From Brown to Green

The Milken Global Conference attracts A-list panelists and speakers like Tony Blair, Deepak Chopra, Matt Damon, Magic Johnson, Bob Iger, Les Moonves, Janet Napolitano, Hank Paulson, Leon Panetta, Sean Penn, T. Boone Pickens and Charlize Theron. It’s a crazy spectrum and the range of topics is no less broad.

But for every session on Redefining the Middle East, Global Capital or Entrepreneurial Leadership there’s a diamond in the rough. Like the breakout on impact investing. Every year Morgan Stanley challenges MBA students to come up with a compelling proposition that combines returns and growth with a passion for values.

Three students from Northwestern’s Kellogg School of Management emerged as the winners of the competition and pitched an investment opportunity called Fresh Coast Capital. It was a full-on dress rehearsal in front of a discerning audience.

Now, I worked several years for Swiss Re, an early adopter of sustainable business practices, so I’m drawn to anything that seeks to generate returns and leave the world a better place. However, I don’t claim to know much about environmental issues, so when the panelists begin throwing around the term “brownfields” I knew I was in for an education.

The concept behind Fresh Coast Capital is simple:

Step 1. Lease toxic land cheap

Step 2. Remediate land by planting poplar trees

Step 3. Sell the timber, pulp and paper

Step 4. Harvest and sell biomass for energy production

Step 5. Collect a percentage of land appreciation, or charge land owner for remediation services

Brownfields are prevalent – there are nearly 450,000 of them in the US, according to the GAO. Imagine the combined land area of 60 of our largest cities; that’s how much land we’re talking about. And the possibilities are limitless. Fresh Coast co-founder Nicole Chavas told of a site in Elkhart, Indiana – a vacant railroad roundhouse that today yields lumber for nearby manufacturing facilities, including the wood paneling in motor homes and RVs!

The genius in successful investing is diversification, and investors of a large scale (e.g. pension funds, insurance companies) are always looking for instruments that aren’t correlated with the rest of their portfolio. If I were in their shoes I’d kick the tires on this one.

Watch the session.