Prof. Britt Harris and His Army of Investing Titans

“This is 21 Jump Street. Try to fit in.”

That is the advice—make like an undercover cop in college—I get from Komson Silapachai, investment manager at Teacher Retirement System of Texas, as we walk into my first class since graduating two and a half years ago. Too late: My grown-up pants and audio recorder give me away.

The course: Titans of Investing at Texas A&M University’s Mays Business School. The lesson: “The rise of the energy complex and transformative business practices.” The professor: Britt Harris, Texas Teachers CIO and most certainly a titan of investing.

So what would college students know about energy investing and why would they even be interested?

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Only five minutes into the class—packed with 19 students, five alumni, and a professional videographer—and I’m proven wrong, wrong, wrong. One class-wide “Howdy” and an opening piano act later, the Aggies get deep in the weeds of Fed Chair Janet Yellen’s views on interest rates and emerging markets’ October currency rally. Their slides would please a Goldman managing director; Silapachai and I stare at each other in awe. (In college, my understanding of currency was the $4 in my wallet.) We’re taken through the Kremlin’s response to the Ukraine bailout and demographic implications of China revoking the one-child policy, only to land on the philosophical question: “How much is enough?”

Art by Kyle T WeberThis is Britt Harris’ class, after all. After quoting British philosopher Bertrand Russell, the Texas Teachers CIO alights the podium for a lesson on his five treasured F’s: Faith, family, friends, fitness, and finance. “I’ve had the fortune to make more money than expected,” Harris begins. CIO’s 2013 Lifetime Achievement honoree spent much of his career in corporate pensions, had a brief stint at Bridgewater Associates, and is now eight years into his tenure at Texas Teachers.

“How much is enough? Money is a wonderful servant, but a ruthless master,” he cautions. “When I asked other wealthy people how much was ‘enough,’ they all looked like deer in headlights. They said, ‘It must be more than what I have now. I feel like I have to make more.’”

That was a tipping point for Harris. When he joined Bridgewater in 2004, he felt he had reached the end of his professional Act I, and was entering the second. His life was no longer about succeeding. Rather, lasting significance was the goal. This realization ushered a move back to Texas, his home state, and to A&M, his alma mater.

“I didn’t want to teach a class that already existed,” Harris says. “This class is about investing, but also a lot about wisdom. I want these students to become fully engaged humans when they go out into their professional fields. Even our selection process takes that into account. To become a Titan, students must have the potential to become successful early on in their careers, be likely to use that success to do something good, be an interesting person, and like to eat.”

Titans delve into the nitty-gritty of finance, investing, and business—What is a hedge fund? How has horizontal drilling changed oil markets over the last decade?—but also hear about life as an analyst on the hallowed floors of JP Morgan and Goldman Sachs. Younger alumni return as guest speakers. They too offer guidance, advising current Titans to “be deep learners, and manage your expectations. You will be working 14- or 15-hour days, mainly to make your boss look good. But always think critically about your projects. You should be prepared to have an opinion, in the one-in-a-million chance that your boss asks you for it.” Legends such as Bridgewater’s Co-CIO Bob Prince and Oaktree Capital’s Co-Founder Howard Marks have also visited College Station to impart wisdom.

One decade and 300 Titans later, the program is thriving. Titan graduates can be found at private equity firms (KKR, Blackstone), consulting firms (Bain, Deloitte), investment banks (JP Morgan, Barclays), and businesses all over the world. Harris recruits interns and investment staff for Texas Teachers from Titans. (For instance, my host Komson Silapachai was Titans III). Harris’ two sons belonged to Titans Classes XI and VI. “We’re not Harvard,” the professor acknowledges. “A&M didn’t always have a strong connection to finance. But now, I’m proud to say Titans have made it into some of the most exclusive institutions.”

The formal section of the class winds down after Harris’ lesson on the differing levels of knowledge (simplicity, complexity, despair, and arrogance). Next on the Titan agenda: Fajitas at the CIO’s house on the edge of campus. Sitting around the fire pit outside, Harris banters about oil, the next Aggies football game, and an upcoming Titans reunion dinner in Houston. It’s clear he’s not the only investing heavyweight warming by the flames—just the most experienced.

“You can tell this is what makes him happy,” Silapachai reflects. “Britt has 300 protégés that he sincerely cares about. He’s building the next generation of investors from the ground up.” Part guidance counselor, part CIO, part pastor: Britt Harris has found his second act.

As world leaders meet in Paris to discuss climate change, asset managers and consultants are offering guidance on how institutional investors can tackle sustainability—and why it’s so important that they do.

Cambridge Associates and Hermes Investment Management both released reports on how to mitigate climate risk in a portfolio, warning of harm that could come to investments should those risks not be taken seriously.

“Carbon risk cannot and should not be ignored,” said Saker Nusseibeh, Hermes chief executive. “It is time that we in the industry help to address it.”

“Carbon risk cannot and should not be ignored.”

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Cambridge Associates reported climate change could directly hurt long-term portfolios through extreme weather events, which could destroy property, or changing weather patterns, which might disrupt supply chains. Additionally, policy and regulatory responses to climate change could impose higher costs on sectors such as fossil fuels, utilities, transportation, and heavy industry.

In particular, Hermes warned the ongoing COP21 conference in Paris will result in new regulations regarding carbon emissions that impose increasing costs on the heaviest emitters.

“Long term, I think carbon risk is a huge issue,” said Gary Greenberg, head of global emerging markets at Hermes.

To manage these risks, both organizations said managers need to be aware of climate risks in their portfolios, and incorporate those risks into investment decisions. Additionally, Cambridge Associates recommended that investors advocate for more transparency and reporting on climate risk metrics.

Other suggestions included proactive hedging via low-carbon strategies and policy-level exclusion of fossil fuel and other sectors. However, the consulting firm said investors should consider opportunity costs before changing asset allocation strategies to protect against risk.

“While carbon regulation and technological advances in alternative energy may be long-term headwinds for traditional fossil fuels, markets are likely to see many more cycles in which investors can capture returns,” wrote Liqian Ma, senior investment director at Cambridge Associates. “Investors should benefit from the flexibility to take advantage of near- to medium-term valuation opportunities, no matter the sector in which these opportunities may arise.”

Rather than just focusing on risks, Cambridge Associates and Hermes both advised investors to consider the opportunities afforded by sustainability. Renewable infrastructure, clean transportation, energy efficiency, and green technology are sectors that will provide structured and regulation-driven growth in the coming years, they said.

“There is too much focus on the risks and not enough on the opportunities,” said James Rutherford, a Hermes fund manager. “If you look just at the risk, there is a danger that you end up excluding companies. If you look at the opportunities for growth, change, and improvement, it is a much more powerful story.”

One such group already planning to take advantage of these opportunities is the newly formed Breakthrough Energy Coalition. The 28-member coalition, led by Microsoft founder Bill Gates and including the University of California, announced at the Paris summit its intention to bankroll investments in clean energy.

“I hope even more governments and investors will join us,” Gates said.