is expected potential behaviour in the environment created by war. (The Stanford University game-study in which students were assigned prisoner and warden roles had to be discontinued after a few days because of the abusive behaviour of “civilised” wardens. See http://www.prisonexp.org/) It is a strong message that war is not an appropriate remedy. Though experienced custodians and interrogators agree that abuse has counterproductive results (as in the case of Iraq) we have not controlled that delinquent behaviour. Our fear is that evidence of abuse of females (prisoners or civilians) will come to light – that would unleash a new level of anger.

Iraq concerns us greatly but we're somewhat uncomfortable with its discussion which remains judgemental and partisan. It is a problem of humanity that needs a global solution – one which may be achieved via the UN. But the associated US political ramifications concern us. Most people from the US met recently apologise for Iraq. While understandable, it is not necessary – we all let it happen. Furthermore, the US track record is not bad: It was founded to escape religious and political persecution and has a history of contribution to development. It may well be that the US takes the lead in reengineering our geopolitical systems as a reaction to the current shocks (for example the new legalisation of same gender unions in Massachusettes or the growing use of public interest polling).

Today, however, there is a growing consensus that the US administration is void of ethics – the Commander in Chief took no responsibility for prisoner abuse. But there are those of good heart and mind who would support the current administration. The overt behaviour of the US, tinged with righteousness, shows striking similarilty to the administration of Germany in the lead up to the Second World War. But, rather than debate the evilness of the administration, if you are in a position of influence, please read Kevin Phillips' American Dynasty before voting your conscience. It has changed our perspective: When the administration asks Congress for another $ 25 billion we wonder how much of that will find its way to the Private Military Companies and others affiliated with administration officials. It is obscure that a philandering president would face impeachment (including the consequent drain on administration resources) but one that has lied, broken international treaties and caused the death of so many civilians (and others) should be so popular!

Investment Management and Venture Capital

Since we are now investing in listed markets, companies of interest are now listed for members herewww.openoffice.org required) Our mandate for all funds has not been exclusively to invest in sustainable businesses, although that remains our focus. And selection has been guided by client preference. The list indicates our sense of “greenness” including those without particular globally responsible initiative. (Please also note that in general we are very bearish on the outlook for public markets and prefer private opportunities, which complement our resources greatly. Nevertheless, our value based approach combined with diversity and long term outlook is designed to achieve attractive risk adjusted returns.)

The public market is increasingly recognising consumer (including investor) demand for sustainable practices. These news items from SocialFunds.com in May illustrate this:

Interest and FX

US interest rates are under increasing pressure to rise. Deflation risk is receding, inflation risk is rising. The priority of having a gradual rise in rates is increasing over the desire to avoid an increase prior to the November election. June may see the first breakout and this will be a positive signal, although it will have consequences for the highly leveraged consumer – mortgage holders and credit card debtors in particular. Concerns that 50 basis points will disrupt the economy suggest that there are larger problems which will be exacerbated, not that the move is inappropriate.


We all know in the future, that oil is going to become a scarce quantity. Depending upon who you read last, that could be the next decade or the next five decades. John Maudlin

Our attention to energy, because of its underlying role in the biosphere as a currency of life, as well as its role in geopolitics and economics, is well founded. The cost of oil has been in the headlines throughout May and we expect it to stay there.

Although the price of oil at $40 a barrel may be modest compared to historical prices (say inflation adjusted prices from 1980s of $80 pb), it is a critical driver of inflation and remains a key component of costs. A high and/or rising price of oil is putting pressure on fossil fuel based industries, but it is also creating an increasing demand for alternatives.

In May the second report of the Carbon Disclosure Project was released and shows signs that movement towards a real costs for polluters is growing. Some extracts from its summary (reproduced here) exemplify the trends:

  • Signatories, from Africa, Asia, Europe and North America, now represent over $10 trillion in assets

  • The total emissions from operations reported to CDP across all sectors equaled 2,886,033,085 tonnes of CO2 equivalent (CO2e), or roughly 13% of all emissions from fossil fuel combustion worldwide.

  • Weather-related natural disasters caused about $70 billion damage during 2003 ($18.5 billion was insured).

