No bank? No problem!

Bank Clerk: How can I help you, young man?

Stan Marsh: I got a hundred-dollar check from my grandma and my dad said I need to put it in the bank so it can grow over the years.

Bank Clerk: Well that’s fantastic. A really smart decision, young man. We can put that check in a money market mutual fund, then we’ll re-invest the earnings into foreign currency accounts with compounding interest aaaand it’s gone.

[Blank stares and silence as it goes from the Bank Clerk, to Stan, to the Bank Clerk, to Stan]

Stan Marsh: Uh… what?

Bank Clerk: It’s gone, it’s all gone.

South Park geeks will remember the episode ‘Margaritaville’ where the US economy goes into freefall due to bankers behaving badly. All trust in the financial system erodes and chaos ensues. Ah yes, that’s right; this actually happened!

In the episode, Stan Marsh goes to bank a cheque and has his savings almost immediately wiped out by the bank. The bank clerk then dismissively asks him to move along. In the real world, many people, like Stan, don’t trust the US banking system.

The Federal Deposit Insurance Corporation (FDIC) has conducted a yearly survey since 2009 to assess the inclusiveness of the US banking system. It’s astonishing to us that 6.5% of US households (that’s over 20 million people) have no bank account whatsoever. They are dubbed the “unbanked”.

Reasons for Not Having a Bank Account, % of Times Citied 

Source: 2017 FDIC National Survey of Unbanked and Underbanked Households

Imagine life without a bank account and all manner of simple tasks become complicated.

It’s the norm to get paid and pay others through a bank account. We can purchase things at shops and online with a single piece of plastic. If you do want the physical stuff, just take it out of a hole in the wall. We can set up direct debits to pay bills and forget how much we are paying for the sports channels. Using a bank account protects our money from fire, theft and accidently throwing out the cash-stuffed mattress. It can also help us access credit for larger purchases, like a house. Heck, they even pay us interest for all of this goodness!

So who can the unbanked trust? One place to turn could be Green Dot, which has been providing an alternative solution since 2001.

Green Dot began life as a tech company before buying a bank and we believe this gives them an edge over the industry’s incumbents. Possessing the ability to build and distribute their own financial services products directly to the consumer has proven successful; they found their niche in pre-paid debit cards and largely helped develop the market into what it is today.

The idea is simple – it works much like a credit or debit card, except 1) you pre-load the card and 2) you do so at your local grocers. This has proven massively popular with the unbanked for the following key reasons:

  • Pre-paid cards are not linked to a bank account and there are no credit checks as no credit is on offer;
  • They can be used to receive wages and government payments such as social security and unemployment benefits for people without traditional bank accounts;
  • Transactions are made on a pay-as-you-go basis;
  • No overdraft allowance and no overdraft fees. Only use what you load onto the card;
  • Access the card at convenient places and convenient times, rather than queueing forever at your local branch

They aren’t perfect and certain fees still apply. But they can provide a great solution for the many millions who are currently excluded from the traditional banking system in the US. This hasn’t gone unnoticed; Green Dot won the Economics Inclusion Award 2017 at American Bankers Association.

If only Stan Marsh had known!

The South Park scene – there’s nothing rude don’t worry!

About the author

Euan Ker is a sustainable investment analyst. He is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Euan joined us in 2014 as an investment implementation analyst with responsibility for implementing macro investment decisions across a number of fund-of-fund mandates, totaling some £13 billion under management. Prior to moving to the ESG Research team in 2018 his responsibilities also included asset class, regional and currency hedging overlays through derivatives. Euan has a 1st Class Honours degree in Management with Economics from Robert Gordon University. He has the IMC professional qualification and has 5 years’ industry experience (as at 30 November 2018).

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Meat the Agricultural Disruptors

Plant based burgers that bleed?! Could companies like Beyond Meat and Impossible Foods be the future of our food needs?

