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A Winemaker Confronts the ESG Market. Will He Succeed?

Kevin Parker's Sustainable Insight Capital Management must persuade critics that it can do what so many others have failed at: doing well by doing good. 

Kevin Parker’s career as a biodynamic winemaker did not get off to a promising start. Shortly after he purchased Chateau Maris, in France’s Languedoc region, in 1997, local vineyard owners, fearful that grapes grown without chemical agents would hurt their own crops, nailed a bloody sheep’s head to his door and made threatening phone calls.

Undeterred, the American sought advice from industry legend Anne-Claude Leflaive, a biodynamic pioneer in the vaunted Burgundy region. Today most of the best Bordeaux and Burgundies are biodynamically farmed — a little-known fact outside the world of winemaking, Parker explains.

A longtime equity derivatives trader and asset management executive who spent years at Deutsche Bank before co-founding his own equity investment firm, Sustainable Insight Capital Management, Parker has faced similar, albeit less bloody, obstacles in his day job. Like biodynamic winemaking, so-called ESG investing — the practice of making investments that adhere to environmental, social responsibility, and corporate governance principles — is often met with skepticism.

“The conventional wisdom in the asset management world is that you must give up returns in order to invest sustainably and responsibly,” says Parker. “The wine world shares much the same view — that you give up taste and quality by buying organic wine. It turns out that both of these notions are generally wrong.”

I arrived at Sustainable Insight’s offices, on the 12th floor of an office building in Manhattan’s Flatiron neighborhood, on a chilly evening a few days before Christmas, just as the last of the dim winter sunlight was flickering out. The firm’s 14 employees had left for the day, and Parker was preparing a tasting of wines from Chateau Maris, which he co-owns with Robert Eden, a nephew of former British prime minister Anthony Eden.

Tall, with graying hair, Parker, 57, has the air of a Wall Street financier but the business-casual attire one would expect of a sustainable-­investment executive. That winter day he sported a blue-checked button-­down shirt, a brown plaid wool jacket, and khaki slacks. As he prepared to share his wines, lined up on a high-top table adjacent to the small kitchen in his whitewashed, open-plan workspace, he described the course of his career.

Parker got his start in equity derivatives during a seven-year stint at Morgan Stanley’s Tokyo office. In 1993, at the request of the firm’s then-­president, John Mack, Parker took a detour to serve as chief information officer back in the U.S., where he rolled out distributed computing and all of the firm’s global trading applications. “We were the first firm in the world to have a fully functional global intranet operating,” he says proudly of his days in IT. Despite that accomplishment, Parker yearned to return to his roots.“It was a fun time, but by ’97 I wanted to get back to the business side.”

He began running Deutsche Bank’s equity derivatives business in 1997 — the same year he bought Chateau Maris — building out the bank’s prime brokerage and proprietary trading businesses. He rose to global head of institutional equities in 2000. Four years later he was named global head of Deutsche Asset Management.

That same year Chateau Maris was certified chemical-free. Parker had spent years converting the property from a traditional vineyard — in France such vineyards are permitted to use 65 different chemicals — to a biodynamic one.

At our December tasting the first wine is a 2010 Oeuf Neuf (“egg nine”), made from Grenache grapes. The cement fermentation tanks that hold the wine are egg-shaped, and the wine is aged for 999 days. Parker, who enjoys numbers, tells me that he made 999 bottles of this wine.

“We’re putting all of our wines in the eggs now for some period of time because of the effect it’s having on the wines,” he says. I am delighted by the rich, Rhône-like quality of the Oeuf Neuf, with notes of red cherry and dark chocolate. Parker is clearly pleased. “If you want to make a wine that has universal appeal,” he says, “you search for elegance in the glass and that soft, subtle feel in the mouth.”

Parker’s work as a biodynamic winemaker spurred his interest in sustainable investing; he launched DB Climate Change Advisors at Deutsche Asset Management in 2006, appointing Mark Fulton as global head of climate change investment research and Bruce Kahn as director and senior investment analyst.

In 2013 they opened their own shop, with seed capital from Capricorn investment Group, the family office of Jeff Skoll, who was the second employee at eBay. (Skoll’s movie company, Participant Media, produced Al Gore’s documentary on climate change, An Inconvenient Truth.) Sustainable Insight Capital has since attracted an investment from the Kresge Foundation, whose CIO, Robert Manilla, sits on its board.

The second wine of the evening, a 2012 Les Planels, is made mostly from Syrah grapes, which along with Grenache are the two leading grapes of the Languedoc region. It has the spicy, peppery flavor typical of the grape but feels softer in the mouth than most Syrahs. With a 93-point rating, it’s a bargain at $25 retail.

Not unlike the challenges he encountered when starting a biodynamic vineyard, Parker is facing major headwinds in growing his investment firm, which manages $330 million in assets. Not only does his firm have to contend with the stigma surrounding the return potential of ESG investments, it is an active manager at a time when passive management is king.

“I honestly believed we were going to have more assets on the platform by now,” Parker admits, acknowledging the mass migration to passive investing. “ESG or no ESG, the world doesn’t need another long-only asset manager who can’t add value. We must have something that we know is going in the bottle, that over the long term is going to differentiate us. Otherwise we’d be crazy.”

There’s a lot going on in our final bottle of the evening, a 2011 Les Amandiers. The well-balanced wine is aged in new oak barrels and sold in a heavy bottle that befits its top-of-the-line status. It’s a dark, rich wine, still young; despite its eminent potability this evening, it could benefit from five more years in the bottle to integrate the oakiness.

As he packs up samples for me to take home, Parker says he is “very confident” of his firm’s position. Perhaps that confidence stems in part from his success in overcoming the early trials of Chateau Maris. It’s hard to imagine a more stubborn group than French grape farmers, but ten years later all those hostile neighbors have converted their own vineyards to biodynamic farming. And the investor’s wines have won accolades. “Wine Spectator magazine in 2005 named us the 59th best wine in the world,” Parker notes.

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