RATIONAL SUSTAINABILITY
by Alex Edmans (London Business School)
Sometimes, he is a bit abrasive and counterintuitive. Even divisive. I know that very well, but all the same, we can not do anything if I love his thought-provoking, original, rigorous challenges.
Here are some excerpts of his article:
- ‘This article has proposed “#Rational #Sustainability” as an alternative to #ESG – a term and practice that started off with much promise and good intentions, but has not achieved this promise due to true believers implementing it naively, ardent adversaries opposing it blindly, and opportunists exploiting it for self-interest.’
- ‘Some critics argue that considering #ESGrisks is inconsistent with #fiduciaryduty, but this is illogical since considering #risks is an essential part of fiduciary duty.’
- ‘Rational Sustainability is concerned with #outcomes, not #labels. The goal of sustainability is to create #longterm #value’.
- ‘Sustainability is pursued for intrinsic reasons – because it’s good for you. It allows organizations, ecosystems, populations, and organisms to thrive for decades, even centuries.’
- ‘Generating long-term, sustainable value is widely accepted as being a core – arguably the core – function of business. Finance 101 teaches you that #shareholdervalue is the present value of all #future #cashflows; any business decision should be evaluated by its long-term consequences.’
- ‘Sustainability recognizes the criticality of analyzing a company’s #impact on society, because many of those impacts will ultimately feed back and affect its #profits.’
- ‘I continue to strongly believe in the power of #purpose to generate #financial and #social #value.’
- ‘First, any societal objectives are pursued in a sustainable way. Targeting #diversity, #equity, and #inclusion (#DEI) by hiring minorities irrespective of their ability may improve a company’s short-term DEI statistics, but backfire in the long term as those hires don’t succeed and leave. The company itself suffers worse performance, hindering its ability to hire in the future.’
- ‘A company is not #responsible for addressing all of society’s challenges or pursuing all 17 #SustainableDevelopmentGoals. That’s the role of governments.’
- ‘Rational Sustainability allows #investors to exploit #market #irrationality – selling sustainable companies that are overpriced, or buying sustainable companies that are underpriced because they do not tick ESG boxes.’
- ‘Principle # 9 highlighted how the herd mentality can lead to market #bubbles and #crashes.’
Food for thoughts ...
MOMentum Alternative Investments SA