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Investing in Sustainable Future: Regenerative Economy and Fiduciary Duty

Explore the paradigm shift in the world of finance towards sustainable investing and regenerative economy. Learn about the implications of exponential growth, ecological overshoot, and the urgent need for financial reform. Discover how fiduciaries can lead the way by redefining wealth, navigating systemic risks, and embracing ESG frameworks. Investment themes for the Anthropocene include low-carbon energy, ecosystem regeneration, and owner responsibility for resilient dividends. Join the journey towards a more sustainable and prosperous future.

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Investing in Sustainable Future: Regenerative Economy and Fiduciary Duty

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  1. 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

  2. 1. Context: Not your grandmother’s SRI/ESG talk 2. Long View Implication: This time IS different

  3. 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

  4. The most powerful force in the universe is compoundinterest. - Albert Einstein*

  5. May 30, 2011

  6. Exponential growth leads to ecosystem crisis ”Safe Operating Space”, J. Rockstrom, National Center for Ecological Analysis and Synthesis

  7. Ecological Overshoot: We use 1.5 planets ”Footprint Network.org

  8. GDP growth does not equal well-being Source: Redefining Progress

  9. We know what sustainability looks like Optimum Sustainability 100% Collapse of Financial System 0% Resilience Efficiency Source: Lietaer, Ulanowicz, Goerner 2008

  10. Desired Outcome What’s wrong with this picture? Economic Efficiency Finance Planet Economy

  11. Lost in finance: So clever, so ignorant Our economy has become an anti-economy, a financial system without a sound economic basis and without economic virtues. - Wendell Berry

  12. Money, Banking, Finance & Investment: Designed for growth • Debt-based private money system • Debt-financed economy • Debt-financed government • Endowment-funded institutions • - Pensions, universities, foundations

  13. Landing the plane will be a turbulent affair

  14. 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

  15. $20 Trillion of denial goes a long way…

  16. 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?

  17. Financial reform: Rearranging deckchairs May 26, 2011

  18. 1. Context: Not your grandmother’s SRI/ESG talk 2. Long View Implications: This time IS different

  19. The situation is hopeless, but I could be wrong. - Ted Turner, quoting his former Foundation head.

  20. Towards a Regenerative Economy • Holistic frame: nature as model • Redefine wealth: natural/social capital • The humble retreat of finance • Public interest in capital investment – an opportunity for leadership

  21. 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

  22. What’s different this time • 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”

  23. What’s different this time • Schumpeter’s “creative destruction” on steroids • MPT built on flawed assumptions • Index benchmarking and tracking strategies exposed • Asset class diversification a mirage

  24. ESG framework: Integrated reporting Unparalleled Leadership: Jochen Zeitz 2010 Earnings: Euro 202mm 2010 “E P&L”: (Euro 145 mm)

  25. Investment themes for the Anthropocene • Reassert owner responsibility: Active concentrated ownership of resilient cash flow/dividends • Diversify systemic risks

  26. Investment themes for the Anthropocene • Low carbon energy infrastructure • Ecosystem regeneration • Technology • Emerging markets • Distress/opportunistic

  27. 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

  28. Thank you www.capitalinstitute.org Future of Finance Blog

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