Joanna Klitzke, MBA-MS E-IPER 2021
Graduate Fellow,
SupplyShift
As a climate ally and supply chain nerd, working at SupplyShift this summer has been a fascinating dive into how to more quickly build greener, lower carbon operations as a part of our transition to a decarbonized economy. SupplyShift is a Series A climate software startup that helps large companies analyze their supply chains and engage the suppliers, factories, and farmers they buy from to track and improve sustainability performance.
The startup was co-founded by Alex and Jamie--two PhDs in Climate Science and Environmental Economics--to provide companies the ability to trace and tackle the disproportionate sustainability challenges and carbon emissions that occur within the many layers of their supply chains. Today, SupplyShift powers sustainability assessments for over 90,000 entities across 133 countries.
My role is focused on new product strategy and development, with my primary project being to support the team’s development of InvestShift, a new SaaS offering for Environmental-Social-Governance (ESG) measurement and management for private equity investors. Since it’s startup life, there is no typical day at SupplyShift, but I’ve spent the last few months fluctuating between conducting user insight calls, building global ESG standards into our product, advising on business development, analyzing the competitive landscape of green investing software, and discussing ideas with my team. I have also been a digital nomad, bouncing between working near campus one week and New York City the next.
The learning here is endless, but I have gained a few insights into the world of sustainable finance throughout my winding summer:
- The private market has a critical gap in green data - ESG data for investors is widely available for public companies because of greater market scrutiny, stronger reporting requirements, and a range of ESG ratings databases like MSCI and FTSE Russell scraping the plethora of public intel. On the private side, ESG data is infrequently reported and the data that is shared is unstandardized and at the discretion of company leadership.
- Investors do not consistently recognize the financial materiality of ESG risk data, but they should - The Morgan Stanley Institute found that sustainable funds outperformed peers throughout the pandemic, and NYU Stern’s meta-analysis of research on ESG and financial performance found positive correlations between ESG performance and operational efficiencies, stock performance and lower cost of capital. In other words, many ESG metrics provide investment insights that are financially material. Managing for a low carbon future is smart business and puts companies in a better position to take advantage of our transition to a decarbonized economy.
- For ESG reporting in private markets to accelerate, we need vocal LPs - In order to spur private equity investors to require portfolio company ESG reporting, we either need (1) stronger ESG reporting regulations or, (2) for those holding the capital to request ESG data from their funds. We need the endowments, family offices, and sovereign wealth funds, particularly anchor LPs like Stanford Endowment, to request ESG data like board diversity or management’s decarbonization plan, alongside financial metrics.
This summer, and frankly the past two years of graduate school, I have been on an academic investigation into all things climate on the hunt for where I fit in fighting climate change. I’ve explored wildfire risk tracking, textile recycling, and carbon dioxide removal technology. I’ve gone deep into reducing material carbon footprints by adding agricultural waste and feeding seaweed to cows to reduce methane. This summer with SupplyShift has been another incredible, fun step closer in my search!
ESG performance is financially significant: Analysis of more than 3,000 funds shows that U.S.-based sustainable equity funds outperformed their traditional peers by a median of 2.8 percentage points.
