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In Conversation With Colin le Duc of Generation Investment Management and Ian Yolles of Recyclebank

Written by BSR
Published: November 3, 2011

Speakers

 

  • Ian Yolles, Chief Sustainability Officer, Recyclebank
  • Colin le Duc, Partner, Generation Investment Management
  • Joel Makower, Chairman and Executive Editor, GreenBiz Group, Inc. (Moderator)

 

Highlights

 

  • Sustainable investing is moving into the mainstream, which requires changing incentives and thinking long term about business success.
  • Consumers will respond to positive incentives—either financial or related to enhancing their social status—more than ethical appeals to do the right thing.
  • Consumer behavior-change campaigns and social media platforms that include offline, “real-world” connections are more sustainable than those that only exist online.

 

Memorable Quotes

 

“We were focused at first on providing financial incentives to motivate consumers. However, different people are motivated in different ways. We’re now experimenting with social currency and information currency to motivate behavioral change.” —Ian Yolles, Recyclebank

“Our investments try to distinguish between companies that are genuinely sustainable over the long term versus those that are not.” —Colin le Duc, Generation Investment Management

“Sustainability succeeds only as long as it means ‘better,’ however you define that. Some clean technologies haven’t been ‘better,’ either because they have been more costly, or for other reasons.” —Joel Makower, Chairman and Executive Editor, GreenBiz Group Inc.

 

Overview

 

Le Duc began the discussion reflecting on Al Gore’s message from the previous day on the importance of passion in the field of sustainable development, and his own passion for long-term sustainable investment. Le Duc described Generation Investment Management’s focus on investing in businesses that are going to be relevant to future generations and successful over the long term. Moreover, the company’s approach is intended to professionalize sustainable investing and to bring it into the mainstream of the financial sector.

Further, le Duc outlined Generation Investment Management’s strategy to buy and hold ownership of companies that provide solutions to climate change and that have integrated sustainability fully into their business models. Fundamentally, Generation Investment Management intends to correct misalignment of incentives within companies, and also between companies and the financial sector, therefore aiding the transition to a sustainable economy.

As an example, le Duc provided more detail about the reasoning behind his firm’s investment in Recyclebank, which provides consumers with redeemable points for their everyday activities that result in reduced environmental impacts, such as recycling household goods and reducing energy usage. In le Duc’s words, Recyclebank “provides incentives to consumers for ‘green’ behavior, and it acts as a ‘green’ currency.” Because the company was doing what no other company was doing, Generation Investment Management idenitified it as a key target for investment.

To further elaborate on Recyclebank’s business model, Yolles explained the evolution of Recyclebank’s activities. At first the company attached RFID chips and scales to households’ recycling containers, which enabled waste-management utilities to track the extent of households’ recycling. In turn, tracking this data enabled the awarding of points, which consumers could redeem at local businesses. In this way, consumers were rewarded for green behavior, and local businesses saw an uptick in their sales.

Following the success of this line of business, Yolles continued, Recyclebank expanded to offer incentives for a wider range of green behaviors. For example, in London, consumers can opt in to a GPS tracking application that rewards them for walking or using mass transit to commute. Yolles described the company’s vision: “The ambition is to build the first authentic mass green brand. We can appeal to a mainstream audience and help influence their behavior.”

Yolles and le Duc then discussed how the understanding of what influences consumers is evolving. For example, financial “carrots” using social currency, such as awarding status badges or establishing leader boards that spotlight top performers, is a powerful way of motivating behavior change.

Makower then brought the discussion back to the question of investment and what long-term, sustainability-conscious investors want as outcomes. From the Generation Investment Management perspective, le Duc explained, they look for low-risk investments that offer a large potential for return from new markets that have sustainability at their core. For Recyclebank, Yolles described a changing landscape from which he hoped Recyclebank would prosper; namely, that more and more companies will seek to engage their consumers, to inspire them, and to assist them in making more sustainable choices and to exhibit more sustainable behaviors.

During the Q&A session, Conrad McKerron from As You Sow, asked about how Recyclebank addresses systems where there are components beyond the companies’ control. He used the example of municipal recycling and pointed out that in many communities curbside pickup of recycled bottles and cans is not an option.

Both le Duc and Yolles responded that it is critical for businesses to make sure the systems that support their activities and consumers “greener” behaviors are in place to ensure long-term success. They pointed to efforts like Gazelle, which encourages consumers to return used products to retailers, and Harvest Power, which generates compost and fuel from food waste, as good examples.

The session wound down with a question about how the speakers value companies that are innovative and sustainable. Yolles answered that for well-developed businesses, their valuation is based on financial information, while for new companies, they ask three basic questions:

 

  • Is the market big?
  • Is the management team excellent?
  • Is there a strong business model?

 

Le Duc closed the session with a story about a business owner who brings his son to look out over the vista of a polluted industrial landscape, and then tells him that he can achieve success by being rich or by being proud of himself. Makower noted that those who can do both will be the winners of sustainability.

You can also read this session summary over at BSR.

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Recyclebank At A Glance

Headquarters
New York

Offices
New York, Philadelphia and Houston

CEO
Javier Flaim

Founded
2004

Investors
The Coca-Cola Company, Craton Equity Partners, Generation Investment Management, Kleiner Perkins Caufield & Byers, Paul Capital Investments, Physic Ventures, RRE Ventures LLC, Sigma Partners, Waste Management Inc., and Westly Group

Members
4 Million+

Communities
300+ in all 50 states

Reward Partners
4,000+

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