Our investment choices must consider the unavoidable fact that the world is poised to change more over the next few years than it has in the past century. Back in early 2020, we were already talking about exponential changes in our societies and economies. Fifteen months on, and the Covid-19 pandemic has acted as the springboard for an unprecedented leap forward. From the expansion of digital practices and the development of vaccines in record time, to the roll-out of promising solutions that will underpin the ecological transition, we are experiencing a period of extraordinary technological acceleration. Meanwhile, a different shift is also taking place, as we turn the focus back on human beings. For the first time, collectively, we are putting people ahead of the economy.
REAFFIRMING OUR SOCIAL MODEL
The finance industry must help to carry these historical changes forward. While recognition of impact investing is already a trend, it is still in its infancy. Our badly shaken societies need to see their future in a new capitalist model built on a clear pledge to combine growth and technological development with a sustainable long-term model. This stance is not based on an ideology, altruism, or sentimentality. It simply reflects the pragmatism required to make our system more efficient and more human. At CPR AM, we firmly believe that an economy rooted in inequality is not only unjust, but also inefficient. At the same time, we need to keep in mind that human development is impossible without economic development.
Put another way, while we are mindful of the historical contributions made by global capitalism, especially its impact on reducing poverty, we are nevertheless convinced that the model must be adjusted to reflect the 21st Century’s realities and challenges. Between the new post-Covid era that is set to dawn, rules in support of sustainability, and advances that enable us to measure our impacts on natural ecosystems and the social fabric, all the signals are green (no pun intended!) to progress along this road.
The asset management industry is on familiar ground here. Our basic mission remains the same, namely to steer capital towards the business models with the longest-term promise and the companies with the brightest prospects. Moreover, it is illusory to imagine that finance could work solely for finance, in isolation: in addition to our primary role of financing the economy, the returns that we target for investors are intended to meet people’s fundamental needs, such as paying for their retirement or their children’s education. Asset management has always played a deeply social role in the public interest.
RETURN ON IMPACT (ROI)
From a practical perspective, how then do we combine sustainable returns with risk integration and positive impacts on society? The path towards impact goes hand in hand with innovation, which is also one of the areas that CPR AM has identified for priority action. This trajectory makes even more sense when considered in conjunction with our investment strategy. Under our approach, thematic investing is based on long-term trends and consequently works to a long-term horizon that fits with sustainable development. Accordingly, it includes financing the new products, services, tools, and technologies that will drive progress on climate, education, food, and social equity, in line with the United Nations Sustainable Development Goals.
But innovation must also be harnessed to transform our own approaches. Only what is measurable can be improved: the time has come to adjust how we assess company performance. ROI needs to be changed to stand for Return On Impact. Today, economic performance is just one aspect of a firm’s overall performance, and we have a duty to bring this new analytical framework to life. Admittedly, due to insufficient standardization and transparency, we are still lacking the data required to measure impact, especially in the listed sector, but this is not a reason to do nothing. As I see it, imperfection is preferable to inaction.
USING INVESTMENT AS A WEAPON OF MASS CONSTRUCTION
As members of the finance industry, we also have a responsibility to explain the challenges to retail investors and grow awareness. Investment is a powerful force for change and should be seen as such. Investing in the huge challenges facing society, from climate change and population ageing to education and urbanization, will yield sustainable returns over the long run. We need to bring to light the opportunities generated by these overarching trends and their impacts.
I am confident that we are up to the challenge, at a time when an estimated $68 trillion in global private wealth is set to be passed down to younger generations over the coming years. More keenly attuned to sustainability issues, these younger investors will want to give their investments more meaning and put their money to work for societies and economies that are transitioning to a more responsible and sustainable model.
Today, CPR AM, like Europe, is more advanced on these issues than many other players. It is up to us to keep up the momentum as we support these virtuous changes, because our investment choices will shape not only the future of our world, but also our place in it.
