1. © 2013 AQAL Capital. Strictly Confidential. For qualified investors only.
1
1
© 2013 AQAL Capital. Strictly Confidential. For qualified investors only
Why
I
Am
an
Integral
Investor
Dr.
Mariana
Bozesan
Club
of
Rome,
Intl.
Full
Member
President,
AQAL
InvesDng
Partner,
AQAL
Capital
May
13th,
2013

2. © 2012 Integral INVESTING. All rights reserved.© 2013 AQAL Capital. Strictly Confidential
Lehman,
Fukushima,
Madoff,
Libor,
Climate
Change,
Debt
Crisis…

3. © 2012 Integral INVESTING. All rights reserved.© 2013 AQAL Capital. Strictly Confidential
…
lead
to
wealth
owners’
sinking
confidence
in
insDtuDonal
investors*
*Source:
BCG
Report,
Regaining
Lost
Ground:
Resurgent
markets
and
new
opportuni5es.
Becerra
et
al.2010.

4. © 2012 Integral INVESTING. All rights reserved.© 2013 AQAL Capital. Strictly Confidential
>=
10%
of
High
Net-­‐Worth
Individuals
want
sustainability
in
both
financial
terms
and
impact,
but
cannot
get
it

5. © 2012 Integral INVESTING. All rights reserved.© 2013 AQAL Capital. Strictly Confidential
….
because
innovaDve
financial
products
that
can
fulfill
our
needs
are
missing
at
large
scale

6. © 2013 AQAL Capital. Strictly Confidential. For qualified investors only.
6
Thus,
many
HNWI
are
bypassing
insDtuDons
• Seeking
alternaDves
to
tradiDonal
fund
products,
oen
sobered
by
weaker
than
expected
past
product
performance
• Wealth
owners
are
self-­‐organizing:
– AVIVA
Corporate
Sustainability
CoaliDon
($2
trillion)
– InternaDonal
Integrated
ReporDng
Commibee
(IIRC)
– InternaDonal
Stock
Exchange
IniDaDve
– Sustainable
Capitalism
Manifesto
–
Al
Gore
– The
Giving
Pledge,
GIIN,
incl.
self-­‐organizing
family
offices,
TONIIC,
PYMWYMIC,
AQAL
InvesDng,
etc.
• Impact
InvesDng
is
oen
missed
by
insDtuDonal
investors
(only
5%
use
it)
vs.
10%
of
HNWI*
*Source:
J.
P.
Morgan
&
GIIN
Report:
Insight
into
the
Impact
Investment
Market.
December
14,
2011
Market
drivers

7. © 2013 AQAL Capital. Strictly Confidential. For qualified investors only.
7
TradiDonal
invesDng
is
challenged*
7
Market
drivers
• Financial
crisis
lead
to
fear
and
uncertainty
– Falling
revenue
and
margins
– Massive
capital
migraDon
– Frustrated
wealth
owners
losing
trust
in
their
asset
managers
– AlternaDve
and
customized
invesDng
are
on
the
rise
• TradiDonal
invesDng
oen
focused
on
short-­‐term
profit
maximizaDon
at
the
expense
of
long-­‐term
health
of
global
community,
culture,
environment,
ethics,
and
overall
human
happiness
• TradiDonal
investment
metrics
oen
missed
sustainable,
Dme-­‐based
businesses
and
responsible
investment
opportuniDes
• Many
tradiDonal
asset
managers
failed
to
develop
a
core
competency
in
alternaDve
invesDng
opportuniDes
including
impact
invesDng
(SRI/RI/ESG)
• The
Venture
Capital
model
is
“broken”*
Profit
TRADITIONAL
INVESTING
Profit
Metrics
e.g.
WALL
STREET
BERKSHIRE-­‐
HATHAWAY
KLEINER
PERKINS
SEQUOIA
CAPITAL
*Source:
Mulcahy,
D.
&
Weeks,
B.
&
Bradley,
H.
S.,
(2012,
May).
We
have
met
the
enemy
….
And
he
is
us:
Lessons
learned
from
twenty
years
of
the
Kauffman
Founda5on’s
investments
in
venture
capital
funds
and
the
triumph
of
hope
over
experience.
Kauffman
FoundaDon
Research

8. © 2012 Integral INVESTING. All rights reserved.© 2013 AQAL Capital. Strictly Confidential
Impact
InvesDng
is
growing
but
is
fragmented

