“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.”
— Albert Einstein
By Amberjae Freeman
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 cost 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. We have 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 suppressing or disenfranchising labor.
When we are confronted with evidence of poor corporate governance, we assume that market forces will prevail. That the private sector will check its own privilege, self-regulate, and be transparent. So even as the oil spills continue and income inequalities increase and become entrenched, we still fail to amend our position 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.
It is long past time for us 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 our ability to steer the financial markets toward disruptive innovation. This transition will enable us to address our societal needs while considering all costs to all stakeholders - which includes the planet, its wildlife, and its people.
By identifying and exploiting inefficiencies in the financial markets we aim to create long-term value for our investors. Our emphasis on sustainable and equitable innovation and disruption supports our mission and vision - to create value for our clients and the broader society in order to build a more prosperous and healthy future for all stakeholders into perpetuity.
The environment and our society are assets. In our view, creating, sustaining, and protecting capital and natural resources 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.
Photo by Sasha • Stories
The task for our society is to determine how to support the economic activities needed to satisfy our water, energy, food, housing, and waste management needs without completely compromising ecological systems and the natural capital that they provide.
The opportunity for our investors is to make money from this transition. In order to achieve our economic, environmental, and social goals, we need to invest in the innovative and disruptive technologies that will supplant unsustainable incumbent institutions. We must understand the challenges of the present to identify the solutions-oriented firms developing the products and services that will support a sustainable and equitable future.
Since 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 (SDGs).
The transformation of the financial markets is a crucial element of this shift and requires open collaboration. That is why we take an interdisciplinary approach and leverage the expertise across academia, private industry, government, and most crucially, civil society. Using 17 UN Sustainable Development Goals (UN SDGs) as a macro-level impact framework, and its 165 sub-metrics as a guide, we attempt to identify and invest in innovative companies and emerging industries that will help us live better, healthier, and 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.
The views and opinions expressed are those of the author and do not necessarily reflect those of Etho Capital, LLC.
Photo by Nathan Anderson
[1] Portfolio 21, “Peak: Investing at the edge of ecological limits” (2012)