Short recount of Cornerstone

This is a retelling, as best I can do, of the rise of Cornerstone Capital Group as it became one of the largest sustainable investment advisors in the US with assets that rivalled most mainstream investment advisors. It is a tale of grit and sheer willpower.

The origin of Cornerstone Capital as a company is informative of why it succeeded. Erika Karp had worked in sales for her entire life, first at IBM and then at a series of investment banks, ending up at UBS as the Head of Global Sector Research and membership at a number of leading organizations such as the World Economic Forum and Global Compact as a representative of UBS.  She had developed a reputation for seeing trends and being able to emotionally connect with people in rapid fashion. She was an inspired speaker, quoting legendary thinkers and leaving the audience wanting more and more.

Erika had decided to leave UBS and start something of her own. It was to be the UBS of sustainable investing. Sustainable investing had grown in fits and starts across the globe since at least the last 70s and in the early 2010s, the area grew in prominence, driven by a range of factors.

Sustainable investing, in Erika’s eyes, was the inclusion of Environmental, Social and Governance (ESG) factors into the investing process. It was not investing in projects or securities which delivered lower than market returns for impact. It was not a focus on screening out companies that were deemed unsustainable or clashed with a client’s morals. At the core of Erika’s proposition was that the inclusion of ESG factors was ‘better investing’. And when I heard her speak in October 2013, three months into my MBA at NYU Stern and six months before Cornerstone was fully formed, I was hooked. Here was a woman that spoke the language of finance and sustainability with ease. She pushed corporate executives from Fortune 500 companies on the connection between the long term viability of their business and the environmental and social issues. I remember thinking clearly ‘this woman will break down barriers’.

I joined Cornerstone 17 months later. In the meantime, I wrote sustainable investment e-books and won the Yale National Low Carbon Portfolio competition. Cornerstone, during that period, built preliminary groups in the different businesses of an investment bank dedicated to sustainable investing. There was an institutional research sales team, a research team and a rapidly emerging investment management group with a chief investment officers, portfolio managers and sales people. The mantra was that Cornerstone would hit the market with a total offering, mirroring the investment banks but for all things sustainable finance.

I joined in February 2015 and the firm were primarily finance industry professionals but a few people were doing jobs that heavily drew upon their previous positions. The remainder were in positions where every day was learning experience. Some people had to learn investment reporting from the ground up while others, having never worked in wealth management, were asked to source millions, if not billions, of investment management money. I joined the company in a similarly foreign role of research analyst.

From the moment I arrived, it was clear that this was a company in flux. I had never written investment research before I joined Cornerstone’s research team. I joined at a time when the team was doing what Erika had told us to do – write good research. We were given carte blanche to write what we wanted to write. Any topic, any take. It was a daunting but exciting prospect.. We began producing reports on income inequality, labor automation and the utilities sector to build our ‘research’ credentials.

Why did we become a major investment advisory firm? It is not blind luck to raise almost $1billion in assets from credible foundations and some of the most prestigious families in the US. We didn’t focus on value for money as we always priced at a premium. We didn’t have proprietary investment products that were unavailable elsewhere. I boil it down to a shared sensibility and high touch service of key clients. Credible sustainability oriented finance professionals led by the deeply passionate and effervescent Erika were able to build relationships with clients that were sick of existing wealth managers or had never had a wealth manager before. Research provided talking points and additional credibility but the core of the investment advisory success was personal relationships.

Much of modern finance focuses on performance and/or fees but our approach worked. Our clients were excited to join us. Our mission overlapped with their objectives. It was a masterclass in targeting an under-serviced group.