9. © 2013 AQAL Capital. Strictly Confidential. For qualified investors only.
9
Impact
InvesDng
is
fragmented
Two
types
of
Investors*
• Financial
(Profit)
First
Investors
– Pursue
the
opDmizaDon
of
financial
returns
before
having
an
impact
floor
– Investors
“are
not
willing
to
accept
lower
than
market
returns
as
a
cost
to
opDmizing
social
or
environmental
goods,
although
they
sDll
make
a
posiDve
impact”
• Impact
(People/Planet)
First
Investors
– Seek
to
opDmize
social
and
environmental
impact
with
a
financial
floor
– For
greater
impact,
investors
are
willing
to
accept
lower
than
market
financial
returns.
IMPACT
INVESTING
Sustainability
Metrics:
ESG
Triple
BoMom
Line
Profit
People
Planet
e.g.
GRAMEEN
BANK
TRIODOS
BANK
GLS
BANK
BANK
SARASIN
Market
drivers
*DefiniDon
aer
(Eurosif,
2010,
p.
7)

10. © 2013 AQAL Capital. Strictly Confidential. For qualified investors only.
10
European
Impact
InvesDng
in
2009
*Source:
EUROSIF
SRI
Survey
2010
Impact
InvesDng
13
23
33
89
242
242
306
312
396
411
1,043
1,851
Germany
Switzerland
Spain
Finland
Belgium
Denmark
Sweden
Italy
The
Netherlands
Norway
UK
France
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
European
Impact
InvesDng
Assets
in
2009
in
Billion
Euros
(Source:
Eurosif
SRI
Survey
2010)

11. © 2013 AQAL Capital. Strictly Confidential. For qualified investors only.
11

12. © 2013 AQAL Capital. Strictly Confidential. For qualified investors only.
12
Global
Sustainable
InvesDng
(SRI/RI)
is
growing*
• Global
Sustainable
Investments
using
some
kind
of
ESG
criteria
reached
US$
13.6
trillion
(=21.8
%
of
total
AUM
in
2012)
with
– Most
common
strategy
being
NegaDve/exclusionary
screening,
US$
8.3
trillion
AuM
– Norm-­‐based
screening,
US$
3.0
trillion
AUM
mostly
Europe
(65%
of
known
SRI
AuM)
– PosiDve/best-­‐in-­‐class
screening
1.0
trillion
AuM,
mostly
US
– Assets
uDlizing
ESG
integraDon
are
at
US$
6.2
trillion
Market
drivers
*Source:
The
Global
Sustainable
Investment
Alliance
(GSIA)
Report
2012,
hbp://gsiareview2012.gsi-­‐alliance.org
• Impact
InvesDng
theme
investments
are
growing
but
are
sDll
fragmented
and
– ComparaDvely
small
at
US$
89.0
billion
• Sustainability
theme
investments
are
growing
but
– Are
also
comparaDvely
small
at
USD
83.0
billion

13. © 2012 AQAL Investing. All rights reserved.
13

14. © 2012 Integral INVESTING. All rights reserved.© 2013 AQAL Capital. Strictly Confidential
The
IntegraDon
between
TradiDonal
InvesDng
and
Sustainable
Impact
InvesDng
is
needed

15. © 2013 AQAL Capital. Strictly Confidential. For qualified investors only.
15
Integral
Metrics
Planet
People
Profit
Ethics,
Ego,
Emo8ons
&
Consciousness
Behavior
Exterior
Interior
Individual
CollecDve
Culture
&
Morals
INTEGRAL
INVESTING
GeneraDon,
AQAL
InvesDng,
AQAL
CAPITAL,
Natural
InvesDng
IntegraDng
TradiDonal
and
Impact
InvesDng
Profit
TRADITIONAL
INVESTING
Profit
Metrics
e.g.
TRADITIONAL
WALL
STREET
BANKS
AND
VENTURE
CAPITAL
FIRMS
IMPACT
INVESTING
Profit
People
Planet
Sustainability
Metrics
ESG,
IRIS,
SAM
Triple
BoMom
Line
e.g.
GRAMEEN
BANK
LGT
VENTURE
PHILANTHROPY
Integral
InvesDng
is
based
on
Ken
Wilber’s
Integral
theory
that
is
widely
applied
in
35
disciplines
including
science,
poliDcs,
economics,
educaDon,
medicine,
and
business;
Ken
Wilber
is
endorsed
by
Nobel
Prize
laureate
Al
Gore,
former
US
President
Bill
Clinton,
former
Secretary
of
State
Hillary
Rodham
Clinton,
and
is
also
used
i.e.
at
McKinsey
and
Company.
Source:
Wilber,
K.
(2000).
A
theory
of
everything:
An
integral
vision
for
business,
poli5cs,
science,
and
spirituality.
Boston:
Shambhala.
IntegraDon

16. © 2012 AQAL INVESTING. All rights reserved.© 2012 AQAL INVESTING. All rights reserved.
What
is
the
evidence
that
it
works?

