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Not fit for purpose

Companies and financial institutions are taking the lead on sustainability. The journey to this point has been a long one as initially the rise of environmental issues was seen as a bit of threat. As a defence to this perceived threat it was no surprise to see the somewhat more vulnerable companies adopting the sustainable language early. You may recall the likes of Shell being one of the first to talk about the triple bottom line (people, planet, and profit) and BP aiming to go “beyond petroleum”. Over time forward thinking companies (Unilever and Ikea as examples) realised they could save money through better environmental management and boost their external credentials at the same time.

Today, 80% of CEOs now see sustainability as “good business”1 , the route to growth and innovation. It is the same in the institutional investment world as the astute have adopted a sustainable approach incorporating Environment, Social and Governance (ESG) factors as well as financial factors into the investment process. CalPERS, the California Public Employees’ Retirement System, $277bn2 in assets under management. This makes them the second largest manager in the US and sixth largest in the world3. They are adopting a 100% sustainable approach to their investments simply because they believe it to be critical to superior long term returns. They understand the investment rules of today are unlikely to be fit for purpose tomorrow; it is probably only a matter of time before individual investors follow this lead.

 

Henry Findlater
Investment Adviser

 

1 The UN Global Compact – Accenture CEO study on Sustainability 2013
2 CalPERS website
3 State Street
Photo credit: Intel Free Press


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