Rattling the cage – Changing the view on sustainability in investments

The corporate and financial world has been operating under a misguided timeline of short-term versus long-term that cannot be sustainable.

Look at the current state ‘state of the world’, with global warming and the recent unanticipated magnitude of its effects, widening wealth inequality that is likely to ultimately lead to populous uprising and resource overshoot. We can no longer ignore these problems – or the fact that we have essentially created them all. Financial services as a world industry has been slow to accept the implications of responsible behaviour but simply by raising the question, this workshop is ahead of the curve in the industry.

The global financial services industry has three major blind spots that become more of a liability each year and prevent objective views.

What depends on what?

The concept and existence of economy has not been around long in terms of the timeline of human history. The ratio of human years without economy to years with economy is 29:1. And nature has been around much longer than human life.

There is a natural order that needs to exist to support survival. Nature needed to exist before homo-sapiens could exist. In the same way, a complex order of society has to be in place before business and the economy could be put in place. However, the business press gives the impression that the economy is the priority in terms of things that need to be taken care of. Then, once we have taken care of the economy and if there is surplus capacity, we can turn our attention to the weak and disenfranchised - and only after those people have been taken care of can we assess and take care of nature.

This is a fundamental thinking disorder that the financial sector needs to recognise.

Growth

In nature growth has a natural cycle. Growth in all natural things starts, accelerates, sustains, stabilises - and then it dies. This is an irrefutable and unavoidable end state of growth in nature.

But the language of corporates worldwide does not support this. In fact, the dialogue of corporates suggests that eternal growth is not only possible – but aspired to.

There are limits to growth on Earth. The Earth itself doesn’t grow and this is something that human beings and the financial industry in particular seem to be ignorant about. I call this “the Limited-Earth problem”. In fact, a study compiled by the global footprint network calculated that if humans continue to grow, produce and use resources as we are now, we will need another full earth by 2030.

It is not hard to see, when we look at the problem like this, that current methods and practices are simply not sustainable.

Private Wealth

The concept of Private Wealth is another blind spot held by the global financial services industry. People invest with wealth managers so that it can grow – their goal is to accumulate and protect their own private wealth. This raises a question about common wealth. All around the world, common wealth seems to be in dire need. This is painfully visible with the effects of the recent spate of natural disasters around the world that have found the collective wanting in terms of understanding their risks.

This raises the question that when the common wealth is in such dire need – how does the financial industry balance it with a mandate to serve private wealth?

These issues are complex and jarring – and bringing them up in this way is supposed to rattle the cage of a potentially complacent financial services industry worldwide. Opening one’s eyes to these blind spots is the first step to having meaningful conversations about the future of responsible and sustainable investment practices.

Peter Willis presented at the Responsible Investing Worksop hosted by Nedgroup Investments in Cape Town in late 2017.