The Thinking ahead Institute has completed its first five years. It set out with the ambitious goal of changing the investment industry for the benefit of the end saver. As a stated purpose it had many positive attributes, not least of which was its ability to unite good people. And our industry has a lot of good people in it. Its main drawback, however, was the lack of specificity. A multitude of research projects could be argued to be the interest of the end saver. Not wrong, but not focused either.
A quick look back
Over the last five years the Institute has written 139 opinion pieces and 42 research papers on 10, or so, topics[1], and discussed them at 47 events. Did we do anything to help the end saver? Our instincts scream at us to answer ‘yes’; our integrity requires us to be more circumspect.
Over the last five years, prices have come down for end savers, industry thoughtfulness and effectiveness has gone up, both issues that we have advocated for but cannot take any measurable credit for.
While the impacts on the system are difficult to attribute, perhaps the impacts on individual firms have been more evident. While we hope that we have engaged with the thinking in individual member organisations in a number of different areas, here we single out culture. We have had the privilege of working with multiple members on assessing and discussing their culture, and the manager research team at one major asset consultant (WTW, for the avoidance of doubt) has changed its process in the light of the Institute’s research. We would argue that organisations working on their culture can only be good for the end saver.
The next five years
If you choose to use the words ‘thinking ahead’ to define you, then there is limited scope for retrospectives. The pressure is to be forward looking. In that spirit, the Thinking Ahead Group, the executive to the Institute, put itself through a strategy refresh process during 2019 in order to be ready to tackle the next five years.
Our heart remains with the end saver and the public good. We still believe the investment industry can deliver a better customer value proposition, and we continue to argue that the investment industry would be better and more sustainable for doing so. But our heads see the environment changing around us, and that change will intensify in the near future. At our June 2019 event in London we described climate as an already present emergency, not a coming problem.
Our two sustainability events in November 2019 were both sobering, but also inspiring – there are many in our industry who want to play their part in bringing change. It isn’t just climate change of course. The loss of biodiversity, to us at least, has non-linearity written all over it. To date we have been able to wave goodbye to numerous species of flora and fauna with no apparent impact on our quality of life. At some point the continued extinction of more species will become obviously negative for us – our food, waste recycling and disease fighting capabilities all depend on healthy ecosystems.
Then there is the massive and multi-dimensional problem of inequality. We have deep sympathy with those who argue that this is the world’s most important problem. We just happen to think that climate change is the most urgent problem – unless we deal with that, we won’t have the opportunity to sort inequality.
So, to unite our heads and our hearts we decided to add a second purpose statement. So, for the next five years the Thinking Ahead Institute will be about:
Mobilising capital for a sustainable future.
In short, our best idea to help the end saver right now is to play our part in driving forward sustainability in all its forms for the benefit of the end saver and all stakeholders involved – basically every person on the planet.
What does ‘mobilising capital’ mean?
One of the definitions of ‘mobilise’ is to make something capable of movement. This is how we see our role. Our part is to provide the research and thought pieces that reduce any frictions preventing capital from moving to a better place. The sticking points are likely to fall into two categories – technical and organisational. The technical category will be about knowledge, beliefs and availability of appropriate vehicles of appropriate scale. The organisational ones will concern culture, values, purpose and vision.
The world – or, more precisely, humanity – needs to level off at a +1.5C economy but many scenarios suggest a trajectory towards +3C to +6C.[2]. To quote Larry Fink’s 2020 letter to CEOs “[in] the near future – and sooner than most anticipate – there will be a significant reallocation of capital”[3]. Capital will need to be withheld from harmful activities, and will need to fund and scale helpful ones.
And what does a sustainable future look like?
In the Thinking Ahead Group we have long argued that intergenerational fairness is a necessary condition for sustainability[4]. This is not a complete answer to what a sustainable future looks like, but the concept of intergenerational fairness is highly instructive. To the extent that we have enjoyed an endowment of natural resources, then our role is to pass on an endowment of equivalent value to the next generation.
What happens next?
The challenges associated with reallocating capital on the scale required are truly daunting. And yet we are excited too. Our five years of collective development have produced an Institute with formidable powers of creating and convening on the toughest challenges confronting us.
We have already had enough conversations with members to know that there is an emerging consensus on the importance of the work to be done; and that there is a strong desire from members to be involved with the co-creation task. We already have a long list of possible questions to apply our minds to. We will now take these forward with our member working group to add, refine and prioritise them. If you would like to be involved, please let us know.
[1] For those worried about our ability to count to even small numbers, this is a categorisation problem: is sustainability beliefs (a big piece of work) a separate topic to sustainability? Is our interesting-but-contained work on investment as an ecosystem significant enough to be called a separate topic? [2] The Paris agreement of 2015 was to keep global temperature rise this century well below +2C, and to pursue efforts to limit the temperature increase even further to +1.5C [3] A fundamental reshaping of finance, BlackRock, 2020 [4] See, for example, Bathtubs, intergenerational fairness and the sustainability end game, Thinking Ahead Institute, 2019