Sustainable Investing in the Anthropocene
State of Missouri Pension Funds
June 12, 2012
http://pricetags.files.wordpress.com/2008/04/800px-london_millenium_wobbly_bridge1.jpg
1. Context:
Not your grandmother’s SRI/ESG talk
2. Long View Implication:
This time IS different
Anyone who believes
exponential growth can go on
forever in a finite world is either
a madman or an economist.
- Kenneth Boulding , Economist, Quaker,
Co-Creator of General Systems Theory
The most powerful force in the
universe is compound interest.
- Albert
Einstein*
May 30, 2011
Exponential growth leads to ecosystem crisis
”Safe Operating Space”, J. Rockstrom, National Center for Ecological Analysis and Synthesis
Ecological Overshoot: We use 1.5 planets
”Footprint Network.org
GDP growth does not equal well-being
Source:
Redefining
Progress
We know what sustainability looks like
Optimum
Sustainability
100%
Collapse of
Financial System
0%
Resilience
Efficiency
Source: Lietaer, Ulanowicz, Goerner 2008
Desired
Outcome
EconomicWhat’s
Efficiency
wrong with
this picture?
Finance
Economy
Planet
Lost in finance: So clever, so ignorant
Our economy has become an antieconomy, a financial system
without a sound economic basis
and without economic virtues.
- Wendell Berry
Money, Banking, Finance & Investment:
Designed for growth
Landing the plane will be a turbulent affair
Stranded Assets: our $20 T “Big Choice”
• 2 degree warming limit: 565 GtC02
• “Proved Reserves” have 5X this amount
• 74% owned by States, 24% by companies
At current market value, $20 trillion choice
Source: Potsdam Institute and “Unburnable Carbon”, Carbon Tracker Report
$20 Trillion of denial goes a long way…
Ecological overshoot = Financial Overshoot
What’s the off balance sheet ecological debt?
What’s the P/E of a “steady state” economy?
What’s the debt capacity of the steady state?
What’s the unfunded pension liability of a SS?
Financial reform: Rearranging deckchairs
May 26, 2011
1. Context:
Not your grandmother’s SRI/ESG talk
2. Long View Implications:
This time IS different
The situation is hopeless, but I could be wrong.
- Ted Turner, quoting his former Foundation head.
Towards a Regenerative Economy
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Holistic frame: nature as model
Redefine wealth: natural/social capital
The humble retreat of finance
Public interest in capital investment –
an opportunity for leadership
A unique moment in history for Fiduciaries
Years of focus on fiduciary duty of prudence has
generated myopic investment herding behaviors,
undermined intergenerational pension equity…
- “Reclaming Fiduciary Duty”, James Hawley, Keith
Johnson, Ed Waitzer
What’s different this time
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Cycles within seismic shift -downside shock bias
Caution: Steady state = revaluation
Long run not sum of short runs
Uncertainty different than risk
There is “no sideline”
What’s different this time
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Schumpeter’s “creative destruction”
on steroids
MPT built on flawed assumptions
Index benchmarking and tracking
strategies exposed
Asset class diversification a mirage
ESG framework: Integrated reporting
Unparalleled Leadership: Jochen Zeitz
2010 Earnings: Euro 202mm
2010 “E P&L”: (Euro 145 mm)
Investment themes for the Anthropocene
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Reassert owner responsibility: Active
concentrated ownership of resilient cash
flow/dividends
Diversify systemic risks
Investment themes for the Anthropocene
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Low carbon energy infrastructure
Ecosystem regeneration
Technology
Emerging markets
Distress/opportunistic
Investment is the bridge to the economy
we need. And the steering wheel.
We are called to be the architects
of the future, not its victims.
- R. Buckminster Fuller
Thank you