Former UBS Banker Wants to 'Accelerate the Velocity of Money'
While activists and industry compete for the president's ear over fracking or the oil sands pipeline, while courts clear the books of laws preventing marriage equality, some financial professionals say markets can steer the world toward a cleaner, more equitable, healthier and more profitable future.
Erika Karp, who recently left her post as head of global sector research at UBS, on Friday launched a new company, Cornerstone Capital Inc., designed to work toward that goal. The company has several missions, which include helping small and medium-size businesses access capital more reliably, and advocating for the inclusion of environmental, social and governance (ESG) data into investment analysis.
Cornerstone wants to "accelerate the velocity of money," Karp said. "What is finance supposed to do? It's supposed to make capital available, and once you do that, theoretically there should be a multiplier effect in the economy. We don't have money moving fast enough."
The idea for Cornerstone came in part out of Karp's work on the World Economic Forum's Global Agenda Council on Financing and Capital, she said, a group that "seeks to address how capital/financing can be allocated in line with economic growth and minimal adverse effects," particularly as it relates to small and medium-sized enterprises, according to its website.
Karp's work at Cornerstone, a Delaware C corporation, will at first focus on advice and consulting for corporations and financial institutions that are articulating their own sustainability strategies. In this sense, Karp will be participating in what James Gifford, executive director of the Principles for Responsible Investment Initiative, a United Nations-backed group that encourages sustainable investing, recently called for as the need for "awareness-raising through thousands of conversations" about the way that ESG factors are changing investment and corporate leadership.
Cornerstone's ambition is to build a business model based on a service that investment banks provide their clients, called capital introductions, Karp says. Banks perform capital introductions — connecting investors with asset managers, often hedge funds trying to raise money. "That's where we're kind of creating a new business model, which is fee-based capital introductions," she said. "And then, that is arguably infinitely scalable." It's also regulated, so Karp is seeking appropriate licensing for Cornerstone Capital.
Karp, 49, will be chief executive officer of Cornerstone, overseeing a small staff. Chairman of its board of directors will be Derek Yach, senior vice president of the Vitality Group, a subsidiary of Discovery Holdings that offers programs in health and wellness to U.S. companies. The new company will also have an advisory network made up of dozens of market specialists from around the world.
Many can attest that bringing sustainability to Wall Street is as difficult as, well, bringing any sort of change to Wall Street. Karp pushed UBS on these issues, according to Mindy Lubber, president of Ceres, an NGO that works with investors and businesses on issues that include climate change, water, working conditions and others.
"We worked closely with her at UBS and I think she was a force there in moving a large international bank, and was frankly the engine on these issues and I hope they continue," Lubber said.
Karp traces her love of finance and markets back to the age of five, when she was given a belt-fastened coin-dispenser. The creative spirit of that five-year-old ultimately pulled her from UBS. "I left for the unbridled pursuit of a more sustainable form of capitalism," she said in an email.
Advocacy for a cleaner environment, social equity and good governance is maturing amid what Karp called "the most massive intergenerational transfer of wealth the world has ever seen." The next generation of billionaires are demanding competitive returns on their investments — and positive impacts on society.
"They're very conscious, and they're not naive about that," Karp says. "And I think it's doable."
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