Sunday, 28 June 2015


The number of businesses and investors embracing sustainable capitalism is growing rapidly, according to former US vice-president Al Gore and business partner David Blood.

Gore and Blood co-founded investment management company Generation Investment in 2004. Launching a white paper last May, they stressed how the business case for sustainable capitalism is stronger now than ever. 

“We don’t believe there’s a disadvantage to taking environment, society and governance (ESG) into account when making investment decisions. The business case is very, very robust,” said Blood, formerly head of asset management at Goldman Sachs.

The white paper highlights numerous studies that examine the relationship between financial and ESG performance. This includes a review by the University of Oxford, which found that 80% of studies examining the issue concluded that investment strategies that incorporate ESG issues outperform comparable non-ESG strategies.

When Generation Investment began talking about sustainable capitalism a decade ago, the proportion of businesses and investors who understood it was small, said Blood. “Now the number is 20–25% and it is increasing very quickly. We’re getting to a point where sustainable capitalism is more of a mainstream notion than not.”

Gore added: “We seem to be approaching a cusp of change that is really quite significant.”

The most important first step for businesses and investors to take is to assess carbon risk, said Blood. “Not all investors do that. But, if that’s the only thing an investor does it’s a vial step in the right direction,” he said. 

The number of companies applying a shadow price on carbon when conducting asset valuations is increasing, with 150 taking it into consideration last year, according to the CDP, the white paper notes. Gore and Blood advocate incorporating the cost of carbon in order to transform an uncertainty into a quantifiable, and therefore manageable, risk. 

The evidence on the benefits of considering sustainability when making investment decisions is so robust that it would be a failure of fiduciary duty to ignore it, they said. Last year, the UK Law commission recommended that trustees expand their analysis of a company to include ESG issues. There are pending law suits on this issue, Gore noted.

Source: Generation Foundation, IEMA.

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