  • Mainstream pension trustees, analysts, bankers, insurers and fund managers have begun to appreciate the implications of climate change and greenhouse gas (GHG) policies in financial terms.

  • Carbon finance is now a reality. Legislation favouring a shift to a low carbon intensity economy is now a fact of life for FT500 companies across the EU as well as in many parts of the US, Japan, Australia and Canada. In January 2005, over 14,000 entities will begin trading carbon in what promises to be the largest, most liquid carbon market in the world: the EU Emissions Trading Scheme (ETS).

  • FT500 firms are major participants in the global clean technology sector. Non-hydro renewables are expected to grow faster than any other primary energy source to 2030.

  • The concepts of corporate leadership, transparency and brand value underpin approaches to climate change. These soft issues should not be taken lightly. Currently, some 85% of a company s true market value can be attributed to such intangible value drivers .

  • (The full report is also here: - ~ 2 MB)

China deserves special consideration in the analysis of energy trends. These remarks from Morgan Stanley's Any Xie summarise the issue:

"Surging oil demand for oil from China is the primary cause for the high oil price. Chinese demand is currently increasing three times as fast as the trend in 1990s. Global demand was rising by about one million barrels per day every year in the 1990s. Chinese demand is now rising at that speed by itself... China has to become either much more energy-efficient or find a substitute for oil. ... Another alternative is to limit the growth of the automobile industry.”

(Ed's italics)

In May, the Tour de Sol was held in New Jersey and New York, USA. The results are impressive and you can see some of the entries here:


One of our favorite winners: powered by the today's version of Diesel's technology running on vegetable oil, just like Diesel intended at the beginning of the 20th Century.

Trenton High School's 1985 VW Golf conversion, Veggie Oil in conventional diesel engine.
1st Place in Category

Light Duty Vehicle: 3rd Place: Low Greenhouse Gas Emissions; 81 grams greenhouse gas emissions per mile
11th Place: High Fuel Economy – 40 MPGe

3rd Place: Driving Range in 5 Hours – 225 miles
6th Place: Autocross
6th Place: Acceleration


LOHAS trends

The recent smoking ban in public places introduced in Ireland has been a success, the Irish health minister says the public smoking ban is working well. Now Norway is instigating a similar ban on 1 June. This is a quick following and a very positive sign of social change. (Ireland's 15c tax on plastic bags continues to keep the countryside much tidier and people are proud of their re-greened communities.)

Our application of spiral dynamics technology in understanding and developing business systems has increased. We encourage an investigation of this technology by those involved with people development, business development and geopolitics (it was used to successfully broker South Africa's end to apartheid). Some introductory notes are here.


The momentum for change to sustainable systems is gathering pace. Those playing to old rules based on resource scarcity and zero costs of pollution are changing or declining. New models of society and economics are replacing the old. Although we are at the beginning the pace of this ethical revolution will take decades only.



This report has been prepared for information purposes and is not an offer, or an invitation or solicitation to make an offer to buy or sell any securities. This report has not been made with regard to the specific investment objectives, financial situation or the particular needs of any specific persons who may receive this report. It does not purport to be a complete description of the securities, markets or developments or any other material referred to herein. The information on which this report is based, has been obtained from publicly available sources and private sources which may have vested interests in the material referred to herein. Although GRI Equity and the distributors have no specific reasons for believing such information to be false, neither GRI Equity nor the distributors have independently verified such information and no representation or warranty is given that it is up-to-date, accurate and complete. GRI Equity, associates of GRI Equity, the distributors, and/or their affiliates and/or their directors, officers and employees may from time to time have a position in the securities mentioned in this report and may buy or sell securities described or recommended in this report. GRI Equity, associates of GRI Equity, the distributors, and/or their affiliates may provide investment banking services, or other services, for any company and/or affiliates or subsidiaries of such company whose securities are described or recommended in this report. Neither GRI Equity nor the distributors nor any of their affiliates and/or directors, officers and employees shall in any way be responsible or liable for any losses or damages whatsoever which any person may suffer or incur as a result of acting or otherwise relying upon anything stated or inferred in or omitted from this report.

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