One of the greatest evolutions in business is taking place before our eyes. No, it is not the fourth industrial revolution with the proliferation of emerging technologies like artificial intelligence and blockchain, although they certainly have their roles to play. It is bigger than that. It is what proponents of sustainability have been saying for a long, long time – constant exponential growth cannot exist in a finite world. Let’s face it, Milton Friedman is dead. His theory and consumption analysis while incredible and deserving of all its accolades in the 70s most likely didn’t consider an uninhabitable world.
Companies and investors are beginning to understand resource constraints and incorporating future-oriented thinking as not only great public relations and corporate reputation initiatives, but also an area of opportunity in risk mitigation, efficiency, and the pursuit of profits.
Before going any further, we must admit that when you are entrenched in a particular industry or focus area like sustainability, it is easy to lose sight of the world around you. We are typically pre-disposed to source our information from organizations and outlets that align with our ideology and outlook. So, if you are a sustainability professional mostly relying on GreenBiz, TriplePundit, Environmental Leader, and the like, you may have been under the impression that we were well on our way toward a thriving low-carbon, more circular and inclusive economy a decade ago. It may be ten years later, but change is certainly afoot.
The conversation is no longer confined to fringe publications and communities; it has fully entered the mainstream discourse and thinking.
U.S. corporations led a record purchase of 6.43 gigawatts (GW) of renewable power in 2018. Climate change and renewable energy are not the only environmental externalities companies and investors are paying attention to either. Dating back to 2013, things like deforestation and water scarcity were on the minds of executives and investors. Fast-forward to 2018 and they still are. According to CDP (formerly the Carbon Disclosure Project), in 2018, more than 2,100 of the 7,000 companies that filed environmental reports disclosed risks to water security, and 455 reported risks to forests. The difference: more of us seem to be paying attention.
The most significant group paying greater attention is investors. In fact, CFA Institute as recently as January 2019 issued its position on ESG (environmental, social, and governance) analysis. The Statement includes the following, “Key points in the new Statement include the duty of CFA charterholders to factor in all material information, including material ESG factors into investment analysis, unless contrary to client wishes. The Statement notes that such factoring is consistent with an investment manager’s fiduciary duty.”
In the event that what you have read thus far hasn’t been clear, this is a big deal! Free markets and capital are what actually produce change and results. The fact that sustainability has fully entered into discussions regarding risk, return, and profit is a game changer. What we have collectively witnessed in regard to the link between sustainability and profit of late, including the Verizon green bond issuance, is only the beginning.
The world is changing, and changing rapidly. We have the knowledge and expertise to help position our clients for future success in the new business environment. If you are interested in learning more about what we do and how we do it, please contact us at questions@longviewstrategies.com.
