Today I spoke with Forbes & Manhattan Founder Stan Bharti. In our conversation, we discussed his career, ideas on sustainable investing, and the future of green investments.
Hi Stan, it’s great to have you with us today. Can you briefly introduce yourself to our readers and give us a little information on your background?
Hello, I am Stan Bharti, founder of the Toronto-based merchant bank, Forbes & Manhattan (F&M). After completing my Master of Engineering at the University of London, I started my own consulting firm, BLM Inc, in 1988. I was also the president of William Resources, a Toronto-based gold public company.
I established F&M in 2002 to identify mining assets and guide mining companies through the exploration, discovery, and production stages. Our team comprises geologists, investment bankers, and financial and mining analysts who provide technical and managerial assistance to mining companies. As we have evolved over the years, we have now also been leveraging our bench strength to provide technical and managerial assistance to companies that we believe can have an impact on the future; not just mining companies.
I also firmly believe in social responsibility, which forms the core of my corporate philosophy. Apart from donating to Laurentian University and the Canadian Olympic team, I’ve established the Bharti Charitable Foundation. The Foundation makes numerous contributions toward an environmentally conscious and sustainable future.
Before diving deeper, I’d like to ask you what you think of the current scenario around eco-friendly investments and the market sentiment. What do you think is the general stance of commercial and retail investors regarding sustainability? What sort of challenges do investors face while making sustainable investments?
If you look at market data, Morgan Stanley reports that 79% of investors have expressed interest in sustainable investing.
I think statistics speak for themselves. In 2020, U.S. sustainable equity funds outperformed traditional peer funds by a median total return of 4.3% according to Morgan Stanely. The U.S. sustainable bond funds also outperformed their peers with a median total return that was 0.9% higher. We also saw a 28% jump in the Principles for Responsible Investment (PRI) signatories in 2020, PRI is a framework for ESG investing. Assets under management for ESG and Values-Based ETFs hit an all-time high in 2021 (over $400B) as well . This tells me that both commercial and retail investors are focused on sustainable investments.
But we must not forget or undermine the challenges facing green investments. I believe “greenwashing” is extremely detrimental to the industry and needs immediate attention. In other words, sustainable business practices should never become a marketing gimmick. Moreover, some investors believe that sustainable investments don’t perform well and are unsuitable for their portfolios. Investors also lack the necessary tools to measure the impact of sustainable investment efforts. So, there is a pressing need for more data to convince new investors to come on board.
How do you hope the global market will overcome these challenges?
The industry needs a multi-pronged approach to address the challenges I just mentioned. The first thing to do is strengthen the ESG knowledge base across companies and investment professionals. The importance of expertise in sustainability has never been more important and is something we are building out at Forbes. Education and training are inadequate if they don’t cause a shift in system-level thinking. Thus, theory and practice need to go hand-in-hand.
I think we also need to strengthen collaborative efforts in the industry if we want to see more sustainable investments in the future. And we need robust ESG data to support these collaborations. Thus, we must focus on generating ESG datasets that can serve as important reference points for all industry stakeholders.
Strong ESG data can channel funds toward research and the development of sustainable innovations. But then again, innovation can only thrive in an ethical, cultural environment. So, stakeholders must contribute toward a value-driven culture that can balance the financial tradeoff in sustainable investing.
What role does Forbes and Manhattan (F&M) play in the broad spectrum of sustainable investing? How do you hope to support new green investments?
In COVID-19’s aftermath, public health has emerged as a dominant sustainable investment thematic. If you look at the available data, public health became the most common thematic investment that drew investor demand. F&M’s portfolio includes companies that are directly working to mitigate the impact of COVID-19. The other dominant themes for sustainable investors are tackling climate change and pollution control. F&M is also investing in companies working in the climate sector for a greener and cleaner world.
F&M is already playing a pivotal role in the sustainable investing space and will continue to do so. F&M discovers companies that offer sustainable products and services to help them improve their offerings. We ensure complete assistance from incubation, development, finance, and management of ESG companies.
Can you tell us more about some of Forbes and Manhattan’s investments and how they offer a sustainable business model while helping sustainability efforts?
F&M has invested in Medivolve Inc. to support disruptive and innovative technologies for managing the COVID-19 pandemic. Medivolve focuses on developing accessible coronavirus testing centers for early detection and treatment. To this end, F&M has facilitated two acquisitions: Collection Sites, LLC (100%) and Colombian Sanaty IPS (28%). Thus, F&M has successfully capitalized on the opportunities in the health sector to offer risk-adjusted, high-margin returns for investors.
F&M has also invested in Brazil Potash Corp., a fertilizer company that explores and develops potash in Amazonas, Brazil. The company intends to become a primary domestic supplier to Brazil’s farmers to support the booming agricultural sector. This investment removes the need for international transport of fertilizers, as the emissions associated with international maritime shipping of fertilizers generate significant emissions. Brazil Potash can reduce the supply chain and thus emissions. That is just the tip of the iceberg when it comes to the positive benefits of the project.
Do you have any closing thoughts that you’d like to share with us?
There are two things, actually. One, the era of sustainable investing is just getting started. If you look at the 2020 OECD report on ESG Investing, you’ll find that ESG-related investment products have exceeded $1 trillion. Moreover, Morgan Stanley has found that 80% of investors believe that ESG practices will generate higher returns in the long term. With 88% of millennials expressing interest in climate-themed investments, sustainable investing will only grow in the coming years.
However, this is where I come to the second point. We must not become complacent and start thinking that sustainable investment practices will proliferate independently. The industry stakeholders must take active steps to bring new investors into the fold of sustainable investing while also developing new and creative products and approaches. Thus, we must continue to highlight the benefits of sustainable investing and dispel any myths about it. After all, I think sustainable investments are the key to a healthy planet and healthier global demography.