Getting Sustainability solutions to scale is going to take a lot of money.
But at present, the investor community is not placing their bets on Sustainability-driven companies.
That’s a disconnect to me, because the business case for doing so is solid. Research shows that businesses that make Environmental, Social and Governance (commonly known as ESG) factors part of their strategy do just as well in the marketplace. Sometimes even better.
The research borne this out in 2011, and it’s still true today.
Via Harvard Business School http://www.hbs.edu:
The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance
Finally, we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance. The outperformance is stronger in sectors where the customers are individual consumers instead of companies, companies compete on the basis of brands and reputations, and products significantly depend upon extracting large amounts of natural resources.
So why isn’t the investor community on board?
Cary Krosinsky’s work is all about understanding and bridging this gap between investors and sustainability. And, approaches for getting money flowing towards positive sustainability investments.
I heard Cary and Steve Viederman speak Mar. 4 on Getting Investors Engaged in Sustainability at the Bard MBA Sustainable Business Series.
Cary is Executive Director of the Network for Sustainable Financial Markets, and teaches Sustainability & Investing at Columbia University and University of Maryland. Previously, he was senior vice president for Trucost, a company that helps organizations measure their environmental impacts. He’s also an author of Evolutions in Sustainable Investing: Strategies, Funds and Thought Leadership (Wiley Finance).
First, the bad news.
Status quo is strong. The people who make investment decisions have deeply entrenched beliefs and behaviors about how to make money. Monolithicly so. Cary’s company, the Network for Sustainable Financial Markets, just released research that finds only 1% of global assets under management overall are managed by investors looking at sustainability.
NSFM White Paper – The State of Ownership (the real size of SRI Assets + the Systemic Nature of Equity Ownership)
So at least we know where we stand. Now on to changing it.
Cary suggested a positive investing mindset to work with the status quo rather than against it. This means focusing on adding Sustainability-minded assets to a portfolio–what’s possible–rather than focusing on what we shouldn’t buy. As an example, he mentioned Bill McKibben’s 350.org college endowment fossil fuel divestment campaign. Instead of lobbying to cull fossil fuel-related investments from university endowments, a positive approach would be to add a percentage of Sustainability-focused investments to a university’s investment portfolio.
I’m really taken with this concept because it has significant potential to create change from the top-down. It’s really the simplest idea in the world. Put our energies towards finding sustainable solutions instead of stamping out fires. It takes more time and energy to say, “What should we do?” instead of “Stop that,” true, but these are conversations worth having. Taking the time it takes, takes less time.
I’m all in for the “and also” top-down, bottom-up, sideways innovating systemic solutions that keep us away from the brink of a 2 degrees-hotter planet. I believe in the scientific consensus about our world becoming fundamentally less hospitable to human life if we don’t.
Putting all issues of money aside, as climate change realities become the new normal (resource scarcities, extreme drought, rising sea levels), business and investors have real skin in fixing things. If we don’t come up with cures for our environmental and energy problems, there’s not going to be a world in which to invest money.
Many thanks to the Bard MBA program for the chance to hear about Cary’s research and contributions to the Sustainable Investing field.