17. © 2013 AQAL Capital. Strictly Confidential. For qualified investors only.
17
e.g.
Whole
Foods:
+40%
Higher
ROI
than
FoEs
over
10
years
(1800%
shareholder
value
1995–2006)
Sample:
8.0x
higher
ROI
than
market
average
(S&P
500)
over
10
years;
and
-­‐
3.1x
higher
than
GGCs
3.0x
higher
ROI
than
market
average
(S&P
500)
over
15
years
GOOD
TO
GREAT
COMPANIES
(“GGC”s)
-­‐
2002
• Nucor;
Kimberly-­‐Clark
• Kroger;
Walgreens
• Wells
Fargo;
Gillebe
ESG
&
INTEGRALLY
ACTING
BUSINESSES
• The
Container
Store;
REI
• Whole
Foods;
Trader
Joe’s;
Patagonia;
DM
• Stoneyfield
Farms
FIRMS
OF
ENDEARMENT
(“FoE”s)
-­‐
2007
• Patagonia;
Amazon
• Southwest
Airlines
• IKEA;
BMW;
eBay
• Google;
AVEDA
*Source:
Sisodia,
R.,
Sheth,
J.,
Wolfe,
D.B.
(2007).
New
Jersey:
Wharton
School,
p.
16
Sample
evidence:
Risk
reducDon
&
inclusive
sustainability
already
visible
with
ESG
&
integrally
acDng
companies
Sample
Evidence
Results
of
the
ongoing
ShiP
to
Conscious
Capitalism

18. © 2012 AQAL Investing. All rights reserved.
18
Evidence:
Investment
return
in
detail*
15
Year
10
Year
5
Year
3
Year
Cumula8ve
Annualized
Cumula8ve
Annualized
Cumula8ve
Annualized
Cumula8ve
Annualized
FOE
Return
1646.1%
21.0%
254.4%
13.5%
56.4%
9.4%
77.4%
21.1%
GTG
Return
177.5%
7.0%
14.0%
1.3%
-­‐35.6%
-­‐8.4%
-­‐23.2%
-­‐8.4%
S&P
500
Return
157.0%
6.5%
30.7%
2.7%
15.6%
2.9%
10.3%
3.3%
*Source:
Mackey,
J.,
&
Sisodia,
R.,
(2013)
Conscious
Capitalism:
LiberaDng
the
heroic
spirit
of
business.
Boston:
Harvard
Business
Press
Review.
Slide
was
downloaded
from
hbp://www.slideshare.net/s2kapoor/foe-­‐updated-­‐financial-­‐performance
on
Jan
8,
2012
Evidence
Note:
Company
returns
are
total
returns
with
dividends
reinvested
and
compounded*
FoE:
Firms
of
Endearment
GtG:
Good
to
Great
S&P:
Standard
and
Poor’s
index
of
five
hundred
U.S.
companies

19. © 2013 AQAL Capital. Strictly Confidential. For qualified investors only.
19
TARGET
FINANCIAL
RETURN
TARGET
SOCIAL,
ENVIRONMENTAL,
ETHICAL,
CULTURAL,
&
HAPPINESS
IMPACT
PROFIT
FLOOR
IMPACT
FLOOR
FINANCIAL
FIRST
INVESTORS
OpDmize
financial
returns
with
an
impact
floor
IMPACT
FIRST
INVESTORS
OpDmize
social
and
environmental
impact
with
a
financial
floor
Philanthropy
Making
Money
INTEGRAL
INVESTING
Risk-­‐adjusted
opDmal
financial
return
and
premium
impact
returns
Summary:
An
Integrated
Impact
Approach
Summary

20. © 2012 Integral INVESTING. All rights reserved.© 2013 AQAL Capital. Strictly Confidential
The
only
crisis
we
have
today
is
one
of
consciousness

21. © 2013 AQAL Capital. Strictly Confidential. For qualified investors only.
21
© 2012 Integral INVESTING. All rights reserved.
WE WILL CATCH THE BOAT!