Generation Investment Management: A Guide To Getting Started

Generation Investment Management is a private equity firm founded in 2004 by former US Vice President Al Gore and David Blood, former head of Goldman Sachs Asset Management. The firm is headquartered in London, with an additional office in San Francisco. Generation Investment Management exclusively advises institutional clients, including investment companies, pension plans, and charitable organizations. The firm integrates sustainability research with traditional financial analysis to identify companies that will drive the transition to a more sustainable economy. Its investment strategies include Global Equity, Asia Equity, Growth Equity, and Private Equity. Individuals can invest with the firm through its pooled investment vehicles, with minimum investment requirements ranging from $1 million to $3 million.

Long-term investment focus

Generation Investment Management is a pure-play sustainable investment manager, with a long-term perspective. The company integrates sustainability research within a rigorous framework of traditional financial analysis. Generation's flagship Global Equity Fund has a long-term time horizon, aiming to invest in companies with quality management teams and sustainable business strategies. This long-term focus allows analysts to gain a deep understanding of how these companies work and make informed investment choices.

Generation's long-term investment strategy is exemplified by its Global Equity and Asia Equity funds. The Global Equity fund takes a concentrated approach, investing in a select group of companies globally. The Asia Equity fund employs similar strategies, focusing on equities in Asia. The organisation of the investing teams allows both funds to cross-pollinate ideas and leverage their collective insights. This structure enables Generation to make informed investment decisions and effectively manage risk.

Generation's long-term perspective is also evident in its Growth Equity strategy, which focuses on investing in growth-stage businesses with proven technology. The company seeks to identify companies at the forefront of the transition to a sustainable economy, demonstrating its commitment to sustainability and long-term value creation. The Growth Equity fund is a closed fund, not actively marketed, further emphasising its long-term approach.

Generation's long-term investment focus is further demonstrated by its commitment to sustainability and measuring the impact of its investments. The company integrates sustainability into its investment process and aims to raise the bar for the investment management sector. Generation believes in the importance of measuring, improving, and communicating the climate, nature, and well-being impacts of its investments. This commitment to sustainability aligns with the company's vision of a sustainable world, shared prosperity, and a habitable climate.

Sustainability research

Generation Investment Management is a pure-play sustainable investment manager. The company integrates sustainability research within a rigorous framework of traditional financial analysis. It operates four complementary strategies investing across public and private equity: Global Equity, Asia Equity, Growth Equity, and Private Equity.

Generation Investment Management's approach to sustainability research is evident in its Sustainability and Impact Reports. These reports outline the company's commitment to measuring, improving, and communicating the climate, nature, and well-being impacts of its investments. The reports also showcase the company's progress and performance in these areas.

The company's sustainability research is guided by its system positive thesis, which involves investing in companies that contribute to specific global outcomes. Generation Investment Management's three outcomes domains are Planetary Health, People Health, and Financial Inclusion. The company believes that these outcomes are interrelated, and this understanding informs its investment research and evaluation.

Generation Investment Management's sustainability research process involves selecting at least one 'North Star' impact metric to measure each business's contribution to its goals. The company also reports on outcomes mapped to the UN Sustainable Development Goals (SDGs) and core ESG performance metrics. Additionally, they conduct social outcomes benchmarking using beneficiary surveys and analyse the total environmental impact of their investments through Life Cycle Assessments (LCA).

The company also utilises the Impact Management Project (IMP) framework to analyse its businesses' overall contribution and risks to impact. Furthermore, Generation Investment Management has committed to aligning its portfolio to net zero by 2040 or sooner by engaging its portfolio in reporting aligned with the Task Force on Climate-related Financial Disclosures (TCFD) and setting Science-Based Targets (SBT).

Generation Investment Management's sustainability research is an integral part of its investment process. The company aims to raise the bar for sustainability in the investment management sector and beyond. By sharing its insights and research, Generation Investment Management hopes to advance its mission of creating a sustainable future.

Client alignment

Generation Investment Management is a financial advisor firm that exclusively advises institutional clients and individuals through its pooled investment vehicles. The firm integrates sustainability analysis into its investment process and has a long-term perspective.

• Understanding Client Objectives: Generation Investment Management should take the time to understand the unique objectives, time horizons, and risk management approaches of each client. By doing so, they can tailor their investment strategies to meet the specific needs and goals of their clients.
• Transparent Compensation Structures: Compensation structures can often create a conflict of interest between investment managers and their clients. Generation Investment Management should ensure that their clients fully understand how their investment managers are compensated. This transparency helps clients make informed decisions and ensures that the investment recommendations are aligned with their best interests.
• Long-Term Focus: Generation Investment Management should emphasize a long-term perspective in their investment strategies. This approach aligns with the firm's sustainability focus and helps avoid the pitfalls of short-term, transaction-based revenue targets that may not be in the client's best interest.
• Risk Management: Effective risk management is crucial for client alignment. Generation Investment Management should consider the relationship between investment portfolios and the client's principal business to avoid concentration risk. They should also provide clients with access to private direct investments, which can be more strategic and better aligned with the client's overall business goals.
• Customized Portfolios: Generation Investment Management should utilize their open-architecture approach to manager selection and develop customized portfolios for each client. By doing so, they can ensure that the investment strategies are tailored to meet the specific needs and objectives of each client.
• Good Governance: Generation Investment Management should prioritize good governance, transparency, and collaboration in their client relationships. This includes regularly reviewing long-term asset allocation, engaging with donors, and documenting investment beliefs.

