Ceres: Eliminating Corporate 'Short-termism' on Climate Change
For the first 36 years of my environmental career, I accepted that, while the solutions I advocated would be good for both society and the economy in the long term, in the shorter term I was asking this generation to make sacrifices for the benefit of their children.
In 2006, as the clean energy revolution began to take hold, I had to reconsider my opinion. Short-term thinking does drive pollution, waste, climate risk, community and ecosystem degradation but the bigger problem is short-termism caused by corporate America's obsession with quarterly earnings and executives fixated on maximizing personal returns and stock options before they retire - even at enormous overall cost to the economy for both this generation and our children and grandchildren.
Indeed, most Americans have no idea just how short-term our capital markets have become. In a recent rebuttal to the charge that hedge funds seek short-term gains with long-term risks, New York Times business writer Stephen Davidoff claimed as progress the fact that "The average activist hedge fund actually holds shares in a company for 20 months, according to one study".
That's the biggest single barrier, in my view, to solving our environmental, public health and climate challenges. The replacement of outmoded, carbon intensive, polluting technologies with innovative, low carbon sustainable approaches pays off - but not necessarily in 20 months or five years. Right now we are told that we can't reasonably expect electric cars to replace petroleum, because the pay-back period is seven years; we haven't been able to commit ourselves to retrofitting leaky and wasteful homes and offices, because banks won't even acknowledge the economic benefits of lower utility bills to residents and tenants.
And most environmental organizations - including the Sierra Club, which I oversaw for 20 years - can't devote much of their energy to a problem as deeply embedded in business structures as short-termism. That's the importance of Ceres, a business oriented sustainability NGO that I am proud to serve on the board of. Ceres brings together powerful stakeholders including environmental groups, Fortune 500 companies and some of the world's largest institutional investors, to find workable pathways to build a sustainable economy. They're all about eschewing myopic short-term business strategies - such as our continued addiction to fossil fuels - in favor of safer, cleaner models that will protect both our planet and the economy.
Ceres' unique voice highlights that environmental progress is not about sacrifice for our children - it's about opportunity for both current and future generations. To take advantage of these opportunities, banks and hedge funds need to adjust their time horizons. A little patience is one of the virtues America could use more of.
By Carl Pope
Principal, Inside Straight Strategies
Ceres Board Member