Tech giants, venture capitalists and famous names such as Bill Gates and Leonardo DiCaprio are backing a burgeoning industry that hopes to disrupt traditional agriculture. Beyond Meat recently filed for an IPO and it’s the first public listing from a slew of companies offering vegetarian meat products that taste, smell and cook like the real thing. Yes really.

The ethical debate and health concerns of factory food production have done nothing to quell our hunger for meat. But more recently, the effects of global warming have shone a light on the industry- will this be the start of meat’s ‘Tesla moment’?

Agriculture has a huge environmental impact, generating around 24% of global greenhouse gas emissions (according to the US Environmental Protection Agency[1]). To add context around that, the global transportation industry accounts for just 14%.

And with meat consumption predicted to rise, forecasts from climate change scientists warn that “unabated, the livestock sector could take between 37% and 49% of the GHG budget allowable under the 2°C and 1.5°C (Paris agreement GHG) targets, respectively, by 2030.”[2]

It is also a drain on resources. It is estimated that livestock occupy 30% of the planet’s land surface and account for 78% of all agricultural land use. 1,799 gallons of water are needed to produce a single pound of beef[3].

Animal meat is just a molecular structure of water, protein, fat and carbohydrates and we are very quickly discovering they can be replicated – but by using entirely plant based ingredients. As Jessica Appelgren of Impossible Foods describes it; “We are at the molecular level figuring out what makes meat meat and reconstituting that from the animal kingdom.”[4]

And they are just a bit more sustainable…

Source: Beyond Meat

It’s proved challenging but we are beginning to move beyond fossil fuels. So, who’s to say we can’t transition to less meat in our diets? The reason Tesla has been such a successful disruptor of the auto industry is because they offer a similar product, but without the nasty side effects of a traditional combustion engine.

Cars and burgers. Modern society loves them both. But if disruption of the latter is possible, it needs a viable alternative….and maybe another eccentric CEO!! Companies like Beyond Meat and Impossible Foods could provide the solution.

1 https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data
2 Harwatt, H. (2018): Including animal to plant protein shifts in climate change mitigation policy: a proposed three-step strategy, Climate Policy
3 Livestock’s Long Shadow: Environmental Issues and Options, FAO (2006)
4 National Geographic, November 2018, p86.

About the author

Euan Ker is a sustainable investment analyst. He is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Euan joined us in 2014 as an investment implementation analyst with responsibility for implementing macro investment decisions across a number of fund-of-fund mandates, totaling some £13 billion under management. Prior to moving to the ESG Research team in 2018 his responsibilities also included asset class, regional and currency hedging overlays through derivatives. Euan has a 1st Class Honours degree in Management with Economics from Robert Gordon University. He has the IMC professional qualification and has 5 years’ industry experience.*

*As at 30 November 2018.

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Pack it in

Growing public alarm about plastic pollution has provoked a war on packaging. What began as a simple concern for the environment has matured into widespread apprehension. Younger generations realise they will have to pick up the pieces of our obsession with single-use plastics.

Millennials and Generation Z are the most environmentally and socially ‘aware’ consumer markets. Generation Z will be the biggest spending group by 2020, and the war on packaging has become as much of a marketing campaign for companies as a sustainability initiative. A 2015 global survey by Nielsen found that 66% of respondents were willing to pay more for sustainable goods. This figure rose to a whopping 73% of millennials, with Generation Z expected to be higher still. And it’s not just their consumer habits; millennials and Gen Z want to work for companies that are taking sustainability seriously too.

Single-use packaging is great; it keeps our food fresh, it’s cheap, you don’t have to clean it and can just throw it away, then it magically disappears right? Wrong. Not enough plastic is recycled, not even close. Just around 30% of plastic is collected for recycling in the EU. It’s now in our oceans, it’s killing our wildlife, it’s even been reported people could be ingesting scores of tiny bits of potentially toxic polymers without realising. But this is old news, right?

The focus is now, rightly, shifting to solutions. And, of course, cutting out the use of ‘pointless packaging’. If only bananas, oranges and avocados came with some natural outer inedible packaging that meant you didn’t need to wrap them in anything…

Whether it’s recyclable plastics, soluble or even edible packaging, we believe there is massive opportunity for innovation in this sector.

