An Interview with Jackson W. Robinson, Partner and Portfolio Manager at Brown Advisory Incorporated: Increased Profitability and Returns through Socially Responsible Investing

Wall Street Transcript

67 WALL STREET, New York - November 8, 2012 - The Wall Street Transcript has just published its Investing Strategies Report offering a timely review for serious investors and industry executives. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Small Cap Investing - ESG Investing - SRI Investing - Long Term Investing - Focus on Fundamentals

Companies include: Unilever NV (UN), Schnitzer Steel Industries Inc (SCHN), Covanta Holding Corporation (CVA), SAP AG (SAP), Caterpillar Inc. (CAT) and many others.

In the following excerpt from the Investing Strategies Report, an experienced portfolio manager discusses his Socially Responsible investing philosophy:

TWST: What are the different sectors of green investing?

Mr. Robinson: When we started in 1983, there really were no public companies that represented exactly what we were looking for. So the approach was more of a negative screening approach. We would screen out companies that sold a harmful product or service. These included ammunitions companies or tobacco or fossil fuel companies or heavy chemical companies, and we were basically screening out about 40% of the S&P 500.

I've since found that screening is far from a new idea. In the 1750s, a Methodist by the name John Wesley, gave a sermon in which he talked about how making money is good, but you shouldn't make it in a way that's inconsistent with health and well being of others. Shortly thereafter, Quakers prohibited the slave trade by their congregations, and that was an interesting step. Back in the 1970s, there was something called the Sullivan principles, which involved avoiding companies that were investing in countries where there wasn't any freedom.

When we approached the 1990s, we were basically screening out companies, as there were very few companies to invest in that were public that were genuinely green. Then in the early 1990s, a little company by the name of Whole Foods (WFM) went public, and that company really was the poster child of the natural and organic foods industry. At the time, many people looked at Whole Foods with a very wary eye, saying, "Why in the world would anybody pay more for natural and organic foods; and furthermore, how in the world do they expect to be national in scope?" You could have bought all the shares of this company you wanted at an extremely low price in the early 1990s because of the disbelief in the whole concept.

Well, Whole Foods is now no longer a tiny company, as it has market capitalization approaching $20 billion. This is a large-cap, very, very successful company that just keeps expanding and in an industry that's about $50 billion in size and growing in double digits. Whole Foods was, in a sense, a tipping point as we then went from screening companies out to screening companies in.

By applying environmental due diligence, what we're basically able to do is reduce the risk in the portfolio, that being risk in companies that had environmental-related issues, such as Superfund sites, for example. Also, we could lower costs. A company that integrates environmental thinking into its plans, tactics and culture could lower their costs and enhance revenue growth.

During my experience at GardenWay, we had terrific growth through what we were doing in remanufacturing tillers and carts, but also by taking an old tiller in and fixing it up, basically recycling. That lowered our cost because we didn't have to buy new raw materials, and hence, that lowered our expenses. So the three keys to incorporating green principles into your business are that you can reduce your risks, you can lower your cost and you can enhance your revenue growth.

But it's even more than that. As I think I've mentioned at GardenWay, it was important in branding that company, and so we're now seeing major companies globally, such as Unilever (UN), for example, that's enjoying a strong and strengthening brand through what they are doing using environmental tenants into their overall business and through innovation. It's also extremely helpful into employee recruitment and retention. Younger people today are far more interested in working with a company that is being responsible in many ways, and even better if it's able to make a difference.

One of the questions I have been asking CEOs in every meeting over the last year or two is "What is it that keeps you awake at night? What's your number one challenge these days?" More often than not, I'm finding them saying to me that their biggest challenge is to find qualified people at all levels that can take our company to the next level. It's a major problem, and you've been reading about it. There is a mismatch in terms of education and skill sets to what the needs are in corporate America.

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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