Late last year it was reported: Global 500 companies, that have demonstrated leadership in carbon disclosure or performance, yielded twice the average return as the index as a whole, between January 2005 and May 2011.
This wasn’t headlined in the Australian Financial Review, or such. It was headlined, though, in an online publication called GreenBiz.com (Sept.14, 2011), which has a surprisingly high readership in, for instance, Fortune 500 management.
The article announced the release of the Carbon Disclosure Project’s, CDP Global 500 Report 2011, and quoted CDP’s CEO, Paul Wilson, as saying “it’s not yet widely accepted or integrated in investment that being sustainable is going to deliver better returns.”
Yet, the companies exemplified with stellar sustainability performances were not your predictable ‘greenies’; we’re talking BMW, Unilever and Novartis, for example. We’re also talking about 68% of the Global 500 companies reporting they have integrated climate change action into their overall business strategy, compared to 48% in 2010.
The same report also demonstrated how much pressure these large companies are placing on their suppliers to ‘line-up’ with similar actions and transparencies – or, lose out.
The movement towards sustainability is no longer a side-line in a company’s activities. The days of a company playing at CSR (corporate social responsibility) are over, if CSR is defined – loosely speaking – as pasting on a respectable do-gooder project over a company’s ‘old ways’. The evidence is that this kind of CSR not only doesn’t ‘win over’ the consumer but adds nothing to the bottom-line. High performing companies are finding huge performance and/or cost reduction boosts through innovative approaches to improving their sustainability performance.
Enhanced performance is not limited to environmentally based activities. Companies are increasingly collaborating with communities, governments or not-for-profits to enhance social goals. Microcredit programs being an obvious example, with ANZ’s programs in Cambodia clearly showing innovative approaches to opening new markets – for the long-term growth outcomes.
Many of the sustainability ROI’s will peak in the longer-term. That’s why accounting methods are also being rapidly revised to include triple (plus) bottom line measurements of a company’s value, returns and performance.
Interestingly, for all these substantive changes, if you read the mainstream business press, you’d still be searching fairly hard to notice them. Regardless, the fact remains, the momentum for change is building so fast that it is undoubtedly heading for the tipping-point. It’s not too far away where sustainable business practices will be business-as-usual; where non-sustainable business practices will not just be unsustainable but unacceptable.
So what do these changes mean for ‘seeing round corners’ and predicting investment outcomes if the emphasis continues to be on traditional measurement and performance indicators for investment returns?
We could all pretend there is a ‘quick fix’ answer to that question and a ready-to-hand ‘Top 10 Tips’ list will display it. No such falsities will do. The truth is we don’t know exactly what this means and how the future will unfold. We don’t know which companies will evolve the best ways to capitalise on new innovative approaches. Those answers will open out over time. There will be valid markers along the way but ‘secure’ predictability of outcomes is a myth of the past.
So, what does this mean when listening to professional advice about investment choices? How do you know whether they’ve factored in new trends and new ‘value-calculations? Do they have their eye on the ball of the new performers factoring in sustainability improvements? Maybe this means that no matter what the advice the investor has to accept that nowadays predicting even reasonable certainties is not ‘under control’. So, choices must reflect the true ambitions of the investor because they are the ones who live with the outcome; good, bad and everything in between.
That begs a whole new set of questions, as well; what purpose does money hold for you? What kind of relationship do you have with ‘money’ – because that’s as important as any relationship any of us have with the primary people/anything in our lives – and THEN, let’s plan from there?
In truth, I don’t know what this means for the future of investment but I know we should be thinking about those answers and starting to do all sorts of re-imagining for our investment predictors, the knowledge base of advisors, and their client conversations, in the reality that a turning point is coming?
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