Who Cares Wins

Source: Who Cares Wins: Connecting Financial Markets to a Changing World

By The Global Compact

Reflecton:

Why wouldn’t “sustainable businesses” be a good investment? After reading Who Cares Wins, this question is my enduring understanding.

The central assumption of Who Cares Wins is that the way environmental, social and corporate governance issues are managed is part of companies’ overall management quality needed to compete successfully. I challenge you, Loyal Readers, to show me that assumption is false. I’ve tried, and I cannot.

Keeping in mind that my knowledge of investing is exactly as deep and broad as my knowledge of law and socioanthropology, and also remembering that unemployed bike mechanics don’t have a lot of money to throw into the market, this is what I would look for in a business:

First, I want responsible management. I’m trusting them to use my money to make money, not lose it.

Second, and related to the first, is risk management. Risk is an unavoidable aspect of business and investment alike, and it is often indistinguishable from opportunity. This truth brought forth the cliché, you must spend money to make money.

Third, I want a company that is in touch with their market, past, present, and future. Past, because history can teach us a great deal about where we are and where we’re headed. Present, because markets are fast-paced and dynamic and you have to stay on top of them. Future should be self-explanatory.

None of this is a revelation. It’s a very simple understanding of what makes a viable corporation, and everything I’ve said applies equally to Business As Usual and sustainable business. Where does the difference lie?

My experience with investing has taught me that there exists a direct correlation between risk and rate of return. The higher the risk, the greater the rate of return, and vice versa. Accepting the notion that sustainable business is really Business As Usual with exceptional risk management on a longer-than-normal timeline, we get closer to an answer to our question. But if one must choose between safe and fast, I’d still choose safe.