By Bill Kelly, CEO, CAIA Association The Urban Dictionary turned 20 years old last month. If staying power means anything, perhaps it is time to use it as a citable source for modern day lexicon of words like Kerth. It seems Kerth is a name for someone who connotes sweetness, politeness, and lovability, but also someone who is prone to serial bouts of procrastination. How appropriate, then, to have Kerth ushering in the 50th year of Earth Day. Earth Day was mostly a US phenomenon conceived during the height of the Vietnam War, a so-called police action that was hugely unpopular across many college campuses. This was also a time when one could still muster bipartisan support in the legislative branch of the government and April 22 was chosen because it fell between Spring Break and final exams and coincided with a massive 1969 oil spill in Santa Barbara, CA. If idle time is the devil’s playground why not give the college campuses another cause to rally around, and thereby raise political, social, and environmental awareness amongst these action-minded undergrads? As a spectacle and a celebration, Earth Day was a smashing success and 20 years later it went global, where it moved to over 140 countries replete with big marketing budgets and even greater media savvy. There is no doubt (other than on 1600 Pennsylvania Avenue) that the awareness-raising aspects of this campaign have been effective but are we more like Kerth on the other 364 days? Of interest, the first 20 million (mostly) undergrads who were active participants back in 1970, are now in or around retirement age. Their days of stewardship of our industries, practices and environmental oversight are in the autumn of years and we need to candidly ask ourselves “are we better off” as these septuagenarians pull their tattered “Save The Earth” tighter fitting t-shirts out from the bottom of dresser drawers. Nothing in life is by coincidence especially when dealing with capitalists. This is not necessarily always a bad thing and the fact that Blackrock chose this month to publish Getting Physical should not only be celebrated and read, but also acted upon before another 50 years ticks off the very precious time left on our global clock. There is nothing flowery or celebratory about the piece and the reader will find it to be a very focused and fact-laden analysis that concentrates on just three specific sectors: muni bonds, commercial mortgage-backed securities, and electric utilities. Each of these sectors represent long dated assets and likely high(er) correlations to impacts from climate changes. The authors’ research and modeling make for a very interesting and compelling case. Our past will bear less resemblance to the future and unfortunately rising sea levels and temperature changes are too often relegated to an analytical thought process equivalent to watching (unleaded!) paint dry. As an investor, it seems clear that many of these risks are being routinely underpriced on Wall Street and too often ignored on Main Street and Getting Physical bears this out in a very convincing way. Kerth might be loveable but it should be more about what is livable. Celebrations need to be supplanted with sustainable actions that won’t be found dancing around a maypole. Earth Day can no longer be Kerth’s day and it is up to us to act accordingly… and now. Seek diversification, education and know your risk tolerance. Investing is for the long term. Bill Kelly is the CEO of CAIA Association and a frequent contributor to Portfolio for the Future. Follow Bill on LinkedIn and Twitter.
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