Safeguard the planet to save the economy

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Looking ahead: we must think about how we can protect our global assets Credit: Getty

The Covid-19 crisis has pushed the environmental agenda to the fore once again – but this time our future depends on a new way of thinking

‘Only fools would go back to business as normal’

We should rethink our relationship with the environment – it will pay economic dividends, says Belinda Gordon

Belinda Gordon

I am reading Dara McAnulty’s Diary of a Young Naturalist. It is a beautifully written reminder of the healing power of nature. But it is also about his righteous rage at our wanton destruction of the natural world. Rates of species extinction are higher than they have ever been, and temperatures are over 1C higher than in pre-industrial times. 

And now, Covid-19 has given us further cause to reconsider our relationship with the environment. It seems likely that the virus was able to cross the species barrier due to human environmental disruption and the exploitation of wild animals.

This demonstrates that there isn’t only a moral imperative to address climate change; there is a pure economic reason. If businesses want to thrive, if investors want reliable returns, then we would be foolish to go back to business as usual.

The good news is that doing what is right for the environment, future generations and the economy also makes sense for individual businesses. Take resource efficiency. Analysis by the Green Alliance, of which I am strategy director, shows that by using materials more efficiently, not only can businesses cut their carbon emissions, they can improve their bottom line and reduce dependence on imports.

The average UK manufacturer spends five times more on resource costs than on labour, so there is plenty of scope to raise productivity by getting more from materials.

New ways of working: in order to change we cannot go back to business as normal Credit: Getty

Creating a more “circular” economy and more remanufacturing and recycling businesses can also be a powerful generator of new jobs – particularly outside the South East, where they are most needed. Our analysis shows that investing in system improvements to make better use of resources could add at least 102,000 jobs across the UK. It is also what the public wants: 60 per cent of people say they support a drastic shift towards a more resource efficient society – even if that changes the way they live.

There’s a saying that every pound we spend is a vote for the kind of world we want. The same is true of the money we invest. Crowdfunding platforms allow more of us to become investors in smaller, innovative initiatives with positive environmental aims. Meanwhile, community renewable energy-generation organisations, such as the Brighton Energy Coop and Community Power Cornwall, may give better returns than mainstream investments.

Major companies – including retail giants such as Unilever and Ovo – remain committed to moving away from business as usual. They know that building environmental action into the heart of their business model makes economic sense and helps them attract young talent from Dara’s generation.

And, most importantly, it helps ensure there will be a habitable and beautiful planet on which we and our descendants can thrive.

Invest today for tomorrow’s global security

Truly ethical funds have never been more important, says John Elkington, founder of Volans and author of Green Swans: The Coming Boom in Regenerative Capitalism

John Elkington

Fortunes are made and lost in such times, as the old economic order comes apart and new ones begin to self-assemble. The commentators may argue over whether recoveries will be V-, U-, W- or even L-shaped, but our ongoing Tomorrow’s Capitalism Inquiry suggests that we are seeing a profound economic reset.

Such disruptions – now fuelled by a volatile mix of incipient depression, deglobalisation and decarbonisation – upend investor assumptions. You hear echoes of this when CEOs of blue chips like Shell and BP fret publicly about being caught on the “wrong side of history” and are forced to write o? billions of dollars of “stranded assets”.

On the upside, we see insurgent companies like Elon Musk’s Tesla, still an electric pygmy among gas-guzzling goliaths, overtaking brands like Ford and Toyota to become the world’s most valuable automaker. Emerging “green chips” will be higher risk – but they can yield spectacular returns while greening economies.

So what can we do to avoid the stranding of our own assets? Having long advised SRI and ESG funds, you might imagine that I would have solved that problem long ago. No, I discovered. Last year, I invited an independent expert to check where our “ethical” pension funds were being invested. His findings were disturbing.

Some so-called ethical funds proved to have a surprisingly elastic definition of ethical, responsible and sustainable. And with the imminent arrival of generous government packages such as the EU’s €1 trillion Green Deal, the risk of misrepresentation – intentional or not – can only grow.

A growing fear of future “Black Swan” events, many linked to the climate emergency, will also spur market appetite for all things ethical and sustainable. A Black Swan, says Nassim Nicholas Taleb, who coined the term in 2007, comes out of the blue, producing off-the-scale impacts, and – when the dust eventually settles – is often misunderstood, setting us up to fail again.

Conscious economy: ethical funds must take center stage Credit: Getty

Some people label Covid-19 a Black Swan, but Taleb disagrees, arguing that experts had long warned about pandemics. What is indisputable, however, is that Covid-19 will bring off-the-scale impacts, forecast to reach as much as 10 per cent of global GDP. A Grey Swan, perhaps.

