Senior Partner Letter 2024

Welcome, everyone. Twenty years. We are deeply grateful to you, our clients and partners, for your trust, advice and engagement, and for joining us on our collective journey to a sustainable society.

My remarks this morning will be in two parts. The first will remind you of our founding principles and mission, identify the key messages we hope you will take away over the next two days, and explain why we named the firm Generation. Part two will be a high-level review of our first 20 years and more importantly our focus for the next decade. I might even challenge us all to take action.

Twenty years ago we began with the dual mission to deliver long-term, attractive, risk adjusted investment results and to increase the adoption of sustainable investing in the wider market. We wanted to use our investing skills to prove the business case for sustainable investing. And, we aspired to help finance and capital markets tackle the global sustainability challenges. We believed and continue to believe finance can be a force for good.

If we learned anything over the last 20 years, it is mission matters. It is our guiding light and has remained the same since we got started. We believe purpose is a competitive advantage.

Over the years many folks have asked about why we are called Generation. Our name, Generation, signifies many things to us.

We were initially inspired by the 1987 Common Future report which placed environmental issues firmly on the political agenda, and defined ‘sustainable’ as: ‘to meet the needs of the present without compromising the ability of future generations to meet their needs.’ Our name reminds us of the future generations we are serving in our alignment with clients and our long-term investment mindset. In addition, it affirms our commitment to developing a firm that long survives its founders.

We also strive to generate strong investment performance for our clients.¹ This provides the fundamental proof point that allows us to exist.

And critically, we recognise we are the last generation that has the opportunity, resources and, indeed, obligation, to do everything we can do to bend the emissions curve and transition to a sustainable world.

Looking back, we see in many ways we’ve achieved more than we could have hoped. We’ve worked with many others and together have helped sustainable investing to evolve from a niche strategy to a mainstream approach.

We are very uncomfortable tooting our own horn but with your forbearance we would like to take a moment to recognise some of our work in developing the field of sustainable investing since we started the firm.

We and others began with awareness building of the risks and opportunities in sustainability and the materiality of environmental and social impacts along with governance approaches. We went on to support efforts to standardise metrics and reporting frameworks, working with initiatives such as the Sustainability Accounting Standards Board and the Task Force on Climate-related Financial Disclosures.

Through Generation Foundation’s partnership with the United Nations Environment Programme Finance Initiative, we’ve considered the legal framework that governs fiduciary duty and investment decision-making. Today, we are helping at a jurisdictional level to spread the recognition that fiduciaries can and must consider sustainability factors, including impact, as part of their legal duty.

At an enterprise level, we’ve supported the B Corp movement (we are a B Corp ourselves) and the Impact Management Project. As engagement and shareholder activism have become important tools for investors to influence corporate behaviour, we’ve advocated for science-based targets for climate and, starting recently, for nature. We have also helped to establish with our peers the Net Zero Asset Managers initiative and Glasgow Financial Alliance for Net Zero.

Throughout all this, we’ve continued to share and deepen our understanding of sustainable investing – most recently, on climate-led investing with Just Climate.

We remain inspired by these objectives, but by setting some of these goals beyond our firm and even our industry’s reach, we realised in a way we could be perceived as letting ourselves off the hook. We absolutely want to be 100% on the hook for our mission, for our clients and for future generations’ right to a sustainable world. Therefore, our intention for the remainder of this critical decade is to double down on our mission through objectives that are aligned with our business. We believe we have delivered and will continue to deliver strong risk adjusted investment results and impact. However, it is the second part of our mission, the widespread adoption of sustainable investing, which is more rigorous and expands what capital values, that is key to achieving the transformation required in finance.¹

Before I share what we will do, let me start with what we will not do: we are not conceding the definition of sustainable investing to politically motivated detractors. We will not shy away from our identity. We are proud to be a sustainable investment firm. It is all we do, and all we will ever do. We are not running from equity, diversity and inclusion because some find it convenient to divide. And, we are not overlooking communities in the Southern Hemisphere who hold many of the answers to these challenges but whose voices are so often excluded from the debate.

So, what are we committed to doing?

We are certain our advocacy voice is strengthened by our investment results. Similarly, our position as a sustainability leader is dependent on our commitment to innovating and driving sustainability ambition and best practice.

To this end, we recently reaffirmed and strengthened the commitment to our mission and core values in our partnership agreement. We will also ensure all our colleagues are connected to and can deliver on the mission.

To fulfil our mission and our duties as investors, we will:

1. Continue to allocate capital to deliver both long-term, attractive, risk-adjusted investment returns and positive impact;¹
2. Engage with our companies to: scale their businesses that provide solutions to the world’s most pressing challenges, but also shine a light on where action is needed to make their impacts on people, the planet and the economy fall within planetary boundaries and meet societal needs;
3. ‘Walk the talk’ and strive to model what a truly sustainable business looks like, in terms of how we run our firm; and
4. Help create the enabling conditions for investors and capital to achieve sustainability outcomes and impact. The Generation Foundation will continue its market-building efforts, and collectively we will explore new opportunities to invest in transformational business models, sustainable solutions and systems change.

We will measure and report on our progress. By all means, please keep us very much on the hook.

In closing, the English-American activist and philosopher Thomas Paine said: “If there must be trouble let it be in my day, that my child may have peace.” We are all very lucky to be alive today in an incredible moment of change. In the history of humanity, rarely has the impact on future generations been so dependent on a single decade of decision-making. In facing our responsibility, we are fortunate to have each other’s support. With your partnership, we are determined to do everything we can to meet this challenge. We are the generation that has both the resources and the obligation to transition to a sustainable world. With your help we can – and will – prevail. Thank you.

David Blood, Senior Partner, on behalf of the Partners and employees of Generation Investment Management, Just Climate and the Generation Foundation