Q&A with Tim Dunn of Terra Alpha

Written by Will Thompson

Photos by Callie Broaddus

Amid the inundation of reports on climate change, deforestation, and an unsustainable demand on freshwater, it can seem like nearly every day, we’re confronted with the overwhelming reality of dire environmental challenges. Challenges of such scale and complexity that the day’s headlines can leave us feeling powerless, as if any effort we could make would be a negligible drop in the bucket.

Not so, says Tim Dunn, CFA, a resident of The Plains and managing partner and chief investment officer at Terra Alpha Investments. Terra Alpha is an investment management firm working with accredited investors to profitably support corporations who are advancing sustainability. I sat down with Dunn to learn more about Terra Alpha, its approach to sustainable investment, and how the biggest impact that we can have globally may be through our investment portfolio.

*Tim Dunn, Terra Alpha’s managing partner and chief investment officer.*

ML: To start, what is Terra Alpha?

TD: Terra Alpha is an investment management firm. We manage money on behalf of accredited individuals, foundations, and endowments by investing in large, publicly traded companies around the world who we see as profitably leading a transition to a truly sustainable world. We define a sustainable world as having an economy that serves the real needs of society and operates within the regenerative boundaries of our planet’s natural resources. We’re interested in investing in companies that will grow revenues and profits in the long term and that provide services that benefit their customers, which is what makes a good business.

ML: Why does this matter? Why only invest in companies that are leading this transition?

TD: We as humans are overusing our planet’s resources to a degree of nearly 80%. So we would almost need two planets to handle the demand that we’re placing on our resources today. And it’s getting worse. That has implications that are starting to rebound back to us including climate change, water stress, massive soil erosion, deforestation, and impact on oceans and biodiversity. This system is in our control though because we created the economy that has created this demand to serve our needs. We all have different ways that we either benefit or hurt the environment. But we all need the environment. We need clean air. We need clean water. We need soil to grow the hay that our horses eat and the trees that have birds in them. And we want to hike through them. But there’s only so much you can do as a consumer in terms of your purchasing decisions and habits. Part of our mandate as a firm is to help people to recognize that their investment portfolio is likely to be the way that they have the biggest possibility of impacting the world, positively or negatively. By investing, we all provide companies with capital and those companies are doing things with that capital that are either having a positive or negative impact.

ML: The consequences of human behavior are negative, but if they don’t affect me directly, why should I care?

TD: Most people in their 50s, 60s, or 70s probably won’t see dramatic impact during their lifetimes, especially living in the Piedmont region of Virginia. But the world will see the impact. It’s already happening, and it will have implications for them in different ways. We’re seeing a growing number of major storms which are affecting areas including the Piedmont and growing levels of heat waves, to the point that they are actually attributed to more deaths on a planetary level than hurricanes and typhoons combined. The ramifications for anyone who thinks about broader issues for society and the world are clear. And everyone has a responsibility to address them. We all want to see people, not take blame for the status of our environmental state, but understand it and take some ownership of their own role in it. And then work together to solve it. We’d like to get people thinking positively about what they can actually do about it.

ML: Is it profitable to invest sustainably? Does adopting positive sustainable practices need to come with a commensurate loss – in efficiency, productivity, or even profit?

TD: We were formed to deliver on the idea that you can invest in a way that generates the financial returns you need, as well as make a positive impact on the environment and society. The reality is that the economy is going to be facing significant changes as we globally adjust to the new environmental realities. This will have huge implications for the success of individual companies and sectors. So as we all develop a new economy that is more renewable and less reliant on fossil fuels, that will have profound impacts that ripple through sectors across the globe from banking, to oil and gas companies, to packaging material companies, to cars… to everything. So if someone is not thinking about sustainability as they’re thinking about investing, they’re putting their portfolio opportunities at risk and probably not maximizing their long term profitability. Everyone can use their portfolio to both support their financial needs as well as their broader human needs. Even if someone feels that they don’t have any responsibility for our environmental state, it will impact their investments. It already has. But, this impact can be positive for your portfolio and for the planet.

*Tim Dunn chats with Delaplane native, Nathaniel Schwartz, who has been with Terra Alpha for five years.*

ML: Would you define what you do as impact investing, or is it more like hedging for these changes?

TD: We definitely feel that we as a firm are having a significant impact. This is in terms of our portfolio, but we also engage with companies very actively to push them to improve on sustainability and disclosure. And we do a lot of thought leadership to broaden this message beyond the companies that we invest in, and to reach other investors and asset owners to build interest in actively having an impact with their investment. We’ve seen many examples of very large companies in the United States and internationally who have actually taken steps to improve their sustainability and disclosure of environmental impacts partially because of our encouragement. We help corporations realize that doing so will make them stronger.

ML: Terra Alpha is employee and investor owned. What does that mean?

TD: We wanted all of our employees to be partial owners so that they all benefit from our success. Some of our investors have also chosen to support the firm by investing directly in it. So we are all in on what we’re doing. We see these environmental challenges as being the issues of the day that are going to affect the world and the investment community for decades ahead. We’re going to make sure that we stay 100% focused on investing in sustainable strategies and by being the owners of the business, we control that. We’re committed to the process.

ML: Are you hopeful for the future?

TD: I am. The future will look different than today in ways that are good in most cases. But let’s not sugarcoat this, we’re going to see some significant impacts. But we’ve shown how resilient we can be as a society and I think the sooner we can be prepared for those changes, the better. There is serious effort happening within the corporate world to change how companies operate. We need to be more supportive of those efforts if we’re going to have them happen in the timeline that we need them to. If we don’t move more rapidly, it will be a lot less of a positive future. These environmental impacts are coming whether we decide to do something about them or not. How much of an impact this will have and what impact it will have is completely up to us. We can use this moment as an opportunity to have a better future. It will just take some better understanding and yes, some investment now. ML

This article first appeared in the April 2022 Issue.