But it’s important that the whole product lifecycle is considered. Using alternatives in place of plastic doesn’t necessarily guarantee a positive environmental benefit. It doesn’t take a genius to work out that an increase in paper-based packaging will see a rise in demand for timber and simply harm the environment in a different way. Crucially, companies are finding innovative ways to reduce the environmental impact of their packaging.

Just Eat is running a trial of using sachets made from seaweed for sauces, which will apparently decompose in just 6 weeks

Mondi has created a water soluble film with a range of uses (for dishwasher / laundry tabs etc) which is biodegradable and non-toxic

Mohawk is one of the largest recyclers of PET bottles in the US, recycling over 5.5 billion bottles every year to make its EverStrand carpet

Avery Dennison CleanFlake labelling solution improves the yield in the PET recycling process. Millions of bottles go unrecycled every year due to the contamination of non-recyclable labels, a problem CleanFlake can address

Kingspan use 250 million recycled plastic bottles annually in the production of building fabrics and aim to double that number by 2023. The plan is for a large proportion of these bottles to be ‘ocean-harvested’, which would help to address the scourge of plastic pollution in the world’s oceans.

Recycling PET (Land & Ocean)


Source: Kingspan

About the author

Euan Ker is a sustainable investment analyst. He is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Euan joined us in 2014 as an investment implementation analyst with responsibility for implementing macro investment decisions across a number of fund-of-fund mandates, totaling some £13 billion under management. Prior to moving to the ESG Research team in 2018 his responsibilities also included asset class, regional and currency hedging overlays through derivatives. Euan has a 1st Class Honours degree in Management with Economics from Robert Gordon University. He has the IMC professional qualification and has 4 years’ industry experience.*

*As at 30 June 2018.

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Everybody’s Free (To Wear…. Earplugs)

Mary Schmich’s article, which Baz Luhrmann adapted into the 1999 smash hit “Everybody’s Free (To Wear Sunscreen)” offers advice and warnings which intend to aid the listener to live a happier, healthier life.

Wear sunscreen, stretch, be kind to your knees, get plenty of calcium, dance.

Sunscreen will help protect you from skin cancer. Stretching daily and taking care of your joints will reduce the likelihood of arthritis. Studies suggest that a regular intake of calcium can protect us from brittle bones and even high blood pressure. And an active lifestyle is recommended to avoid diabetes.

I’ve linked the advice to a number of the most prevalent chronic physical health conditions in the US today. However, there’s one missing and it’s the third most common behind diabetes and cancer; hearing loss.

I wouldn’t blame Schmich for the exclusion – it’s a largely unrecognised health problem but almost one in four adults in the US suffer from some form of hearing difficulty. The Centers for Disease Control and Prevention (CDC) states that hearing loss is associated with decreased social, psychological, and cognitive functioning” and is “inversely associated with distress, somatization, depression, and loneliness among all age groups”.

Ok, time to look outside the US. The World Health Organisation estimates that, globally, 466 million people live with disabling hearing loss. 34 million of them are children.

And due to recreational exposure (nightclubs to personal headphones and everything in between!), over one billion young people (12-35) are at risk of it. Public health campaigns to raise awareness on the issue are paramount as it is largely preventable amongst children.

For hearing loss that has already occurred, I’m going to highlight two companies that are trying to make a difference.

Amplifon supplies hearing aids and has over 65 years’ experience in retailing and fitting the devices. Founded in Milan in the 1950’s, the company now operates in over 20 countries and provides an end to end service. It really excels in this area, evidenced by receiving the “Best in Italy – Champions of Service” award for the past three years. Allan commented on Amplifon’s acquisition of GAES last month. Take a look here.
  Cochlear provides ear implants and over 450,000 people of all ages, across more than 100 countries, now hear because of Cochlear. The company designs, manufactures and supplies three implants for different medical situations. It has the most reliable products on the market and its implants for children rank as the second best healthcare expense, on a cost benefit analysis (behind neo-natal care), according to a Stanford study.

