San Francisco’s Bay Area has a GDP of $748 billion and is growing at 4% per annum, twice the US average. If it were a country, it would be the world’s 19th largest economy, coming between the Netherlands ($822 billion) and Switzerland ($686 billion). It is home to the world’s first trillion dollar company, and 74 billionaires - the third highest concentration of billionaires in any region of the world.
But, at street level, the divide between the “haves” and the “have-nots” becomes startlingly clear.
As we heard from many senior ranking experts as this year’s PRI in Person, the annual conference of the UN Principles for Responsible Investment (PRI), investors can play an important role in helping to address inequality. It is in our interests to do so as inclusive growth means more sustainable growth - and by extension more sustainable investment returns - in the long run.
”Shareholder return maximisation has been used as an excuse to take inequality off the table. One of the areas investors can have a great deal of influence is on the relationship between companies and workers.”
Nick Robins, Professor in Practice for Sustainable Finance,
Grantham Institute on Climate Change and the Environment,
London School of Economics
Start a conversation with anyone about responsible investing today and within 30 seconds you get: “Hang on. Let me just clarify what I mean by responsible investment…” The language around this space – whether that be ESG, SRI, sustainable investing, responsible investing, impact investing, ethical investing etc etc – is so diffuse, it has become its own worst enemy.
At the heart of this whole notion is one simple principle: Long-termism.
The further down the road you look, the more the shape of the path and the eventual destination matter.
Is the world or economy going to be fundamentally different in one year? Baring another 2008-style apocalypse, the answer is hopefully no. But is the world going to be fundamentally different in five or ten years? I hope so, yes.
We simply cannot go on as we currently are. We are using up natural resources at a much faster rate than the planet can replenish; climate change is compounding the problem; our population is growing, getting older and moving around; technology is changing jobs, educational needs, our consumption habits and, perhaps most importantly, how well we understand the scale of the sustainability problem.
Why does this matter in the context of investment? Because given enough time, all of these challenges will shape our economy. In other words, they will alter the direction of the path and where it ends up. So if you’re a long-term investor, you have to account for sustainability at the heart of your investment process.
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A quick cuppa with Faith Ward, Chief Responsible Investment and Risk Officer, Environment Agency Pension Fund