Capitalism As We Know It May Be Broken - Can We Reimagine Capitalism So It Works For All?
Photo by Markus Spiske on Unsplash
Capitalism As We Know It May Be Broken - Can We Reimagine Capitalism So It Works For All?
Impact Investors Are Showing How We Can Rewrite the Rules of Finance To Right Our World
We are facing urgent crises all around us and across the globe. Climate disasters, systemic racial injustice, COVID job losses – the list goes on. At best, capitalism as we know it has proved ineffective to address these problems in a meaningful way. At worst, it has exacerbated them. What’s clear to us is that capitalism as we know it isn’t working. For impact investors this means that a stakeholder capitalism approach to investing isn’t just a nice to have. It’s a must for all businesses and investors – not someday, but right now.
What we’re seeing is the perfect storm coming together, blurring the lines between environmental and social investments (the “E” and the “S” in ESG investing). This calls for a more holistic approach to how we invest. If you’re a social-leaning investor, you can’t invest capital without considering how climate issues affect the social issue you’re trying to remedy. After all, if we don’t have a planet to live on in 20, 30, 40, 50 years, what does it matter what I am doing around social issues? The same holds true for investors with an environmental focus: environmental justice actually overlaps with social justice.
We also have to use all of the tools we have available to create investible solutions – it can’t just be traditional ways of using equity, debt and real estate investments. We must reimagine capitalism, and to do that we need to consider a full range of investment options (including alternative forms of financing) – otherwise we’re just putting a band aid on these issues.
Three Ways Impact investors are Reimagining Capitalism
Here are three examples of how impact investors like you are showing how we can change capitalism for the better:
An explosive proxy season in oil and gas: With a slate of activist investors winning board seats and passing climate-friendly shareholder resolutions this spring at annual shareholder meetings at Chevron, Exxon and Shell, these investors served notice that the oil and gas sectors have to transform their practices today for where we are going as a society.
Investing to promote racial and gender diversity: There are ways to invest to address systemic issues of racism and gender inequality. Align recently completed an analysis of all 100 plus investment firms in which our clients have impact investments so we could better understand how our work is advancing a more equitable society. We have also spent many months putting in place processes and protocols to ensure that our investments support diverse managers and investments. We’ll look forward to sharing these findings with you in the near-term, but the takeaway is that every investor must interrogate their investment stewards about how their practices further a more diverse world.
The great resignation: COVID has unleashed changes in how we work like we have never seen before, and CEOs should be scared out of their minds. Nearly half of the U.S. workforce is looking for a new job. A record 4m Americans quit their jobs in April, the most since the U.S. Bureau of Labor Statistics began publishing such data in December 2000. And more than 40 percent of the global workforce is ready to resign at some point this year. To stem the tide, we’re going to have to design new ways to work that are more inclusive and responsive to workers’ needs. What this means for investors is that you now need to factor in these risks to your due diligence and risk analysis.
The bottom line is that we have to come together as a society and as investors to drive solutions that really work for everyone and the planet, and to do that we have to have a better understanding of how these problems interrelate if we’re going to create real systems change. The good news is that the power of impact investors is coalescing, offering us all a pathway on how we can rewrite the rules of traditional capitalism to address some of our most pressing issues of our times.
I firmly believe that capitalism can be a force for good, but it has to be reimagined and we need to use all the tools we have at our disposal to tackle it from multiple angles. Capitalism reimagined allows us to go beyond the dollar and really incorporate our voice. By raising our voice, we will start to shift the power so that everyone’s voice is represented and integrated into the solutions. The time is now. Will you join us?
With gratitude and in partnership,
Jenn and the entire Align Team.
Photo by Brett Jordan on Unsplash