Perhaps if Baz Luhrmann was to re-release the hit “Everybody’s Free (To Wear Suncreen)” it would include the line; “To Wear…. Earplugs”?

Well, there’s a reason I didn’t make it as a songwriter.

 

In case you missed the reference… Baz Luhrmann – Everybody’s Free To Wear Sunscreen

You may not have heard that it was national ‘Quiet Day’ last week… National Quiet day

About the author

Euan Ker is a sustainable investment analyst. He is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Euan joined us in 2014 as an investment implementation analyst with responsibility for implementing macro investment decisions across a number of fund-of-fund mandates, totaling some £13 billion under management. Prior to moving to the ESG Research team in 2018 his responsibilities also included asset class, regional and currency hedging overlays through derivatives. Euan has a 1st Class Honours degree in Management with Economics from Robert Gordon University. He has the IMC professional qualification and has 4 years’ industry experience (as at 30 June 2018).

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Tramspotting. Choose to unlock economic growth

Choose to unlock economic growth, choose a clean city to work in, choose quicker commute times, choose well connected and frequent public transport, choose the bus, choose to walk, choose to cycle, and choose to keep building that wonderful tramline …. I feel like this could be an unpopular soapbox with my colleagues in Edinburgh. Bear with me a minute.

Transport networks are reaching capacity in the UK. When we talk of change in the automotive industry we immediately think of electric vehicles, which is a change we unreservedly support. But if we all owned an EV tomorrow, our commute time wouldn’t change. Ryan highlighted the rapidly decreasing commuting speeds a few weeks back.

This is a problem.

The National Infrastructure Assessment (NIA), released earlier this year, highlighted that productivity is too low in too many UK cities and a lack of transport infrastructure is a key contributor.

This is a problem that will get worse.

In 1970 around 77% of the UK’s population lived in urban areas. That figure has increased to 83% today and is predicted to hit 92% by 2030 according to the World Resources Institute. What’s more, the UK’s highest value jobs are found in London and it is projected to grow faster than anywhere else in the country.

It’s all about capacity.

In order to unlock growth within our ever growing cities we will need to increase the flow of people in, out and around them. The NIA measured how our city roads cope during peak hour traffic compared to off-peak traffic. As the size of an urban area increases, the capacity of our roads during rush hour quickly depreciates. Manchester’s reduction in capacity during peak hour? -56%. Greater London? A whopping -76%.

So we need to increase capacity, but how best to do it? Invest in high capacity public transport modes of course!

We have pulled together some data from the Norwegian Centre for Transport Research that gives a clear picture on how to increase travel capacity throughout highly populated areas. Walking and train/ tram come out as clear winners.

Source: Norwegian Centre for Transport Research

The good news is there are organisations out there that are currently involved in high capacity UK infrastructure projects. For instance, Transport for London recently completed Cycle Superhighways 3 and 6, each carrying between 7,000 and 8,000 cyclists during peak hours. The Crossrail 2 project, which would add 10% to London rail capacity and bring an extra 270,000 people into London during peak hours, is due to start work in 2020. NetworkRail are investing to increase the speed and the capacity of the Edinburgh to Glasgow rail line and are also adding 42km of new tunnel in London as part of the Elizabeth line – another significant capacity increase.

So yes, let’s keep choosing to build and invest in higher capacity transport modes to keep our cities moving.

More tram disruption anyone?

About the author

Euan Ker is a sustainable investment analyst. He is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Euan joined us in 2014 as an investment implementation analyst with responsibility for implementing macro investment decisions across a number of fund-of-fund mandates, totaling some £13 billion under management. Prior to moving to the ESG Research team in 2018 his responsibilities also included asset class, regional and currency hedging overlays through derivatives. Euan has a 1st Class Honours degree in Management with Economics from Robert Gordon University. He has the IMC professional qualification and has 4 years’ industry experience (as at 30 June).

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