Path founder David Macdonald on why we need green investing
In my view, we need the capitalist, free-market model. Broadly, it is the best system we have ever developed. The problem with the current way the market works is that it chases profits regardless of the consequences. Continuing as we are with an economic system that encourages linear and exploitative behaviours is not a viable option. We live in a world with finite resources. The only way the present model could continue successfully is to exploit more of our resources and they are simply not there. We need to move to a circular and sustainable green finance model. And it needs to happen fast.
Certainly, since the post-World War II era, corporates have focused on the way capital behaves and have maximised profit. And if that means exploiting people and the planet, then, as it stands: so be it. It’s my belief that if companies want to exist for the long term, then they need to make sure that they align their activities to ensure there will be a long term. The time for exploiting everything without a care is over.
It’s no exaggeration to say that billions of people’s lives depend on the success of what we might call a new ‘quiet revolution’ to transform the capitalist model. Instead of being about profits at any cost, it’s got to be about saving people’s lives, and the planet, regardless of the cost. Adam Smith, the author of The Wealth of Nations, published in 1776, and widely regarded as the father of modern economics, described how striving for profit results in everyone’s best interests. I think that ethos needs to be updated so that everybody’s best interest comes before the striving for profit.
We have a responsibility to think about the way we invest our money, and the purpose of the meaning it has, not only for us as individuals, but for society. We must bring the impact of our investing to the heart of our society and place the outcomes at the heart of our economic system. We need to make ethical financial decisions in a way that’s consistent with achieving the highest impact for investors, while minimising the risk and threat to people and the planet.
There was a time when people thought about the impact of the negative consequences of investing only in terms of the financial risks, but now we must see investing as an opportunity, and review it through the lens of environmental, social, and governance factors (ESG). My philosophy is that we’ve got to disrupt economics to improve lives, reduce inequality and save the planet.
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As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.