UPFRONt
“When carbon emissions
have a price tag attached, from
a risk management perspective,
investing in carbon management software is going to be
essential, particularly for firms
with revenue above $2 billion,”
says David Metcalfe, a director
at London-based research firm
Verdantix. In an October report, Verdantix warned against
using standard spreadsheet
programs for tracking emission
levels across multiple locations
and company divisions. The
report highlighted six vendors –
Enablon, Enviance, ESS, Hara,
IHS and ProcessMAP – offering more suitable, specialized
tools, some having evolved out
of environmental auditing and
compliance. It also listed well-known names CA, SAP and
SAS among the innovative challengers.
Companies will “need software that is built by people with
deep domain expertise in emissions, who are grounded in the
physics and chemistry of GHG
emissions and, ideally, have
been doing this sort of thing for
the past 10 years, as we have,”
says Lawrence Goldenhersh,
founder and CEO of Carlsbad,
California-based Enviance,
which recently added the U.S.
Army as a client.
“It’s not enough just to be a
software vendor in this space,”
says Michael Meehan, president
and CEO of San Francisco’s
Carbonetworks. “We also help
firms understand what they
need to do and then actually
connect them with a network of
companies in 40 countries that
can provide them with carbon
reduction solutions.”
Endowments Raise
Their Tech Ante
By lisa tiBBitts
If recent sales of FinAnalytica are any indication, demand
for risk management tools is
picking up among institutional
investors, including university
endowments intent on getting a
better in-house handle on risk.
After relying on “risk estimates
as a check-box tool to see whether certain limits were breached,
they have started to think more
about risk and the fact that it
should become a real component in the decision-making
process when rebalancing portfolios,” says Boryana Racheva-Iotova, president of New York-headquartered FinAnalytica.
Of six recently added users of
the company’s risk management
and portfolio allocation software, two are university endowments. One is the University of
Washington (UW) in Seattle. Its
consolidated endowment fund
(CEF) stood at $2.161 billion as
of June 30, 2008, and its one-year return on investment was
1.9%, according to the most recent annual report prepared by
the treasury office responsible
for the fund’s administration.
Nationally, endowments lost
an average 3% for the fiscal year
ending June 30, 2008, according
to a study by the National Association of College and University Business Officers and Commonfund Institute, and some of
the biggest university endowments have reported subsequent
declines well into double digits.
David Merrill
A succession of losses “
undoubtedly will have adverse effects on
endowment spending rates and,
ultimately, on institutional budgets,” the report said. Funds that
in recent years raised their positions in alternative investments
tives, or “an investment strategy
which focuses predominantly on
insulating the investor to some
extent during declining markets
while enhancing overall portfolio returns over complete market cycles.” Moreover, 14% is
non-marketable alternatives, or
“higher risk investments, generally held in limited partnerships,
with the potential for significantly higher returns.”
Traditionally, endowments
relied on consultants that “were
focused primarily on helping
with portfolio construction, but
not on making risk management
an active part of that process,”
says David Merrill, chief executive officer of privately held
FinAnalytica, which is known for
taking extreme “fat-tail” events
into account in its portfolio analysis methodology. “Now endowments can be more proactive in
managing their selections. They
want more timely analytics as
well as more control.”
FinAnalytica had a personal
connection to the UW sale: R.
Funds are rethinking strategies and
seeking new and better risk tools.
are rethinking their strategies,
seeking new and better risk tools
and perhaps becoming more
transparent in the process.
UW’s CEF, which like many
university endowments is selective in revealing portfolio details,
gives its general breakdown as
76% equities, 9% fixed income
and 15% real assets, which
consist of real estate, natural
resources and “inflation protection vehicles.” But a fifth of
the fund is marketable alterna-
Douglas Martin, who co-founded the software provider with
Racheva-Iotova in 2003, served
as chairman and CEO until earlier this year, when he returned
to the university as a professor
of statistics. Also in the latest
group taking up the technology
are undisclosed pension funds
and funds of hedge funds. One
of the latter is in Hong Kong,
FinAnalytica’s first client in
Asia, where Merrill says a sales
force will be in place in 2010.
