Green Capitalism
Toby Heaps, Co-Founder and President of Corporate Knights
January 28, 2014.
About the Author
Toby Heaps is the co-founder and president of Corporate Knights. With a B.A. from McGill and a graduate degree from the London School of Economics, Toby has been a staunch advocate of incorporating sustainable practices for better business. Before founding Corporate Knights, Toby served as managing editor of the Mutual Fund Review and Planning for Profits magazines.
Green Capitalism – Is it for Real?
The current economic system faces a fundamental challenge in becoming truly sustainable. Driven by quarterly reports and prompt returns on investment, firms lack incentives to make the long term investments to transition to a more sustainable practice. Despite these pressures, there is an increasingly well-developed consensus amongst the world’s major financial players. These corporate leaders are looking to go beyond adhering to the regulatory baseline, and are taking a proactive approach in order to skate to where the puck will be.
As the private sector becomes increasingly proactive in its approach to transitioning to a sustainable future, observers must develop new conceptions of how policy is formed. Although government has typically set the bar, it appears that corporations are changing the rules of the game to favour leaders in sustainability to enhance the social contract. The end result of this is that most policy is no longer made in Ottawa. As the federal government demonstrates a protracted impotence on advancing sustainability, strong action from the private sector indicates that Ottawa no longer holds a veto.
Resource management has a central part to play in the transition to a sustainable economy. Commodity prices have increased more in the past 13 years than they did over the past century. This highlights the importance of creating more accurate price signals through the practice of natural resource wealth accounting. By more accurately valuing our natural resources, Canadians can understand whether or not they are truly creating wealth through resource extraction. This practice has already employed by Norway as they manage their considerable endowment of oil reserves. By properly valuing their oil, Norway has amassed nearly 900 billion dollars in their sovereign wealth fund to provide for future generations. This is in drastic contrast to Alberta, which has accumulated only 15 billion.
Ultimately, green capitalism will be driven by investment. Investment is essentially the oxygen which will drive the green capitalist economy. In order to direct investment efficiently, empowerment through education is critical. Though many have advocated directing investment to firms which excel in a range of sustainability indicators, the solution may be more nuanced than this. From a range of analysis it appears that while not all sustainability indicators are related to business success, a select handful are directly related. Such firms typically yield an ROI 4% higher than their business as usual counterparts. Investments in firms which excel in these areas will develop competitive businesses while simultaneously supporting sustainability.
In summary, green capitalism is being defined by progressive corporate leaders. These actors have sought to change the rules to create accurate price signals and incentives to support sustainable investments.
Précis written by Pete Massie and John Stwora, M.A. Sustainable Energy Policy