“A human being is part of the whole, called by us 'Universe'; a part limited in time and space. He experiences himself, his thoughts and feelings as something separated from the rest - a kind of optical delusion of his consciousness. This delusion is a kind of prison for us, restricting us to our personal desires and affection for a few persons nearest us. Our task must be to free ourselves from this prison by widening our circle of compassion to embrace all living creatures and the whole of nature in its beauty.”
Economic growth and sustainability are interdependent.
It is not possible to have sustained economic prosperity without the efficient management of natural resources. Mainstream economics and political thought have helped entrench this idea of a private sector that is divorced from being accountable for what its business activities costs to human health and the environment. As such, many have become comfortable with the idea that capital accumulation is an end in and of itself. Money for money's sake. Our society has normalized the idea that it is acceptable for private enterprise to regularly externalize off of its balance sheets and into society the negative consequences of its business practices which include polluting our planet and either suppressing or disenfranchising labor. Simultaneously, we continue to support the idea that these entities and the people in charge of them are entitled to the benefits of the capital wealth these negative externalities produce, mainly for the benefit of very few.
We then expect this segment of society to check its privilege and be transparent. When faced with evidence to the contrary, we still have failed to amend our position on the idea that just like all other segments of society, economic activity in general and the financial markets in particular, does require guardrails and checks on its power. Why have we decided that the existing forms of economic and financial system activity are sacrosanct?
We need to iterate.
This is why it is long past time to reject the fallacious idea of a ‘self-regulating' market that will always, and under all conditions, provide the most optimal outcome for social organization, and that said outcome is as beneficial as possible to the broader society — the evidence of history and the challenges of the present support the efficacy of our rejection.
To address the challenges we face today, and to protect the long-term interests of our shareholders and all stakeholders, it is time for a paradigm shift in the broader economy in general and in the financial markets in particular. This investment perspective and approach is not new, as many recent entrants in ESG and Impact investing often suggest. Rather, it is an approach that is interdisciplinary in its focus and has deep roots in the social and life sciences. The growth and preservation of investor capital are predicated on the ability to reform markets to address our societal needs while considering all costs to all stakeholders - which includes the planet and its people.
As sustainable investors, our focus has always been to leverage the financial markets for the benefit of our clients and the broader society to shape a more prosperous and healthy future for all stakeholders into perpetuity. Creating, sustaining, and protecting capital and our natural resources so that they may be used for the benefit of shareholders and stakeholders now and into the future is the essence of asset management.
To borrow an analogy from a Portfolio 21 report , if you think of ecosystem services as the earnings, or yields of our natural resources, the depletion of these resources is akin to the continued withdrawal of financial capital, ultimately reducing the capacity of our savings to provide interest earnings. The task for our society is to determine the optimal level of economic activity needed to satisfy our water, energy, food, housing, and waste management needs without completely compromising ecological systems and the natural capital that produce them. The opportunity for investors is to make money off this transition. In order to achieve both our economic and environmental objectives, we will need to allocate capital toward products and services that can do and provide more with less.
As we are all stakeholders in the fate of our society and the environment upon which we depend for our survival, we ask - why not be shareholders too? It is time for a shift from our zero-sum-game view of the world toward economic and financial governance systems that are global in their focus and scope and designed for the benefit of all. We already see attempts at these kinds of interventions, most recently with the Paris Climate Agreement but also the UN Sustainable Development Goals to 2030.
Participation in the financial markets is a crucial element of this shift. Using the 17 UN Sustainable Development Goals (UN SDGs) as a macro-level framework, and its 165 sub-metrics as a guide, we attempt to identify and invest in companies and industries that are conducting their business sustainably and developing the technologies that will help us live longer, healthier, more sustainable lives.
Our centuries of mismanagement and destruction of our natural environment has now cast our prospects for survival on Earth into sharp focus. We see the consequences of our poor planetary stewardship and the results of our excessive pollution in the form of extreme weather events that are increasing in both number and intensity; hurricanes are stronger, flooding more pronounced, droughts are more prolonged, wildfires destroy everything in their path. These events degrade precious ecosystems, threaten our supply of food, the safety of our homes and cities and result in loss of life for more significant numbers of humans and wildlife.
The environmental challenges we face will only serve to exacerbate the social issues we aim to make progress on. Poverty, violence, economic instability, and social inequality persist. More than a billion people still do not reap the benefits of safety and security, technological advancement, and robust economic development. Governments and civil society have been working to address these issues with varying levels of success, but for too long the private sector has buried its head in the sand pretending as if private enterprise is somehow set apart from the society that it relies upon for the natural resources and labor it necessarily must utilize to generate profit.
Returning to Einstein’s optical delusion of consciousness:
“...This delusion is a kind of prison for us, restricting us to our personal desires and affection for a few persons nearest us. Our task must be to free ourselves from this prison by widening our circle of compassion to embrace all living creatures and the whole of nature in its beauty.”
As an ESG and impact investor, our aim has always been to help people invest so that they can meet their long-term future goals by investing in the companies we believe will help us build that future together sustainably.
 Portfolio 21, “Peak: Investing at the edge of ecological limits” (2012)