Environmental, social and corporate investing – the new ballot box?
SAY ‘climate change' and you may have one or two reactions:
‘What's the point, when presidents and heads of governments/states preach about it, but fly their own gold jumbo jets and helicopters?'
Or: ‘this land, its air, water and existence is there for the ages', would be the view shared by the majority who do not display the aforementioned personality traits.
In time, that view will win and it is already flowing.
Say sustainability, environment, social or corporate governance (ESG) and you have the attention today of investors flocking towards making a difference they cannot make at the ballot box, a ballot box as democratic as one controlled from beginning to end by lobbyists and money.
In an increasingly distracted and consumer driven world, taking time to reflect on what investments are really sustainable is time well spent. Being ahead of the game is where you buy a share for a fraction of its future price.
Modern capitalism has arguably failed as central banks have consistently had to interfere with monetary stimuli such as rock bottom interest rates, quantitative easing (‘printing' money and re-injecting back into the system). Now we have the real option of negative interest rates coupled with soaring record global debt.
The people of Ghana have a metaphorical symbol of a bird with its head turned lifting an egg from its back - Sankofa. The significance is about looking back to the past and learning from it to make positive progress for the future.
Easter Island. Erected over 600 years ago, its symbols look out to sea.
It used to have a thriving community of over 15,000. Its society harvested and overharvested, so trees became unimportant. They were gone. A few generations later, the entire civilization collapsed, having adjusted to living off rodents for the interim.
They had, in reality, committed ecocide.
Many studies have been created on how civilizations ‘collapse'. None more so than the book ‘collapse' showing how environmental issues factor so strongly in abandoned temples, pyramids and societies like the Maya abandoning areas they had invested generations into.
Conflicting priorities is a disease that is handed down easily through generations.
Theodore Roosevelt was indeed a great environmentalist, with a great concern and empathy for the disadvantaged who really pushed back at racial and cultural inequalities and prejudices.
He could not, however, accept that the mass murder of Native Americans was indeed a genocide. (See conflicting priority comment above).
Roosevelt set aside 230m acres for posterity and created countless parks and monuments making him one of the best environmental presidents of all time.
I stood at the edge of the Grand Canyon with my children once and read his note:
“Leave it as it is. You cannot improve on it. The ages have been at work on it, and man can only mar it... keep it for your children and your children's children”.
Nice words Teddy.
Trump in 2016: “We'll be fine with the environment. We can leave a little bit, but you can't destroy businesses.” Almost like a puppet reading a script off a screen for payment.
He then reduced two historical, scientific national monuments (Bears Ears and Grand Staircase-Escalante) taking nearly 2m acres from protection for mining oil and gas, perhaps the greatest U-turn in history.
Trump, or his sponsors and lobbyists do not believe the world is as important as them. The same may be said of the current corporatocracy, or neoliberalism, which has spread and infected the world over recent times.
But, they are wrong.
Roosevelt said, we are a part of the land and it is a part of us.
ESG investing strategies have shown significant impact on the share prices of companies, particularly after highlighting supply chain labor issues – sweatshops, in short.
The bar for companies to perform well is no longer set by the law they have lobbied to set.
The investor sets it, and it is much higher. This is the new ballot box.
There have been many studies created on the ESG practices and their performance financially.
The results are nice reading.
Look after your labor force, community and environment and you do well.
Good Environment and Social Governance accounted for over 2 per cent extra performance return on equity and 1.1 per cent return on assets.
Peter McGahan is chief executive officer of independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. If you have a question, call Darren McKeever on 028 6863 2692, email email@example.com or visit www.wwfp.net.