Andrew Parry leads the development of sustainable investing strategies at Hermes Investment Management and shares his vision of what constitutes a sustainable strategy in today’s world.
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Highlights of the discussion:
- Public value is a recognition that we are all part of an embedded system. We’re all in this together! You can’t work on sustainable markets detached from society. The way governments perform and companies manage themselves, the way in which we invest, the way in which we live our lives – all have profound impacts that are interconnected and will shape the world to come. It’s about thinking broadly about where we all want to go.
- Actions are never done in isolation. We see a number of trade wars or short-term strategies that have huge impact on our lives. Responsible investors need to think holistically and refer to values.
- The world is changing. Few years ago, talking about environmental challenges was often dismissed. Now it is centre staged. It could be a generational issue, but many now recognise that it is good business. If you want to support the financial returns of the system, if we want to address the quality of life of the many, then we need to tackle these challenges. We are all becoming a lot more aware of the direction of travel, and this is a system change. We have to keep in mind the general demand that is changing too.
- Citizens too become more responsible. Increasingly they are asking where their money is being invested, and this has become the pulse of the industry. Beyond understanding the returns of financial products, it also raises the question of how we live our own individual lives. With responsible investing, we think differently about food or mobility. It is crucial that the demand continues to put pressure on the industry, demand results on CO2 emissions, on waste, etc. We are in it together.
- Impact investing is not a new concept. There is recognition that financial returns are a key part of sustainability. But to address the current challenges, we are mobilising trillions of investment. Considering the sums needed, the traditional capitalist market has an important role to play. Impact is forward looking. The Sustainable Development Goals (SDGs) highlight what we aspire to change in the future. It is not about remapping existing activities to address the Goals, but to think of innovative solutions. This is an important growth opportunity.
- We should not underestimate the power of language. In place of acronyms (ESG, SRI), it’s more efficient to articulate our thoughts, speaking of people (in place of stakeholders) or responsible capitalism. It’s all about shared value. We are part of an embedded system. In Europe, we all talk the same language: Sustainability is not an option, it’s an imperative. Elsewhere, when companies do not recognise the current change, they risk to be left behind. Their business models are dying. Looking to the future, it is urgent to develop a more responsible capitalism and long-term strategies. But to be a sustainable business, you first need to survive and apply a long-term vision to the existing system of budgeting and RoI. If you have a bad business model, you can be as green as you like, but you can still fail.