OPINION: The ice age of capitalism is starting to thaw

by Amit Bhatia | The Global Steering Group for Impact Investment
Friday, 15 November 2019 12:23 GMT

ARCHIVE PHOTO/Melting ice shows through at a cliff face at Landsend, on the coast of Cape Denison, Antarctica January 2, 2010. REUTERS/Pauline Askin

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The pursuit of a more accountable form of capitalism is neither a coincidence nor altruism, but survival instinct.

Amit Bhatia is the CEO of The Global Steering Group for Impact Investment

A revolution is underway to transform the 19th century construct of capitalism, so that it may justly respond to the world’s most formidable challenges – poverty, inequity and global warming – in order to ensure purpose and profit co-exist. 

At the Global Steering Group for Impact Investment we just got a taste of this revolution, as we had to move our annual summit, a convening of the global leaders in impact, from Santiago to Buenos Aires, this month. The protests in Chile exemplify the growing global social, economic and environmental unrest.  

The current status quo is untenable and unsustainable for several reasons.

Firstly, because social inequalities abound. The wealth of the world’s poorest three billion adds up to the same as that of the richest 26 individuals and according to McKinsey 30% G7 households have seen their income fall in real terms since 2005.This has led to a sharp rise in protests and activism.

Secondly, there is rapid political change – from events like Brexit to new Governments in US, Italy, Hungary, the Czech Republic, Poland, Greece, Turkey, Brazil and the Philippines – the rise of populism is an incongruous response to the quest for a more equitable society. 

Thirdly, environmental catastrophe is imminent. The latest report on Global Warming by the Intergovernmental Panel on Climate Change (IPCC) concludes that meeting a 1.5 °C target is possible but would require global net human-caused carbon dioxide emissions to fall by about 45 percent from 2010 levels by 2030, reaching 'net zero' around 2050.

However, transformative steps are being made. Recently, 181 chief executives of U.S. companies decided to transcend goals of profit-making to serve all stakeholders, not just shareholders. This is far more than just a semantic shift and we hope it will drive real, actionable change.

The Business Roundtable announcement is the continuation of a trend we have been seeing. Larry Fink, CEO of BlackRock, one of the world’s largest asset managers, has been articulating the “inextricable link” between profit and purpose in his annual letters.

Meanwhile U.S. Democratic presidential hopeful Elizabeth Warren has proposed an “Accountable Capitalism Act” urging corporations to create a general public benefit. 

This pursuit of a more accountable form of capitalism is neither a coincidence nor altruism, but survival instinct. Steps towards change are being taken by many stakeholders. 

Businesses are starting to measure and report on impact. The chief impact officer will be the new champion within companies who will use creative, new approaches like Harvard Business School’s Impact Weighted Accounts to prove impact.

In investing, according to The Global Sustainable Investment Alliance (GSIA), the impact movement has grown from near zero in the year 2000 to $30.7 trillion in 2018, across responsible, sustainable and impact investing. 

Policy is responding too with innovative measures. For example, Britain now embeds impact in government procurement process via the Social Value Act and provides Social Investment Tax Relief. A recent McKinsey survey found that a majority of investors and executives favor a regulatory mandate.

Consumption patterns are also changing. According to a Nielsen poll, 66% of consumers and 73% of millennials are willing to pay more for sustainable products. Greater product and company accreditation will create transparent options for Ethical and Responsible Consumption to grow.

The Impact Revolution is heating up; it is thawing the ice and enabling change. It is important for us all to be conscious of this and to be proactive in our response so that we avoid being the dinosaur as the climate of capitalism transforms. 

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