By focusing on client alignment, Generation Investment Management can ensure that their investment strategies are tailored to meet the unique needs and objectives of their clients, ultimately helping them achieve their financial goals while also prioritizing sustainability and long-term growth.

Global research platform

A global research platform is a critical tool for any investor looking to navigate the complex world of Generation Investment Management. This platform provides access to a wealth of information and insights from around the world, helping investors make more informed decisions. Here's how you can utilize this platform to your advantage when investing in Generation Investment Management:

Access a Wide Range of Information:

• Market Data and News: Stay informed about the latest economic indicators, market trends, and news from around the globe. This includes real-time data on stock prices, currency exchange rates, commodity prices, and economic announcements. Keep yourself updated with Generation Investment Management-specific news and analysis, ensuring you're aware of any strategic updates, fund performance reports, and thought leadership pieces they publish.
• Research Reports and Analyses: Utilize in-depth research reports and analyses produced by leading investment banks, brokerage firms, and independent research providers. These reports offer valuable insights into specific industries, markets, and companies, helping you evaluate potential investment opportunities within the realm of Generation Investment Management.
• Company Filings and Financials: Review company filings, annual reports, and financial statements to assess the financial health and performance of prospective investments. This includes analyzing key metrics, revenue growth, profitability, debt levels, and cash flow statements.

Gain Insights and Identify Trends:

• Analyst Opinions and Recommendations: Consider the opinions and recommendations of industry analysts who cover Generation Investment Management. Their insights can help you understand the competitive landscape, identify potential risks and rewards, and make more informed investment decisions.
• Industry and Sector Analyses: Deepen your understanding of specific industries and sectors relevant to Generation Investment Management. Look for trends, emerging technologies, regulatory changes, and competitive dynamics that could impact your investments.
• Market Commentary and Thought Leadership: Stay abreast of market commentary and thought leadership pieces from respected economists, investment strategists, and industry experts. This can help you identify emerging global trends, assess geopolitical risks, and gain a broader perspective on the investment landscape.

Utilize Tools and Features:

• Data Visualization and Analytics: Leverage data visualization tools, such as charts, graphs, and heat maps, to identify patterns and trends in financial data. These visual representations can help you grasp complex information more easily and make more intuitive investment decisions.
• Customizable Alerts and Notifications: Set up customizable alerts and notifications to stay proactive informed about specific market movements, price targets, news related to Generation Investment Management, or updates from key companies within their portfolio.
• Investment Screening and Idea Generation: Use the platform's screening tools to identify potential investment opportunities that align with Generation Investment Management's strategies. You can screen for companies based on financial metrics, growth potential, sustainability practices, or other criteria important to you.

Stay Informed and Adapt:

• Regularly Review Market Insights: Dedicate time to review market insights and updates, especially before making any investment decisions. Stay open to adjusting your investment strategy based on changing market conditions and new information.
• Monitor Portfolio Performance: Utilize the global research platform to monitor the performance of your investments in Generation Investment Management. Regularly review financial metrics, compare performance against relevant benchmarks, and assess the impact of market events on your portfolio.
• Stay Agile and Seize Opportunities: The global investment landscape can be dynamic and unpredictable. Stay agile and be prepared to act on new information and investment opportunities as they arise. The ability to adapt your investment strategy based on global research insights can set you apart as an investor.

Sustainable capitalism

• Address stranded asset risk: The potential impact of climate change on asset pricing is significant. Investors need to consider the eventual pricing of CO2 emissions and the risk of catastrophic outcomes, which will negatively affect stock prices in industries such as utilities, mining, transportation, chemicals, and fossil fuels.
• Embrace integrated reporting: Combine financial and non-financial information to provide a holistic view of how investments create value. This includes connecting an organisation's capital resources (physical, natural, financial, and human) to its outcomes (products, services, financial returns, and externalities).
• Stop providing quarterly earnings guidance: This practice encourages short-term management and trading rather than a focus on long-term value creation.
• Re-think executive compensation structures: Executive compensation should be aligned with long-term sustainable performance to promote a long-term wealth-creation mindset.
• Promote constructive investor behaviour: Long-term shareholders should be rewarded with extra voting rights or extra dividends to encourage loyalty.

Generation Investment Management's approach to sustainable capitalism involves taking a long-term perspective and fully integrating sustainability research within a rigorous framework of traditional financial analysis. They operate four complementary strategies: Global Equity, Asia Equity, Growth Equity, and Private Equity. Their mission is to create an economic system that can better serve the world and support prosperity and sustainability for future generations.

Frequently asked questions