This will be an exponential decade, with whole flocks of Black (and Grey) Swans coming home to roost. Once again, Taleb may insist that we saw climate chaos coming, but many other negative exponentials are at work in crucial systems – economic, social, environmental. Once again, the unintended consequences will be off the scale.

Happily, rather than Covid-19 derailing green agendas, the pandemic provides a timely learning curve – with changes that once took years now happening in weeks. In that spirit, our pension portfolio now includes companies like Tesla, Vestas and Beyond Meat.

Consider how your own money can sidestep Black Swans and piggyback emerging “Green Swan” (or positively exponential) market trajectories. For example, expect a continuing drop in renewable electricity costs, spurring exponential growth in market share for solar and wind power.

Ultimately, however, the world’s money flows have little option but to finance the transition to a net zero economy. Take banks: this is the assumption behind our Bankers for Net Zero initiative, co-organised with the All-Party Parliamentary Group for Fair Business Banking.

Yes, greening our family pension took months, but things just got easier with the Make My Money Matter campaign. Its aim: to influence the £3 trillion invested in British pensions, much of the money still driving Black Swan outcomes. No excuse, then, to duck the question: which side of history do we want to be on?

‘The system that raised living standards for billions isn’t over’

Coronavirus does not spell the end of capitalism, says author and futurologist James Wallman. But the new version will be getting a green makeover

James Wallman

During the early, eerie days of coronavirus, those sunny spring mornings when I walked my dog along empty streets, I often thought of the old curse: “May you live in interesting times.”

Some think the events of recent months spell the end of capitalism, or that some sort of revolution is nigh. Capitalism and its wilful pillaging of the Earth’s resources got us into this mess, they say.

But I don’t think capitalism is done – not by a long shot. The system that raised living standards for billions of people isn’t over. It’s just evolving.

Coronavirus has reminded us of how, without our health, the rest doesn’t matter. So, rather than simply hurtle back to business as usual, the “Covid pause” has given many a chance to reassess: their lives, their spending, their investing. (And maybe their relationships, but that’s a topic for another day.)

And rather than struggle back to business as usual, smart investment firms are putting the planet at the heart of their strategies. At least 22 per cent of the UK asset management industry is now sustainably invested, according to a 2019 government report. That’s set to increase significantly. It is what consumers, employees, shareholders, investors – people who live on Earth, in other words – care about. There’s a strong call to shift the UK’s £3trillion pension pot into ethical investments. Legislation such as the European Commission’s Action Plan on Financing Sustainable Growth asks investors to be more transparent about their assets’ sustainability.

Future predictions: watch this space as capitalism evolves Credit: Getty

To borrow from Bill Clinton’s presidential campaign of 1992: it’s the economics, stupid. Investing for the good of the planet isn’t only the right thing to do, it’s the smart thing to do. Environmentally sound investments are giving better returns. Since the beginning of the year, Legal & General’s Future World ESG UK Fund has weathered market turbulence better than its benchmark, showing that the incorporation of sustainability criteria can help select companies.

Greg Jackson, CEO at unicorn startup Octopus Energy, makes simple sense of this: “The energy market is worth $2 trillion, excluding petrol, diesel and oil. As we decarbonise transport, that’ll become a $4 trillion market. This is the biggest thing since the internet – and it might be bigger than that.”

That thought is echoed by investigative reporter Jacques Perretti, whose next book is about the economic opportunities Covid and the environment may present: “The Silicon Valley guys say that 15 years ago the big thing was tech,” he told me. “But now it’s the planet. They see the Earth as a giant iPhone – one that needs its apps updating.”

So, as we make the slow, bumpy journey back from coronavirus, even in the gloomy days that are sure to come this winter, remember that capitalism isn’t over. It’s evolving.

The future – for capitalism, our planet and all of us – is bright. The future's green.

The Power of Us

Building greater, more sustainable economic growth can improve the lives of everyone in the UK.

This is the goal of inclusive capitalism: using money and investment as a force for good, to create real jobs and better infrastructure to transform the UK’s cities and towns and tackle the biggest issues of our times such as housing, climate change and ageing demographics.

It’s something businesses, communities and individuals can all get behind and work together to achieve – and it’s why Telegraph Spark has teamed up with Legal & General for The Power of Us, a campaign that aims to identify the challenges facing society, then use some of the UK’s brightest, most innovative thinkers to help solve them.

The Power of Us: the future is in your hands.