Joe is a 21-year-old economics graduate who joined the Thinking Ahead Institute team in September 2023 for a short spell of work experience. This period included observing TAI’s Future of ESG event, and Joe’s writing of the below thought piece.
We need to make sustained progress towards a more sustainable future. Private capital seems to see the need for more immediate change, while it strikes me that governments are making slow progress. With big corporates driving this immediate change, it implies that they see the possibility for profit, competitive advantage and better risk management as well as a better planet. Are these intrinsic components of a more caring form of capitalism, or coincidental by-products of profit-driven capitalism? For this to be a shift in capitalism, all agents in the system are going to need to set better risk management and better planet goals and act on them in a collaborative way, sooner rather than later. However, collaboration is complex where existential threats to profit and competitive advantage are at play. Is that the fundamental reason for progress being so slow?
To me, it seems that many agents that I have come across do have climate change and social impact high on the corporate strategy list, or at least in their corporate communications strategy (the latter is still a positive step forward from ten years ago). When seeking to construct a better system, the risk is that short and medium-term progress can be slow – as agents and principals can be slow to agree on beliefs, standards and operating frameworks. So, what can be done in parallel while these more infrastructure-related improvements are being designed, agreed on and implemented?
The system at present has a huge number of different agents, all vying for investment and for capital to be deployed in so many different ways for a better future. I wonder, can they all be successful? How long will it take, and can it all be done while a “new and more sustainable system” is forming? In discussions with my peers, the proverbial “oil tanker” is often mentioned, that it needs to be turned around across all sectors for the system to be more sustainable. Mainstream business needs to be more sustainable, not just the high-profile “green” subcategories of businesses.
In asset management, this is where mainstream investment strategies lean towards companies that have a long-term plan to be better with all their stakeholders. In retail, it is reconsidering supply chains to make sure there is a more respectful and sustainable use of natural resources, including people. In big pharma, opening up potentially massive new markets in low-cost drugs for distribution in developing economies.
I would call this sustainability on the quiet, even if their communications people roar this loud in the media. This approach suggests a need for a shift in culture which will take some time. Perhaps this is why some young people find it difficult to engage with the topic, as their urgency, energy and keenness to make an impact now leaves them feeling bored and uninterested, despite being well aware of its importance. I believe that to engage younger people – and more importantly harness our typical “let’s get this done now” attitude – more of an “impact now” strategy is needed. This would complement the “let’s fix the system” approach in parallel. We cannot afford to wait five or ten years for a more sustainable energy system.
Our parents and the generations before mine have been spenders, fuelled by low-interest rate-driven debt. We will likely not have this luxury, so I expect this generation of successful young people to be savers and investors, emphasising the importance of what is being done with our savings and investments. Some will want nothing to do with fossil fuel companies, others might see them as the future of renewable energy and crucial players in the clean energy transition.
I believe there will be a growing interest from young investors in companies doing new and positive things. When I was at school (2005 to 2020), interestingly, it was not so much just climate change that we were taught about, it was primarily the evil of plastic. This led to a much greater awareness of the need to recycle, and to not use plastic where you could possibly help it. Our imaginations were caught, we were engaged, we were acting and there has been measurable positive impact. Can the same result be achieved if our attention is turned to climate change, the biggest problem of our generation?
As I start investing in the coming years, I know where I want my money to go and grow. Do I care about my investments beating an index? Or do I care more about my investments clubbing together with those of like-minded people to do good while generating a decent return to fund my future? Yes. I think this is becoming less and less of just a young person’s view and more the view of people of all ages, especially after the discussions held at TAI’s recent Future of ESG event.