Fifty-nine years ago, I was born into a world with 3 billion people. In the 1960’s a middle-class lifestyle was an achievable goal, though only one in six people had attained that status. We had yet to celebrate our first Earth Day (that would happen in 1970) and few US federal environmental standards existed.
The major global issue of the time (the 1960-80s) was the Cold War between the US and Soviet Union, and the threat of nuclear warfare. In elementary school, we practiced hiding under our desks in the event the Soviets launched a missile attack. In college, I studied International Relations with a focus on nuclear missile treaties. I imagined a career as a Foreign Service officer helping to solve big geopolitical problems. In my senior year of college, an Economics course on International Trade and Finance introduced me to the raw power of the global capital markets, which affect so many aspects of our lives.
Thirty-five years ago, as a young MBA student I became fascinated by what made great companies…. great. Management consulting, investment banking, and investment management were the obvious potential career options. Having never made a single investment in my life, I was perhaps lucky enough to find a job as a public-equity research analyst at a Trust Bank in Providence, RI (albeit at a salary of $21,000). On my first day I was given an office and the responsibility of covering 25% of the companies in the S&P 500. This “trial by fire” opportunity launched my professional investment career.
Thirty years ago, my wife Ellen, our young son, and I moved to Pasadena, CA after she was offered a post-doctorate role at the Jet Propulsion Laboratory (JPL). As the trailing spouse, I was fortunate be hired by Capital Group as an investment analyst. Over the next nineteen years, my role evolved from Research Analyst to Global Equity Portfolio Manager with a leading role managing several of Capital’s largest and most successful mutual funds. At the same time, Capital grew from a $60 billion AUM firm to the largest active equity manager in the world with over $1.2 trillion in AUM.
Ellen and I were now financially able to make our first personal investments. I was fortunate to be offered equity in Capital Group (we had to borrow money to do so) and then be able to make a small investment in two Sequoia Capital venture capital funds (Capital was one of the founding investors in Sequoia). We also established 529 College Plan accounts for our children, which were managed by Capital Research’s American Funds.
Eleven years ago, I walked away from my career in professional investing as I came to terms with the fact that I had become a major participant in the global capital markets that were creating society’s biggest problem – climate change. I was directly managing $26B in public equities at the world’s largest active equity manager. While Capital has always been a long-term investor with deep research capabilities, we were largely blind to, or simply ignorant of, the environmental and societal consequences of our investments. My efforts to raise awareness of the issues within Capital garnered limited support. My departure letter to my colleagues made it clear, I wanted to focus the rest of my life on addressing major environmental threats, particularly climate change.
I began a much more meaningful phase of my life, one of learning, collaborating, and investing to solve problems. I spent five years working with some of the largest and most successful environmental organizations and thought leaders both to learn from them and to help increase the effectiveness of their organizations. These included The Nature Conservancy, Sierra Club, and CDP, among others.
These experiences taught me about the growing amount of knowledge about how companies impact our environment and the need to alter the course of “business as usual”. At the same time, the power of the capital markets remained very “front of mind”. I knew that our own personal investments, which were still almost exclusively invested mutual funds managed by Capital and in Capital Group equity, had to shift to become better aligned with our values. My search for better options was not very rewarding. The mainstream firms were largely ignoring the social and environmental issues, while the traditional ESG/SRI firms were too focused on simply excluding companies with bad social or environmental factors for my taste. I was looking for options that would provide financial returns while recognizing the need to drive change in our economy’s actual impact on our planet.
It was becoming increasingly apparent that there were too few options for me or other investors to invest in what I viewed as a truly sustainable and impactful manner. I made the decision that my best course of action was to make the very risky step of starting my own sustainable investment firm to manage a large portion of our money, and hopefully do the same for other like-minded investors. I was fortunate to have the right combination of investment and environmental knowledge and experience to do the work, along with the capital needed to launch a new investment firm.
Six years ago, I cofounded Terra Alpha Investments to provide investors with a better way to invest in public equities. We are employee (all associates have equity in the firm) and investor owned, and we are dedicated solely to sustainable investing.
We built a firm that invests for the long-term and places the value of our planet’s limited natural resources (e.g. clean air and freshwater, healthy soil, forests and oceans, and essential raw materials) at the heart of our investment analysis and portfolio construction.
We invest in larger companies (>$2 billion in market capitalization) from around the world that are leading the transition to a more sustainable economy.
Today, Ellen and my investment assets are mostly in sustainable funds or companies.
- Over 30% of our investable assets and in our family foundation’s assets are invested in funds managed by Terra Alpha.
- 15% is invested in the Terra Alpha GP, which requires significant capital in its early years.
- 5% is invested Global SME Growth Fund, an impact-oriented developing economy SME credit fund managed by Advanced Growth Capital; led by another former Capital Research investor, Janet McKinley.
- We own shares in Tesla, Cisco Systems and Microsoft. The latter two we distributions form Sequoia Funds.
- We have a small investment Virginia Everywhere, a private, local Wireless Internet Service Provider, which expands internet access into our rural community.
- We have recently made a commitment to invest in the Global Impact Fund II, which will be managed by Carrie Rich, who founded the Global Good Fund. GIF II will invest in social entrepreneurs with a focus on woman and minority led businesses.
- The remaining 40% of our investments are invested in Capital’s American Funds mutual funds.
I will continue to actively seek opportunities to better align our personal investments with our family’s perspectives and values. Fortunately, the number of viable investment options continues to grow, allowing us (and all investors) to move our money away from firms that don’t properly recognize the repercussions of how and where they direct capital.
Fifteen years from now, it is my hope that our economy will have evolved to one that is truly aligned with our planet’s natural resource capacity, and one that is serving the real needs of society. Well before then, we plan for 100% of our financial assets to be invested in truly sustainable ways.
- Tim Dunn, Managing Partner and Chief Investment Officer, Terra Alpha Investments
