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Forbes.com: Companies, Investors Band Together to Catalyze a Sustainable Economy

From Wall Street to business associations, recognition is growing that the long-term viability of business depends on how quickly we develop and support solutions that use fewer resources and cleaner energy. That’s what sustainable capitalism is all about: generating financial return in a long-term and responsible manner.
by Mindy S. LubberForbes Sustainable Capitalism Blog Posted on May 27, 2011

To some sustainable capitalism is an oxymoron. How could a system based on ever-expanding markets possibly be sustainable?

I believe that not only can capitalism be sustainable, but also that it’s our best hope for the future on an increasingly crowded, hot and resource-constrained planet.

Take a look at commodity prices, now at a 24-year high. Those peak prices strongly indicate that global consumption is outstripping resources, from precious metals to oil, wheat and corn.

From Wall Street to business associations, recognition is growing that the long-term viability of business depends on how quickly we develop and support solutions that use fewer resources and cleaner energy.

That’s what sustainable capitalism is all about: generating financial return in a long-term and responsible manner. It’s about breaking the tether to quarterly profits, driven by unsustainable, high-polluting technologies.

Here’s an example:  Two of the country’s largest investors —with collective assets totaling some $400 billion—have recently taken extraordinary steps toward sustainable capitalism.

The California Public Employees’ Retirement System has committed to fully integrate environmental, social and governance (ESG) factors—a key tenet of sustainable capitalism—into all investment decisions across all asset classes.

What’s that mean in practice? It means that CalPERS will take an issue like water scarcity and examine its impact on the giant fund’s real estate portfolio, its public and private equities, and its fixed income holdings.

Maybe those municipal bonds financing pipelines to transport water hundreds of miles across the Nevada desert won’t look so attractive anymore. Conversely, maybe it’s time to invest in that company innovating the latest drip irrigation technology.

Integrating ESG may sound daunting but it’s not so difficult, says CalPERS senior portfolio manager Anne Simpson.  “It is absolutely no different than thinking about long-term finances and is, in fact, a buried and hidden part of long-term financial success.”http://www.youtube.com/watch?v=QeL0cI_9dTc

The California State Teachers’ Retirement System has made a similar commitment to ESG integration, and the combined action of the two pension giants raises the bar for other investors.

The funds’ announcements are part of a broad set of commitments issued by the newly formed Investor-Business Roundtable for a Sustainable Economy, a group of prominent investors, companies and labor unions that also includes the AFL-CIO, Levi Strauss & Co., software firm SAP and property giant Jones Lang LaSalle.

Each roundtable participant committed to deeply integrate sustainability into its governance and management systems, and support policies that accelerate sustainable business practices while building long-term shareholder value.

SAP unveiled a new and enhanced energy management software tool with the potential for influencing one-sixth of the planet’s collective human-made greenhouse gas emissions.

The AFL-CIO is working with the Clinton Global Initiative, public pension funds and private investors to create new financing instruments to boost energy efficiency investments – a move that would reduce pollution and create jobs.

And Levi Strauss is seeking to transform working conditions in global contract factories across the apparel industry. The effort, which will include other apparel companies, will set new performance requirements aligned with key United Nations Millennium Development Goals.

“The hard truth is we haven’t made nearly enough progress on improving the everyday lives of the people who make our products,” CEO John Anderson said, in announcing the commitment at Ceres annual conference in Oakland.

Anderson referenced a pilot program launched with a nonprofit group, Give to Colombia, to increase financial literacy among apparel workers. The partnership provides financial training, matched with savings accounts and microenterprise development programs for workers in the apparel industry in Medellin.

Levi’s has also committed to producing a blueprint to address the issue of living wages in its contract factories, and to providing health services for its workers.

Healthy, financially stable employees miss less work, and that’s better for the bottom line. Financially secure families also have fewer children, which eases pressure on dwindling resources.

Levi’s win-win commitment is a good example of what I mean by sustainable capitalism.

More announcements from the Investor-Business Roundtable are on the way.   These new commitments flow from business leaders’ recognition that shifting to long-term value creation will give them an edge in the 21st Century— while unleashing innovation and paving the way for a new era of more widely-shared prosperity.

Clarification: Levi’s living wage commitment is to explore solutions with its stakeholders to address the issue in its contract factories and its health services commitment is to work with its suppliers to provide maternal and child health services, and combat HIV/AIDS and other diseases.

Read the post at Forbes Sustainable Capitalism Blog

Meet the Expert

Mindy S. Lubber JD, MBA

Mindy S. Lubber is the president of Ceres and a founding board member of the organization. She also directs Ceres’ Investor Network on Climate Risk (INCR), a group of 100 institutional investors managing nearly $10 trillion in assets focused on the business risks and opportunities of climate change. Mindy regularly speaks about corporate and investor sustainability issues to high-level leaders at the New York Stock Exchange, United Nations, World Economic Forum, Clinton Global Initiative, American Accounting Association, American Bar Association and more than 100 Fortune 500 firms. She has led negotiating teams of investors, NGOs and Fortune 500 company CEOs who have taken far-reaching positions on corporate practices to minimize carbon emissions, water use and other environmental impacts. She has briefed powerful corporate boards, from Nike to American Electric Power, on how climate change affects shareholder value.

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